Home Sweet Home Financing 

By Barry Cooper, Senior Loan Officer with Superior Mortgage, a direct lender

With mortgage rates at slightly under five percent for 30-year-fixed mortgages, it is still a good time to refinance or purchase that home. Yes, there is the emotional pull of owning a home but home ownership can also pay off with tax benefits and investment opportunities. Consider your options—length of time of the mortgages, points vs. no points, monthly payments.

Do the math

To determine the tax benefits of owning a house and paying a mortgage, deduct the interest and real estate taxes at your ordinary income tax rate. So, if you purchase a house for $400,000 and put down 20 percent and take out a $320,000 mortgage at 5 percent, your interest for the first year is $12,000. Of that money, the government is paying $3,000 as tax savings.

When refinancing your home, you may want to take equity out of your house and use it elsewhere—for renovating, college funding, investing the monies elsewhere. If you are paying 5 percent on your mortgage and your after-tax savings are 3 ½ or 4 percent, consider taking the additional monies that you obtained by refinancing and investing the money where you can get a bigger rate of return.  This option is practicable because it keeps people liquid in case of a catastrophe such as disability or job loss.  If you have a bigger mortgage, you could sustain yourself with the equity that you put elsewhere until you get back on your feet.

Alternatively, you may be able to purchase a second home with the cash out from your first home. If you buy real estate as an investment property, it might be a smart investment because it would then generate a positive cash flow. With low mortgage rates, housing prices at a record low, it is a perfect storm.

Some things to keep in mind when deciding where to obtain a mortgage:

• Ask around. See if you can get a referral from someone who recently used a mortgage broker or from another financial professional that you already consult
• Use the internet for research but do not give out your social security information or other personal information. Doing so may open you up to identity theft or spam email or unsolicited phone calls.
• Direct lender vs. a bank lender. With a direct lender, you can avail yourself of that broker’s rates and, other institutions’ rates. A bank loan officer is limited to the rates that their lending institution offers. For instance, I have access to many different bank rates. I also have options to broker loans for unique situations such as stated income programs. Many lenders aren’t doing that anymore.

All mortgage brokers except those who work for one of the financial institutions must now not only take a test to be certified but also must have good credit scores. This is a safeguard for the consumer because poor credit scores can be a red flag for financial despair, which might cause the mortgage broker to provide bad advice to the consumer in order to generate more business to benefit themselves.   

• Consider your timetable. A direct lender lends their own money and the whole processing is done in house. You can get a quick and accurate decision. Alternatively, a broker puts the file together and then sends it off to someone to review. The process usually takes longer than using a direct lender and you lose control of the transaction, which may cause further delays.  
• The old adage, “if a deal sounds too good to be true, it probably is” holds.

I was working with one client who had credit issues, and unfortunately I was the person who had to tell them. It wasn’t necessarily what they wanted to hear so they went to someone else. This client found a mortgage broker who said he could secure a mortgage for them. Many weeks later and past their original closing date they were back. The client had gone through multiple appraisals and multiple application fees because every place they had sent their application had turned them down. I looked at the file and saw that they had fixed their credit issues. I saw what else needed to be done and closed the deal.

For more information about financing or refinancing your home, contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .