The Accunet Mortgage Show (12/20/2020) Episode
And we’re back with a new record low mortgage interest rate! This week we’re looking at a 2.67% on a 30-year fixed rate. While we’re excited to be back in the record-breaking zone, David and Brian discuss why getting the lowest interest rate isn’t always the route you’ll want to take, and plenty of other surprises on this week’s radio show.
This week’s Highlights:
- Understanding your mortgage interest rate.
- Vacation Home vs. Rental Opportunity: Does it matter what you call your second property?
- How to use a monetary gift to buy a house.
Is the lowest interest rate always the best rate?
Nope! It’s not. While a lower mortgage interest rate is a great thing, it won’t necessarily make or break how much house you can afford. One of the things to keep in mind is the fact that higher closing costs can skew the worth of a lower interest rate.
For example: Let’s say you lump closing costs into your loan. You will save money over the whole 30 years you have your loan, but in the example we use on the show, you won’t break even until roughly the 17th year. If that’s worth it to you, great! But saving $23/month and not seeing any benefit for almost 20 years isn’t worth it to us. There are other options out there that could definitely work better for our clients.
Make the decision to refinance easier with Accunet mortgage and our team of refinance experts—click here to get started.
Pro Tip: Renting out your “vacation home” is technically fraud.
We don’t want to scare you, but it’s important to note that the way you go about getting a loan for a second home is very important. Getting a mortgage for a vacation home is different than getting a mortgage for a rental property.
Buying a vacation home
You cannot use any rental income to qualify for the mortgage on a vacation home. If you end up renting the home without indicating it’s a rental home, it will lead to “acceleration of mortgage.” That’s a nice way of saying “You must pay all the money back immediately.” You likely don’t have all that money lying around, so we’re talking about foreclosure here.
Buying a rental property
If you plan on renting out your vacation property while you’re not there, it might be in your best interest to get a loan for a rental property instead of a vacation home. You can use expected rental income (known as synthetic income) to qualify for the loan, not to mention you can still use it as a vacation home in addition to renting it out. It’s a win-win!
Learn more about the rules of refinance with Accunet’s refi rules of thumb.
Things to consider when using a money gift to buy a home.
It’s perfectly acceptable to use a gift from a relative to buy a house, but the way you go about doing it is a little more involved than many people realize.
Let’s say you’re buying a new house using savings, the sale of your current home, and a gift from a relative. If you put the money gift directly into your checking account, you will need to prove it was a gift by showing a picture of the front and back of the check and show it go into the bank account, and a whole mess of other specifics that you don’t have time for.
Brian & David’s recommendation: Instead of depositing the gift into your account, have the donor wire it directly to the title company and have them sign a gift document. That way everyone can easily see where the money is coming from without all the extra hassle.
What happens if the gift amount changes?
It’s in your own best interest to try and avoid this at all costs. We had a client contact us after the approval process was already underway because she wanted to change a gift amount from $40,000 to $14,000. If we wanted to make this change, we would need to start the whole underwriting process from scratch. This is dangerous for her, because if they have a second chance to go through everything, they easily could find something they missed before that would end up costing her more in the long run.
Instead, we recommend keeping the amount the same. If the gift change is less than the original amount, simply go through with the original & pay the difference back to your relative once the process is complete. You’ll still be able to get approved as easily as before, and can just transfer the excess back to the gift giver after it’s all settled.
Buying your first home? Start here so you know what to expect from the process!
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