The Accunet Mortgage Show (5/3/20 Episode)
In this week’s episode, Brian and David talk listings, LLCs and liquidity.
This week’s highlights:
- Listings are down, but homebuyers are hungrier than ever
- Sure, you can rent out your second home, with a few stipulations…
- Liquidity is the king as a financial safeguard, now more than ever
Now is the time to list your home
As of the end of the week of April 25th, 2020, there were a reported 3.5 million new unemployment claims, and The U.S. Department of Labor’s latest number is that 17.8 million people are continuing to file for unemployment insurance.
However, high unemployment has not dampened the enthusiasm of homebuyers. According to Milwaukee-area Multiple Listing Service data, listings in April are down 37.7%.
So Brian asks, is now a good time to list your home?
The answer is absolutely yes.
Inventory is down but buyers are still eager and willing to get into a new house.
Contact a home loan expert today if you are ready to take the next step in home buying.
Client Story: No LLCs allowed
Brian told the story of two of his clients who desired to purchase a second property to use as a vacation home, and planned to rent it out on Airbnb in their off months. Fannie and Freddie allow buyers to use their second home in this manner (and to claim it on their tax returns), but rules state that you must occupy that property for some part of the year.
However, these clients wanted to title the house under an LLC to add a layer of protection when renting. David said pump the brakes on that plan, because Fannie and Freddie only give mortgages to humans, or in mortgage lingo, “natural persons.”
Brian advises that the extra layer of protection that the homeowners are seeking can simply come from taking out liability insurance, or from titling the second home in the name of the living trust, with the home as the only asset. This will keep the clients from getting into legal trouble with the feds and still protecting their property and reputation.
Brian warns that you cannot take out a mortgage ‘as a human’ and flip as an LLC later, either. Your vacation home will be immediately foreclosed upon!
Are you (a human) looking to buy a vacation home? Get Rock-Solid Pre-Approved so you can start renting.
Client Story: Liquidity is king
Brian told the story of a couple looking to buy a lake house as their second home.
They currently have a 15-year fixed-rate mortgage with a high payment on their primary residence. Brian encouraged them to turn that mortgage back into 30-year-fixed cash flow.
The couple desired to put 20% down the new home, but in these strange Coronavirus times, their new maximum would be around $650,000 down, and they could not swing that.
So, they instead decided they wanted to liquidate money out of their bond portfolio, but Brian put a stop to that idea, saying all the money that was needed for the down payment could be lent on a cash-out refinance, allowing them to literally finance 100% of the purchase price. This way, they could safely leave their bond portfolio untouched, allowing it to potentially yield a net return greater than the cash-out and let their liquidity flow freely.
Finally, Brian suggested they take $1,250 from their bond fund every month, supplementing their mortgage payment for 199 payments over a 19-year span, giving them the safest and lowest cost option, and “wielding their mortgage like a financial planning tool”.
Interested to see how much you could save by refinancing? Use our Refinance Repayment Calculator to see your reduced monthly payment.
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