Spring is here!! We are hopeful that everyone is about to enjoy the upcoming Passover and Easter holidays (for those who celebrate)!! Time for introspection and reflection on who and what we are and where we want to go….
Our recommendation, as it relates to the mortgage arena, is to allow Centek to evaluate your existing mortgage profile and analyze if any alternative programs would be better suited for your overall financial strategy – reducing the amortization of your current loan, changing from an adjustable rate mortgage to a fixed rate or conversely changing from a fixed rate mortgage to an adjustable rate program. We have included an analysis of when your mortgage adjusts from the fixed period to an adjustable rate as well as when an interest only mortgage converts to a principal and interest payment with a new amortization basis. The numbers are quite compelling to refinance into either a new ARM or changing to a fixed rate. In either of these instances, the rate/payment might increase, but better to have the stability of a new fixed rate for a defined period of time than be at the mercy of the global interest environment. The Libor index which most of the adjustable rate mortgages are linked to, has risen dramatically and as of today stands at 2.67%. When you add the margin of 2.5-3% to this, the new rates upon adjustment will be in the 5%+ range!! The past couple of days have seen mortgage rates drop to levels of early February. Our steadfast philosophy is to have your loan package in and ready to go in order to best take advantage of any rate decline or be prepared to “bite the bullet” and change out of an adjustable to a fixed rate or even a new adjustable rate to provide a longer fixed period even if this means increasing your current interest rate. The end result will alleviate all of the what if scenarios that could potentially play out..If we start the process further down the line, we might not be able to catch the window of opportunity.
In regard to the real estate market, we feel the most prevalent issue is with the lack of inventory for sale. The lack of inventory is due to several interrelated factors that we have not recently experienced. The escalation of property prices in our California market (especially our SoCal & Bay areas),the vibrant California economy & the increases in the stock market. The combination of these and other factors including the demand from foreign investors, has limited the number of available properties on the market. The flip side to this equation is where is the seller of the property going to move? This point is a large reason as to why more properties are not for sale. This is a problem and a main reason why with elevated home values more properties are not on the market. The move up buyer is difficulty in selling their existing house and being able to afford the next level up in price….This by no means applies to everyone, but is a major point in the overall real estate market place. Another salient issue is with the new tax laws. The limiting of the interest mortgage deduction to $750,000 is a marginal issue. The canary in the coal mine is how the limitation on the deductibility of real estate taxes in conjunction with other state and local taxes , has an effect on real estate values…..
Please feel free to contact us to discuss your financing or overall real estate acquisition or sales needs. We can review and strategize with you. Stay tuned!!
Gloria Shulman & Curtis Cohen