We guess lighting does strike twice!! Since the beginning of the year, interest rates have made a dramatic U-Turn…The pundits were talking about rates going thru the roof, but the herd mentality was wrong! The 10 year Treasury note has declined from 3.25% in January all the way down to piercing the 2% level….
How does this translate… it means it’s time to reanalyze one’s current mortgage interest rate and review alternatives that may be available such as, lowering the monthly payment or perhaps shorten the amortization period to pay off the loan in a shorter timeframe. Naturally, we have many products available to customize. In some instances, cash out refi’s make excellent sense to pay off prime based home equity lines of credit (prime is now 5.5%) and many are adjusting to higher payments based on term.
The math for residential loans is so appealing that many clients are taking the opportunity to pay off business loans, student loans, potential upgrade costs, consumer debt etc. This repositioning of debt usually makes good economic sense.
We also are doing a large volume of cash out refi’s to pull cash out of existing properties and using this cash out as part or all of a down payment for an Investment type property or second home. The Apartment and Commercial property markets are extremely aggressive and the overall acquisition concept is the appreciation potential with these Investments. This is an alternative to review instead of letting equity accumulate in a property and not producing any cash flow– this cash out concept is not for everyone of course but our grandparent’s mantra of a free and clear house is undergoing many manifestations in the real world of today– caution still prevails.
In addition to the conventional suite of loan products, we are now excited to offer a wide range of bank statement programs and asset based lending options. Albeit, these rates are typically 2-2.5% higher than conventional rates, many of our self- employed clients have utilized this excellent avenue for both primary and investment property loans. Finally, one of our institutional lenders has rolled out a very aggressive reverse mortgage program that does not have a dollar amount limitation, which previously was a major constraint. As most of us know, these various products are wonderful alternative solutions for clients who for a multitude of reasons don’t quite fit into conventional Underwriting Guidelines. These programs are as close as it gets to the old fashioned stated income programs that many of us fondly remember.
The real estate market remains quite strong with pockets of slight softness. On the whole, demand remains stable for all types and classes of real estate. We are extremely broad based and are experts with Construction and Commercial financing under $10 M, SBA, Small lot subdivision and 1031’s at all levels and cross collateralizing. There is tremendous liquidity literally chasing almost any type of real estate — as they say there is a market for any piece of dirt.
As always, we are available to discuss your personal or client financing needs. Have a happy and safe 4th of July holiday!! We welcome your contact — stay tuned!
Gloria Shulman and Curtis Cohen
by: Jacob “Coby” Cohen
As more and more Millennials graduate from college and graduate school and embark on their life’s path, a common question arises should I rent, or should I purchase a house. There are many misconceptions about home ownership and qualifying for a mortgage. Perhaps the biggest and widely missed understood concept is having to save 20% for a down payment. This, however, is not the case as there are many loan products available in the market place that only requires a 3%, 5% or 10% down payment. In many metropolitan areas, the monthly mortgage payment can be less expensive than a monthly rent payment. This element doesn’t even take into account the tax benefits of mortgage interests and property tax deductibility “even with the new Tax Cuts and Jobs Act of 2017”. Furtherer more debt to income ratio for loan qualifying has relaxed, with this ratio going as high as 50% of one’s income and still being able to qualify for a mortgage. However, one must carefully analyze their particular situation in deciding between renting vs. owning. There are many important factors to consider including but not limited to job security, the location of the property to both job and family and school districts in the neighborhood for a future family. However, most importantly one has to understand the associated additional costs of homeownership. There is always going to be some kind of repair and general maintenance to be performed which adds additional costs to home ownership vs. picking up a phone and explaining to the landlord that something is broken and needs to be replaced or fixed. These are the type of questions that need serious discussion and consideration when weighing the benefits of homeownership. An additional positive of homeownership is that of capital appreciation over time even with a small annual percentage gain the appreciation of the home is a significant benefit of home ownership.
Even with all of the above reasons for home ownership, renting still may be better suited for many Millennials this could be a result of many factors. Perhaps number one on the list is that many millennials have student loan obligations and they are nervous about having to repay these loans while at the same time having to make mortgage payments. According to CNBC, the Millennials ages 25 to 34 have an average of $42,000 in student loan debt each. Another factor why renting appeals to more people of the Millennial age group is that of location with home prices at near record levels across the country especially in urban areas where most Millennials desire to live, the costs of homeownership merely are too expensive. This forces Millennials to look at secondary or tertiary locations or cities which are outside the circle of their work, family, and friends.
This, in turn, underscores the strength of the multifamily apartment marketplace. Investors and developers have had a keen understanding of what the millennial renter is seeking in their living situation. Amenities such as; swimming pools, gyms, shared common space and other on-site services have been a driving force in capturing the millennial market into renting in prime areas vs. the path of home ownership in outlying areas. The appeal of not having the additional financial stress of purchasing a property coupled with the ability for millennials to share apartments and split costs is a significant factor in the decision-making process. Having one or two roommates in an apartment is much easier than having to purchase a property with another party. The commitment level on renting vs. owning has a much lower threshold. The co-ownership route is a road lined with numerals deep sinkholes.
Ultimately, the factors that determine one’s perceptions about job stability and the health of the real estate market are the two most significant factors in contemplating the rent vs. own question. Each person has their own personal philosophy and level of financial stress they are willing to undertake to make a decision. It would be wise for millennials and any prospective buyer to have discussions with an advisor or trusted knowledgeable friend in discussing their housing decision
Time marches on…Hope everyone is well!!
The “current” major focal point of world economics is the US – China trade dispute. While most of us view this as the focus of the issue, we should not underestimate how the trade dispute manifests itself and characterizes global trade concepts as a whole. Creating an “out there” analogy– Global companies function in the same manner as a simple roof leak in a piece of real estate. The water leak will migrate to the path of least resistance and usually pick up momentum. In our overall economic model, companies regardless of size and specialty of the business structure will allocate resources to the most effective, but least expensive supply chain and production possible. How this plays out is subject to a multitude of variables of course.
This tariff dispute and resulting economic uncertainty has led to pressure on bond rates creating very attractive mortgage rates. The current read is that no one knows how long this current opportunity will prevail. Obviously, there can be a directional change with one tweet, so anything goes…
Please contact us to review your current mortgage and provide some thoughts on any new acquisitions that maybe contemplated—residential and commercial of course. Now is the time to act. We do not know when rates might make the U-turn back up!!! We have lifelong backgrounds in all areas of real estate, in addition to a very broad based spectrum of clients and contacts at all contacts.
As always, please feel free to connect with us to review your financing situation and just to say hello!! We welcome your contact!
Gloria Shulman and Curtis Cohen