Atlantic Capital Management

Atlantic Capital Management (114)

Friday, 25 May 2018 15:42

Facts About Refinancing

Written by

Even with interest rates rising, you may want to explore the possibilities.

In the first quarter of 2018, the refinance share of home loan applications in the U.S. fell to 40%, the lowest in ten years. Higher mortgage rates had reduced demand for refis.1

Still, the refi is not exactly dead. If you have good credit, you may be considering refinancing yourself, for one or more reasons. Perhaps you want to shorten the term of your home loan. Maybe you have an adjustable-rate mortgage now and want to refi into a fixed rate. Or, maybe you want to tap into home equity or consolidate debt. Whatever your reason(s), you must weigh two questions. One, how long do you want to stay in your home? Two, how much money will you really save?

Refinances break down into three types: rate-and-term, cash-out, and cash-in. Rate-and-term refis simply adjust the term and/or the interest rate of your existing loan. Even though interest rates are rising now, they still make up the bulk of refinances. This kind of refi could permit you to walk away from closing with as much as $2,000 in cash. The no-cash-out variety adds closing costs to the loan balance, relieving you from having to pay those costs out of pocket.2

A cash-out refi gives you an opportunity to tap home equity and pay off your existing mortgage. In a cash-out mortgage, the loan balance on the refinance is at least 5% more than the balance on the original loan. As you just owe the balance of your original loan to the lender, the overage is either paid out as cash at closing or routed to your creditors to help you whittle down other debts.2

A cash-in refi is the inverse of a cash-out refi. You bring cash to the closing to lower the outstanding principal of the loan, pursuant to a shorter loan term or a lower interest rate available at lower loan-to-values (LTVs). You may be able to cancel mortgage insurance premium payments as part of the move (i.e., by reducing a conventional mortgage to 80% LTV or lower).2

How much will a refi cost? In ballpark terms, the answer is often $2,000-$5,000. In percentage terms, think 3-5% of the loan amount.3,4

The price of a refi may be notably cheaper in one state than another, thanks to variations in closing costs. Of course, certain closing costs may be negotiable, like app and processing fees. Sometimes you can save on title searches, title insurance, and inspections by turning to a third party for those services. If your last appraisal was conducted recently, you might be able to negotiate your way out of a new one.3

Sometimes you can refinance without an appraisal. The Federal Housing Administration (FHA) and Veterans Administration (VA) offer streamlined refinancing programs to homeowners with existing FHA or VA-backed home loans. The underwriting process is less demanding than it would be otherwise. Besides usually waiving the appraisal, these programs also commonly waive credit score and income verifications.2

In some situations, refinancing may not be “the answer.” If you are stretching the term of your loan out with a refi, you will carry mortgage debt for years longer than you originally planned, complete with thousands more paid out in interest. If you are using home equity to fund a remodel or upgrades, your home’s value may not rise as much as you anticipate from the work. Then there are the little curveballs life throws at us, such as potential job changes and relocations. If you sense you might have to move before you can recapture the closing costs of the refi, is it even worth the trouble to try?

Hopefully, you will be able to lower the interest rate on your loan, shorten its term, or find a way to reduce your monthly payments through refinancing. Online calculators and a conversation with a trusted mortgage professional may help you determine the potential break-even points for a refi and find paths to a home loan more suitable to your needs.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 - cnbc.com/2018/03/13/mortgage-refinances-fall-to-decade-low.html [3/14/18]

2 - themortgagereports.com/16096/refinance-mortgage-rates [12/9/17]

3 - lendingtree.com/home/refinance/how-much-does-it-cost-to-refinance/ [3/14/17]

4 - investopedia.com/financial-edge/1010/9-things-to-know-before-you-refinance-your-mortgage.aspx [1/12/17]

Wednesday, 16 May 2018 14:39

Avoid These Life Insurance Missteps

Written by

Shop wisely when you look for coverage.

Are you about to buy life insurance? Shop carefully. Make your choice with insight from an insurance professional, as it may help you avoid some of these all-too-common missteps.

Buying the first policy you see. Anyone interested in life insurance should take the time to compare a few plans – not only their rates, but also their coverage terms. Supply each insurer you are considering with a quote containing the exact same information about yourself.1

Buying only on price. Inexpensive life insurance is not necessarily great life insurance. If your household budget prompts you to shop for a bargain, be careful – you could end up buying less coverage than your household really needs.1

Buying a term policy when a permanent one might be better (and vice versa). A term policy (which essentially offers life insurance coverage for 5-30 years) may make sense if you just want to address some basic insurance needs. If you see life insurance as a potential estate planning tool or a vehicle for building wealth over time, a permanent life policy might suit those ambitions.1

Failing to inform heirs that you have a policy. Believe it or not, some people buy life insurance policies and never manage to tell their beneficiaries about them. If a policy is small and was sold many years ago to an association or credit union member (i.e., burial insurance), it may be forgotten with time.2

Did you know that more than $7 billion in life insurance death benefits have yet to be claimed? That figure may not shrink much in the future, because insurers have many things to do other than search for “lost” policies on behalf of beneficiaries. To avoid such a predicament, be sure to give your beneficiaries a copy of your policy.2

Failing to name a beneficiary at all. Designating a beneficiary upon buying a life insurance policy accomplishes two things: it tells the insurer where you want the death benefit to go, and it directs that death benefit away from your taxable estate after your passing.3

Waiting too long to buy coverage. Later in life, you may learn you have a serious medical condition or illness. You can certainly buy life insurance with a pre-existing health condition, but the policy premiums may be much larger than you would prefer. The insurer might also cap the policy amount at a level you find unsatisfactory. If you purchase a guaranteed acceptance policy, keep in mind that it will probably take 2-3 years before that policy is in full force. Should you pass away in the interim, your beneficiaries will probably not collect the policy’s death benefit; instead, they may receive the equivalent of the premiums you have paid plus interest.3

Not realizing that permanent life insurance policies expire. Have you read stories about seniors “outliving” their life insurance coverage? It can happen. Living to be 90 or 100 is not so extraordinary as it once was.3

Permanent life insurance products come with maturity dates, and for years, 85 was a common maturity date. If you live long enough, you could outlive your policy. The upside of doing so is that you will receive a payout from the insurer, which may correspond to the policy’s cash value at the maturity date. The downside of outliving your policy? If you want further insurance coverage, it may not be obtainable – or it could be staggeringly expensive.3

Take your time when you look for life insurance, and compare your options. The more insight you can draw on, the more informed the choice you may make.

  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - smartasset.com/life-insurance/5-mistakes-to-avoid-when-buying-life-insurance [4/11/18]   

2 - kiplinger.com/article/saving/T063-C032-S014-could-unclaimed-money-be-yours.html [10/13/17]

3 - nasdaq.com/article/4-errors-to-avoid-with-your-life-insurance-cm868133 [10/30/17]

Our Blog

2018

(21 articles)

2017

(24 articles)

2016

(24 articles)

2015

(15 articles)

2014

(18 articles)

2013

(12 articles)

2012

(3 articles)