Should I Refinance My Mortgage?
In the wake of August 2011's stock market athletics, and the accompanying drop in interest rates, some have wondered whether they would benefit from a mortgage refinance. To help you decide if refinancing is right for you now, we have asked some of our favorite local mortgage officers for their opinions.
Martha Preston, Mortgage Loan Originator from CFCU Community Credit Union responded promptly with some good general guidelines to consider:
"The mortgage interest rates are incredibly low, but the mortgage underwriting guidelines are tighter than they've ever been before, so borrowers have to jump through a few more hoops in order to take advantage of these low interest rates. The old rule of thumb was that if you could reduce your interest rate by 2%, it was worth refinancing, but that was back when interest rates were much higher … now the rule of thumb is if you can recapture the costs to refinance within 24 months/2 years, it is worth refinancing."
Brian Kunk-Czaplicki,Mortgage Officer of the Alternatives Federal Credit Union, responded to our query with this clear and comprehensive statement:
"Right now is a great time to refinance a mortgage. Mortgages are a function of the interest rate, for sure. But, they are also a function of time. If someone started their 30 year fixed rate mortgage 25 years ago, it matters very little what interest rate they refinance to. They have such a small amount of time and principal left that they would not save any money on refinancing even if they drop their rate a few points.
I educate borrowers that are approaching a milestone (like 5 years into a 30 year loan) to look at all the options, including shorter term loans. Even a 20 year amortization may be able to shrink their total payout over time, and their payment might not change much depending on the amount of the new principal.
As far as Adjustable Rate Mortgages (ARM's); Most Home Equity Lines of Credit (HELOC's) have an adjustable rate feature. So if folks want to put equity into their home through improvement projects, but don't want to borrow all the money right up front, a HELOC offers a favorable term (usually between 10 and 20 years) and a flexible balance that can be repaid without penalty and reused for future projects or debt consolidation in trade for the prospect of a fluctuating rate over time. These are usually second mortgage products.
Adjustable rate first mortgage products are regulated much more since the market fell apart. For example, in 2008 the Federal Government instituted a market survey for fixed and adjustable rate mortgage products. This survey tracks the overall cost (the Annual Percentage Rate, or APR) including future rate/payment adjustments for ARM's. Financial institutions are to compare their products' APRs to this market survey weekly. Mortgage products with an APR that exceeds the market survey require significant disclosure and are considered more "risky". This discourages lenders from offering mortgage products that might experience immense jumps in payment due to significant &/or frequent changes in the interest rate over time. If a mortgage has a rate that can adjust in the future, it will be noted clearly on the new Good Faith Estimate form.
All of this basically means that borrowers need to really assess what their goal is and then they can accurately decide what their best option is. If they only want to be in the house for a few years, they can get a loan that has a better interest rate than a 30-year fixed rate loan. If they plan on staying in the home for a long period of time (longer than 10 or 15 years) then they might choose a slightly higher interest rate with a fixed rate product.
Pre-qualification for new mortgages, refinancing, and home equity lines of credit (HELOC's) is a free service available at most lenders, including the AFCU and CFCU.
If you think refinancing your mortgage may be a good idea for you, Brian, Martha or any of our other excellent local lenders are happy to meet with you to prequalify you and offer their best advice, with your goals in mind.
To give yourself a head start, click here and fill out the form to calculate your revised monthly mortgage payments: http://www.mortgagecalculator.org/ . Each lender is the best source of information on their menu of financing products and the closing costs associated with them.
Please visit our resources for links to these local lenders and other helpful mortgage brokers and loan officers.
January 2011 Sound Advice
The 2011 calendar has barely turned and already my Realtor colleagues here and elsewhere are expressing optimism that this year will be a busy one. Here in the midst of this snowy January, we have already seen the rate of activity double on the Ithaca Board of Realtors Multiple Listing Service, as compared to the 2010 holiday season. Five of my company listings, on the market since last summer, have just received acceptable purchase offers.
Fresh properties are beginning to appear on the market and last year's unsold properties are being re-tooled, re-priced, and re-marketed for the 2011 market. If my business is any indication, there is a solid backlog of motivated and qualified buyers competing for a relatively small pool of available properties. Capable, service oriented local lenders (see the "lenders" on the "Resources" page) continue to offer a menu of mortgage products at historically low interest rates.
Perhaps both buyers and sellers have something to cheer about. I can't guarantee that sale prices will be higher in 2011, but I am confident that we will witness a brisk market develop over the next few months. Historically, houses listed in this early "spring market" have sold more quickly and for more money that at other times of the year. Last year was an exception to that rule, but I am optimistic that Spring, 2011 will be a fine real estate season.
Feeling ready to jump in? Here at Carol Bushberg Real Estate, I am now advising my clients to list their properties as soon as possible.
Thinking of selling? Need advice on your property's value or how to stage it for the real estate marketplace? Call or email Carol Bushberg Real Estate, where I do my utmost to provide all my clients with "Sound Advice for Big Decisions."
September/October, 2010 Sound Advice
How is the current economic climate
affecting local trends in real estate sales?
It has been two years since the collapse of financial giants like Lehman Brothers and AIG in Fall, 2008. Since that time, news reports have been full of discouraging information on the housing market. How is the current economic climate affecting local trends in real estate sales?
As a member office of the Ithaca Board of Realtors Multiple Listing Service, Carol Bushberg Real Estate has access to data on sales of Tompkins County homes. My staff and I have compiled the table and bar graph below.
The bar graph (Figure 1) compares sales of residential properties sold during twelve month intervals beginning in October 2007, one year before the crash. The last bar represents the number of houses currently available for sale.
What may be surprising is the lack of dramatic change in the number of houses sold over the last three years here in Tompkins County. This is in contrast to national trends, according to the US Census Bureau, whose findings on the drop in household formation correspond with slow housing sales in many communities. The formation of new households has dropped by 2/3 from the 5 year period preceding the financial crisis. For more on this topic, see the link below:
Local statistics are more encouraging. While the drop in home sales in 2008-2009 may not have been unexpected, the 2009-2010 numbers show tangible evidence of recovery, even before the calendar year is out.
Pricing a house to sell seems to be the key to efficient sales in this economy. There is little inventory remaining on the market under $250,000, whereas, above that asking price there is an excess of inventory. At asking prices above $350,000, the number of properties currently on the market exceeds the number of homes typically sold locally, during a one year period. 75% of the residential properties that sold in Tompkins County in the past 12 months, sold for under $250,000.
The table (Figure 2) compares the number of days that houses remained on the market this past year, with the number of days that houses currently for sale have been on the market. We see similar trends in these data; houses priced above $250,000 and currently available for sale have lingered on the market for an average of ten months, whereas less expensive houses with sale prices under $250,000 sold in an average of 4 months . Some houses between $250,000 and $500,000 also received offers after 4 to 5 months on the market. Likely those that sold quickly were priced to sell.
This past year, for every house that sold for over $500,000 in Tompkins County, eleven homes sold for under $150,000. This is exciting news for those who own a reasonably priced home and may wish to purchase a more expensive one. Those hoping to sell more expensive homes should be realistic as they price their homes, since they are competing in a flooded market, and for a small fraction of the buyer pool.
August 2010 Sound Advice
Sound Advice: Getting an Education on Certificates of Compliance
Do you own a property that includes a rental unit of any size? It may be as small as a rented room in your home or as large as a multi-unit apartment complex. The municipality in which your property is located has a legal right to monitor the condition of rental units within its boundaries.
Typically, your municipality’s building or zoning office inspects rental units to evaluate their condition and habitability. Once a rental unit passes inspection(s), the municipality generates a Certificate of Compliance or Occupancy-different municipalities use different names. Some municipalities, like the City of Ithaca, simultaneously define the number of legal bedrooms and the number of legal occupants permitted to reside in the house or apartment. Tompkins County municipalities differ as to the length of a valid Certificate of Compliance/Occupancy, but in most cases the Certificate is valid for a few years.
Thanks to the internet, landlords can access information about their community's policies via the municipal website. For those who prefer conversation, building or zoning department employees are helpful and well informed.
Given its high tenancy rate, the City of Ithaca maintains particularly strict oversight of rental properties. Many landlords are unaware that the onus of responsibility for contacting the City of Ithaca Building Department to update and renew Certificates of Compliance rests with the property owner. All current City Certificates include an expiration date-mark your calendars!
When a Certificate of Compliance lapses out of date, getting a new one usually involves a short cycle of inspections and repairs. City of Ithaca Building Department staffers recommend that City property owners allow a minimum of 60 days to receive an updated Certificate of Compliance.
The City of Ithaca Building Department provides a checklist of items to help landlords know what to expect from the housing inspection process:
There are fees associated with the renewal of these certificates and they too are the responsibility of the property owner.
No matter where your income property is located, if you are preparing your property for sale, it is especially important to have a current Certificate of Compliance. Banks and credit unions usually require valid Certificates before money can be lent.
Not ready to sell your property? It is still vital to keep your Certificate up to date. As a property owner you can be fined or found liable if your rental property is not adequately maintained, lacks current and appropriate Certificates, or is found to be in violation of local occupancy regulations.
Also, experienced property management firms, including the Cornell University Housing Office, are likely to require that you have a valid Certificate before they are willing to publish information about your property for rent.
July 2010 Sound Advice
Why NOW is a Great Time to Buy!
Have you been wondering if you missed out by not taking advantage of the Federal Government’s first-time home buyer’s tax incentive this past spring? The good news is that this is still a wonderful time to buy, and conditions may be even more advantageous this summer than they were in April. Why?
Interest rates have fallen even lower than they were in April. Nationally, the Federal Home Loan Mortgage Corporation shows a drop in 30 year fixed mortgage rates from 5.10% in April to 4.58% in July.
You may be interested in to learn more about trends in mortgage financing by visiting the following sites:
A larger inventory of homes of all kinds is available through the Ithaca Board of Realtors Multiple Listing Service. There were 1001 residential properties of all types on the market in June, 2010, as compared with 981 in April, 2010; roughly eighty five percent of these properties are single family homes.
There continues to be a large number of properties available now, since the market was extremely quiet during May and June of this year. This lull was not surprising, given the race that we saw to meet the April 30th purchasing deadline to qualify for the Federal Income Tax Credit. However, since late June, we have seen an increase in the amount of buyer activity and properties going under contract. The historically low interest rates that are now available have increased the borrowing power of a homebuyer’s income and/or decreased the cost to borrow that money.
There may be some intangible differences in negotiability. We won’t have statistics showing the difference between listing price and selling price until the current listings are sold, but anecdotally, it seems that sellers are highly motivated and may be willing to entertain a wider range of offers.
Historically low interest rates, a large pool of interesting properties available for sale, and a seller pool that is motivated to do business….that’s why NOW is a great time to buy!
June 2010 Sound Advice
Avoiding and Coping with Encroachment Agreements
Property buyers and sellers alike hope for a smooth closing when real estate changes hands. Like good fences, good encroachment agreements can make good neighbors.
What is an encroachment?
An encroachment is an improvement, such as an overhanging gutter, a stretch of fence line, or the wall of a building, which belongs to one neighbor but extends, wholly or in part, onto a property owned by another party.
It is often the case that encroachments exist and neighbors are unaware of them, until the time of a sale. Property surveys, prompted by the pending sale of a parcel, may identify a previously unknown encroachment, or confirm that one exists. With the advent of more sophisticated surveying equipment, encroachment problems have become more common.
Simultaneously, lenders and the mortgage underwriters that review loan applicants (and the properties that intend to purchase) have become stricter. The attorney for the lender studies the fresh survey prior to closing. Upon learning that an encroachment exists, a lender will typically require that the affected neighbors sign an encroachment agreement, before the property closes.
What is an encroachment agreement?
An encroachment agreement is a fairly simple agreement between the owners of the affected properties. Standard agreements acknowledge and describe the encroachment, and identify who is the owner of the encroaching improvement.
Firstly, the encroaching owner agrees that, despite the fact that they are “using” the neighbor’s property, they will not make any future claims of ownership on the neighbor’s property.
Usually, the owner of the encroaching structure agrees to maintain it and to hold the neighbor harmless for any damage the encroachment might cause. He or she remains responsible for maintenance of the encroaching structure. These agreements often stipulate that if the improvement deteriorates and requires replacement, the future structure will not be allowed to encroach.
Though encroachment agreements are relatively simple, I recommend that you engage an experienced real estate attorney to write an encroachment agreement for you.
“Sound Advice” on how to avoid encroaching:
Fence lines are, by far, the most common types of structures that encroach on a neighbor’s property. Here are my tips for avoiding the need for an encroachment agreement:
- Make sure that you have a very recent survey, IN HAND, before you initiate any fencing project. If you do not, have the relevant boundary line surveyed and make sure that the surveyor places obvious, multiple, and permanent pins along the property line, so that there will be no future disagreement about your property lines.
Extend rope or tape between the pins. If you are hiring a contractor to install your fence, make sure that this work is done BEFORE the contractor arrives to install the fencing.
- I recommend that you locate the new fence 6” inside your property line, just to make sure that you do not run the risk of encroaching on your neighbor’s property.
- Please note: “Neighbor Law,” a body of laws that address the rights of adjoining property owners, mandates that the party that is constructing the fence is required to have the less attractive side of the fence (if there is one), facing towards themselves.
For more detailed information on encroachment agreements, please refer to this excellent, plain language discussion on the topic from the blog of Cary, NC attorney Jonathan Richardson:
May, 2010 “Sound Advice”
Tax Credits for Energy Efficient Home Improvements
From the Federal and New York State Governments
Planning spring or summer home improvement projects? Keep in mind that it's not too late to take advantage of federal tax credits for improvements that enhance the energy efficiency of your home.
Many improvements placed "in service" by December, 2010 are eligible for up to $1500 in federal tax credits. These include: insulation, replacement windows and doors, heating, ventilation and air conditioning, roofing and domestic hot water heaters. More expensive alternative energy capital improvements like geothermal heat pumps, wind energy and solar installations will remain eligible for tax credits until 2016.
In order to claim your tax credit you will need to save receipts for the energy saving products you purchase, and submit them when you file your 2010 tax return. Manufacturer's Certification Statements should be saved and kept in your own records, though they do not need to be submitted in order to receive your tax credit.
To qualify for the tax credits, your appliance or improvement must appear on the Fed's list of qualifying products. JUST BECAUSE AN APPLIANCE IS ENERGY EFFICIENT DOES NOT MEAN THAT IT AUTOMATICALLY QUALIFIES FOR A TAX CREDIT. If this credit is necessary to make your project affordable, please make sure that you or your contractor confirms that the new appliance and/or improvement qualifies.
For a complete listing of what improvements qualify for this program, visit the U.S. Department of Energy Website: http://www.energysavers.gov/financial/70010.html
Detailed instructions on how to apply for your federal tax credit can be found here: http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Though some credits have expired, further tax savings may be available from New York State. For a comprehensive list, try the Database of State Incentives for Renewables and Efficiency: http://www.dsireusa.org/incentives/homeowner.cfm?state=NY&re=1&ee=1
How valuable are these new tax credits? The U.S. Department of Energy explains:
"A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces your income tax burden dollar-for-dollar, while a deduction only removes a percentage of the income tax that is owed. Consumers can itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government."
For a more generalized description of what tax incentives may be available, it's worth a visit to this website to educate yourself further: http://www.energy.gov/taxbreaks.htm
April, 2010 "Sound Advice"
The Hydrofracking Controversy
As citizens of this region, I want to encourage you to educate yourselves on the hydrofracturing ("fracking") controversy. You've seen the signs, but what is "fracking?" Hydrofracturing is a process used to extract natural gas from previously impermeable shale. Also known as hydraulic fracturing, the process utilizes millions of gallons of water, sand, and chemicals injected at high pressure into horizontally drilled wells, some as far as 10,000 feet below the surface.The pressure causes the shale to 'crack'. These cracks or fissures are held open by the sand particles and chemical wedges, which then allow the natural gas to escape the shale, for collection in the gas well.
Many of our neighbors have leased rights to national energy corporations in return for yearly income and/or royalties on any marketable natural gas that is extracted by these energy companies from wells on the their property. There is tremendous controversy concerning the safety and long term environmental impact of this industrial activity including: extensive chemical pollution of aquifers and private wells, high volume truck traffic, squandering of vast amounts of fresh, potable water, and the transformation of an area known for its natural beauty into a landscape peppered with natural gas worksites and platforms.
Owners of large parcels of land who might plan to subdivide in the future should be aware that conventional banks are often unwilling to provide mortgages for buildings on land that has been leased to an energy company (or any third party.) Make sure you are aware of all the ramifications before you sign any agreement.
Think that this does not affect you? Go to http://www.tcgasmaps.org and see a detailed map of all the tax map parcels in Tompkins County and the leasing status.
One of the most comprehensive sources of information on this issue is the website for Shaleshock Action Alliance: www.shaleshock.org/ . Toxics Targeting Inc. also has a very valuable site; http://www.toxicstargeting.com/MarcellusShale .
On a lighter note, those who share my appreciation of zombie literature and lore really must take a few minutes to view Shaleshock's addition to the canon of zombie genre films by viewing the recent locally produced movie: Frack Attack: http://fracattackthemovie.com/watch-the-movie/ .
Informing yourself is critical to understanding this controversy.
March, 2010 Edition
The Greener the Better
Kermit the Frog sang “It’s not easy being green”, and just like Kermit, “green” is really what we want to be. When you prepare to sell your home, or even if you just want to spruce it up for spring, here are some handy references for keeping a “green eye” on the whole process:
Disposing of Hazardous Household Chemicals
Cleaning out the garage, the basement or the attic inevitably involves the dilemma of how to dispose of hazardous household chemicals that should not be dumped into sewer drains or septic systems. What can you do with non-recyclables, like partially used cans of paint, aerosols, varnishes or other toxic substances?
For the price of a solid waste permit, the Tompkins County Solid Waste Division offers the perfect solution. On DEPOT Days (Don’t Empty Pollutants in Our Trash), Tompkins County residents can safely and easily dispose of household hazardous waste by following these simple guidelines: http://www.recycletompkins.org/EditorsTree/view/166/298
Load bottles, cans, and buckets of household chemicals into your car; Depot Day staff will remove and safely dispose of them.
“Green” Housecleaning and Maintenance
As you prepare for spring cleaning, remember that avoiding popular brand name products may benefit both your health and the Earth’s. You can save money and achieve sparkling results with the simplest ingredients, found at the following links: http://www.eartheasy.com/live_nontoxic_solutions.htm , http://www.greenseal.org/
Be aware of non-toxic options when you select new paints and finishes for touching up interior and exterior surfaces: http://www.eartheasy.com/live_nontoxic_paints.htm
Reduce, Reuse, Recycle
The Finger Lakes Reuse Center in the Triphammer Mall, http://www.fingerlakesreuse.org/, offers a “deconstruction service” as an alternative to demolition. Part of their mission is to reduce solid waste by “deconstructing” worthy old homes and buildings and salvaging the building materials for future use. They also accept gently used furniture, commercial fixtures and house wares, which are then sold at their retail center.
Love Knows No Bounds is an organization near and dear to our hearts, http://www.renew-orleans.org/. Despite the passage of time, the people of New Orleans still need donations of furniture, clothing and house wares to help them rebuild their homes after the devastation of Hurricane Katrina. Donated furniture, appliances, building materials, clothing and house wares are trucked from Tompkins County directly to a Parish distribution center in New Orleans. LKNB also now has initiatives in place to offer aid to the survivors of the recent earthquake in Haiti.
Carol Bushberg has completed the certificate of Green Designation with the National Association Realtors. She is prepared to help you make environmentally conscious decisions about any aspect of home modification.
February, 2010 Edition
Should I Grieve my Tax Assessment?
The groundhog's prediction of spring may or may not be reliable, but one thing we can all count on for sure is the yearly tax cycle: http://www.tompkins-co.org/assessment/cycle.pdf.
The mission of the Tompkins County Assessment Department is to tax your property on the basis of its current market value. Now is the time to confirm that your property tax assessment(s) matches the current market value of your property. Though a low assessment is never a bad thing, a higher than market value assessment may mean that you are paying more than your fair share of property taxes. This can be a disincentive to buyers, if you are in the process of attempting to sell.
1. Find your current assessment on your most recent property tax bill, or The Tompkins County Department of Assessment offers an online process for getting this information: http://asmsdg.tompkins-co.org/disclaimer.aspx
2. Determine the current market value of your property. This is often done by identifying properties like yours that have recently sold. If you would like help, I will gladly discuss your property and local trends. I can to provide you with comparable sales data to support your discussions with the Assessment Department.It has been my experience that, in most cases, it is not necessary to have your property professionally appraised, in order to successfully grieve.
3. Fill out the grievance application by the County deadline and attend Grievance Day.This is a less intimidating experience than one might expect; complainants present their case for assessment reductions to a small and friendly group of Assessors and expert volunteers.
The following is the assessment calendar to help you with your planning:
March 1st: The Tompkins County Assessment Department mails notices to property owner's whose assessments are likely to change.
May 1st: Everyone who has not received the March mailing will receive a notice of their next year's assessment, called the Tentative Assessment Roll.
May 1st→Fourth Tuesday in May: This is the period during which property owners who believe that their assessment is incorrect can submit grievance applications. To grieve an assessment, follow this link to the grievance application, which must be filed with the Assessment Department prior to Grievance Day: http://www.orps.state.ny.us/ref/forms/pdf/rp524.pdf
4th Tuesday in May: Grievance Day:
The Board of Assessment Review meets with property owners to discuss their complaints.
July 1st: You will be notified of the final results of your grievance.
For an expanded description of the assessment and grievance process, please click here:
January, 2010 Edition, Sound Advice
Sound Advice for Sellers
If you intend to sell your home in 2010, local data prove that Sellers get the highest prices for their homes when they list them with Realtors between January and April of any year. Therefore, if you have not already begun the process, the first weeks of the New Year are an important time for preparing your property for sale.
Here are a few things you can do to ensure that your property will have the best chance of selling this spring with a minimum of hassle and a maximum of profit:
- Establish a relationship with an experienced real estate professional like me, with the stated intention of learning more about getting your property sold. As a free service, I will visit and evaluate your property. My office works with sellers and buyers of homes, commercial and investment properties, raw acreage, and subdivided building lots.
- An important part of my job is to prioritize the repairs/maintenance necessary to maximize the appeal of your property to your target market. Some Realtors suggest quite elaborate (and expensive) changes to your property, before it goes on the market. I am gentle and reasonable with my clients, knowing that their funds and time are often limited. When I visit your property, I will compare your “To Do List” to mine.
- Visit the following link to read a report published annually by the National Association of Realtors. The “Cost vs. Value” edition compares the return on a homeowner’s investment in a variety of upgrades and additions, http://www.realtor.org/
- It is vital to know if pending repairs will impact the “bankability” of your property. Old or leaking roofs, scaling exterior paint and substandard electrical service panels-this deferred maintenance is likely to be noticed by the buyer’s bank (via the bank appraiser) and often complicates a purchase or sale. There are strategies for handling these problems-best discussed with me, well in advance of placing your property on the market.
- I am glad to be a source of referrals for local contractors and real estate related professionals including (but not limited to); cleaners, haulers, landscapers, property managers, lenders and attorneys.
Sound Advice for Buyers
- Serious homebuyers-now is the time to get yourselves pre-approved by a lender! As we move into the spring market, there is likely to be brisk competition from other buyers. You will be at a disadvantage if you have not done the important work of getting preapproved for a mortgage. Sellers and their real estate agents often stipulate that a prospective buyer submit a preapproval letter along with their offer, or provide such a letter within a very short time after acceptance of the offer.
There is a big difference between preapproval and prequalification; for more information, go to http://www.mortgage101.com/
- Did you think you missed out on the $8,000.00 tax credit people were buzzing about last fall? Due to the remarkable success of the Federal Homebuyer Tax Credit for first time home buyers, the deadline for this opportunity has been extended. Experienced homeowners can now benefit, as well. “Eligible buyers who are selling a home that they have occupied for five of the last eight years may now apply for a $6500.00 tax credit. In order to qualify for this Tax Credit, homebuyers must close on their new homes by June 30, 2010. January, 2010.” For more information: http://www.federalhousingtaxcredit.com/