The most ingenious thing lenders ever came up with was refinancing real estate for which you already owe a boatload. It’s all about the payment. And you can pretty much count on making payments for the rest of your life and you are foolish if you don’t. Loans secured by real estate are by far the cheapest rate loans around.
By refinancing (forget your dad’s dream of paying the house off) you get cash out or pay down your revolving debt (which is holding your credit score down). Thus increasing your credit score. And your credit score seriously affects your insurance rates and your interest rates paid on loans.
And there is nothing like taking a loan on some appreciation. Generally when you refinance it is not because you have almost paid it off, it is because you have gained money on the current market value. And while the market may be down in a few areas, it is currently coming back with a fury.
Almost every day I see signs that say under contract (usually sells when they put that sign up).
I is better than when you have to put up a price reduced sign because you either overpriced your home or you weren’t realistic as to how your house compared to others in the neighborhood (even if they are not for sale now).
And think about this, refinance your house and use the cash out for down payment on a new house. Move out rent the old house, get a new loan on the new house.
and even better and I know it works, every time you get a new mortgage on a new house, your new home qualifies as OO (owner occupied). And while your old house will become an asset, you will be keeping your old loan (which you got at oo rates on). If your purchase or refinance a house you are renting to someone else, then you get NOO (non owner occupied rates), which can be 1% or more higher.
Don’t get an adjustable rate, or a loan with PMI or a prepayment penalty. And forget the escrow too, and any sane lenders should let you pay your own taxes and insurance. Put this money away every month on your own, even if into a different account. Or plan on paying your taxes in full every 6 or 12 months with your insurance. I personally prefer biannual taxes and insurance payments instead of monthly.
If you’ve got rent receipts instead of Real Estate tax bill receipts and can’t get a mortgage then DO this:
Rent a place with option to buy, even if you have to pay some money down. Just make sure you agree on the price right now! or at least how the price will be determined. Once you have been living there for a year or two and have canceled rent checks showing your payment history, you can refinance it EVEN if you don’t own it. Even if the owner doesn’t give you monthly credit towards the purchase price or something, you still have your $ down to the owner (down payment), you can prove you have been paying every month for the house x numbers of months rent was paid, you have agreed on the price.
Then 2 years later you buy the house for $150,000, now its worth 180,000 and you gave him 5000 down, plus rent every month, plus any monthly credits towards the purchase price (or even the down payment!) you are looking pretty good I don’t care what your credit score is. It is easy to get a score up with some cash.
Fix it up a little while you are living in it for a year or more. Refinance it, get max cash out and take this and use it as a down payment on another house and move in there. Repeat process and eventually you will find the house you like the most. Or maybe your long term goal is to build a house, in any event this can get you there.
Eventually the mortgage can be paid off and all the rent is now 100% yours, you own the property and someone else had paid for it.