10 Clever Ways to Save Money on Your Mortgage

What’s your biggest expense? If you’re like most people, it’s putting a roof over your head. And it’s getting more expensive. In fact, the cost of housing is rising faster than incomes for the middle class, according to a National Housing Conference report. Renters may have the worst of it; the Wall Street Journal reports that rent has been rising for 23 consecutive quarters.

By buying a house, you have more control over rising housing costs. You won’t have to worry about a landlord raising the rent, and a fixed-rate mortgage loan guarantees the same principle-and-interest loan payment for the next 30 years. Yes, borrowing for a home is expensive. Fortunately, with a few smart strategies, you can reduce your monthly mortgage payments and cut the overall cost of paying for your home. Here are some options:

1. Modify Your Loan - If you are late on payments or going through tough times, you might qualify for a loan modification through various programs. Depending on the program, you could qualify for a reduced interest rate, forgiveness of part of the principal, or an extended loan period and lower monthly payment. Check out various programs on MakingHomeAffordable.gov or contact your mortgage servicer.

2. Cut Out the PMI - If you borrow more than 80% of the value of your home, you normally have to pay for private mortgage insurance (PMI) to protect the lender. PMI typically costs between .5% and 1% of the loan amount. So if your loan balance is around $140,000, you could be paying as much as $1,400 for PMI just this year. A down payment of 20% is the most obvious way to avoid paying for PMI. If this is tough with the homes you’re considering, Realtor.com suggests simply shopping for lower-priced homes for which you can make a 20% down payment. Multiply the down payment you have by five to arrive at the highest price you can pay while avoiding PMI.

Credit.com says some lenders still offer 80/10/10 programs. This structure allows you to borrow only 80% on the primary mortgage, so you don’t have to pay for PMI, and then borrow another 10% as a second mortgage loan — sometimes from the same lender. You generally need a credit score of 700 or higher to qualify. If you’ve already bought your home, you can speed up those payments to get the balance below 80%, and then request that the PMI payments be dropped. Lenders do not always agree to drop the insurance requirement, according to BankRate.com, but at that point you could also refinance to get rid of the PMI. The law says a lender has to drop the PMI at the point when you are scheduled to reach a balance of 78% of the home’s value at the time of purchase, as long as you’re making the payments on time. If you are at that point, check to make sure the PMI has been dropped.

3. Buy a Less Expensive Home - Buying a less expensive home not only opens up the possibility of a 20% down payment, which eliminates the cost of PMI, but it also reduces many other costs. Payments (and interest charges) will be lower on a smaller loan. In addition to the lower direct loan costs, you’ll save money on property taxes and insurance. If it’s a smaller house (not just cheaper), you may also save on maintenance and utilities.

4. Downsize - If you already own a house but want to cut costs, consider downsizing your home. You can reduce your payments, eliminate mortgage insurance and probably cut other expenses as well. Selling your house and buying a less expensive one works especially well if you have substantial equity, since you can put much of that toward the new home to keep the loan amount (and payments) lower.

5. Refinance Your Mortgage - Before you refinance, you have to be clear about your goal. Is it just lower payments you need, or do you want to lower your long-term costs? Or are you looking to do both? For example, if you have 13 years left on a 15-year, $140,000 loan at 4.5% interest, you owe about $126,000 and have payments of $1,071. A loan calculator shows that a new 30-year loan for that amount at 6% drops that payment to $839, or $232 less per month. The downside: You’ll pay $302,173 over those years, versus $167,076 if you stuck with the old loan and faster payoff. That’s $135,097 extra for the convenience of lowering your payments now. So do you want to pay less over the years or just have lower payments right now?

You also have to be careful about loan costs. Surprise fees are one of the primary complaints from borrowers, according to a recent survey. Apart from loan costs, you may have to pay for an appraisal, recording fees and taxes in some states. Ask lots of questions to determine as closely as possible what the total cost of refinancing will be. Once you calculate your cost to refinance, you can determine your break-even point using a refinance calculator. For example, with a current balance of $140,000 on a 30-year loan taken out in 2009 at 5%, refinancing at 4% with $2,500 in loan costs leaves you with a break-even point of 31 months. That’s when your savings in interest paid will have covered the costs of refinancing. If you move (and sell) before your break-even point, you’ll have lost money by refinancing. On the other hand, in this example, if you stay for another 30 years you’ll save $17,562 total — not bad for a few hours of paperwork.

6. Reduce Property Taxes - Although property taxes are not technically part of the loan, payments often include money that’s put into escrow to cover property tax bills and insurance. If you think your home is worth less than the assessor says, ask for a review. You might need to try a few tricks to getting the assessment changed and lowering your property taxes, but if you succeed your lender should adjust your payment to reflect the lower annual bill.

7. Buy Cheaper Insurance - If your mortgage payment includes an escrow amount for home insurance, you can get it lowered by finding a cheaper policy. Of course, even if it isn’t rolled into your house payment, you can save money by finding better insurance rates. Lenders have minimum requirements for homeowners insurance, so the policy you buy must meet their criteria.

8. Make Extra One-Time Payments - If you get a big tax refund or a gift or small inheritance, you can put a chunk of it toward your mortgage loan. If you pay an extra $1,000, the balance of your loan will be $1,000 lower than it would have been for every remaining month. For example, if the interest rate on your loan is 5%, you’ll save $50 in interest every year until you make the final payment. That adds up!

9. Make Regular Extra Payments - If you can afford to add more to your monthly payments, this is one of the surest ways to reduce your interest charges over the years. A loan payment calculator can show you how much you’ll save with regular extra payments. As an example, if you have 30 years to pay on $140,000 at 5%, and you add $356 monthly to your regular $751 payment, you’ll pay off that loan in half the time and save $80,000 in interest. Of course, you could also save on interest by getting a 15-year loan to start with. But by paying extra on a 30-year mortgage you get the same effect, and you can stop paying the extra amount if you run into financial difficulties.

10. Use Credit Card Offers - Do you ever get 0% interest credit card offers? If so, you can use them to reduce the mortgage loan interest you pay. For example, suppose you’re paying $400 extra monthly on your 5% mortgage loan and you can get a card with 0% interest for the first year and a 2% fee the convenience checks (often this is 3% or even 4%).

Here’s what you can do:
     Step 1: Write a check to your mortgage servicer for $5,000 (that’s approximately what those $400 payments add up to in a year) and pay the $100 fee.
     Step 2: Put the $400 that was going toward the loan into a savings account each month and pay the minimum on the credit card from it.
     Step 3: In a year (when the promotional rate ends), use the savings account to pay off the remaining balance on the card, and put the rest toward the mortgage loan. By using this strategy, you’ll earn interest in the savings account (1% in a good account, or as much as 3% in a Kasasa account). More importantly, you’ll reduce the loan balance by $5,000 right up front instead of spreading it out over the year. You’ll save $250 in interest charges (5% of $5,000) and make $25 to $50 from the savings account. Even after the $100 fee, you will have reduced your total cost by $175 to $200, which is more than the $46 you would have saved on interest by just paying the extra $400 monthly.

This form of credit card arbitrage is sometimes called “stoozing,” and is best done only if you’re very disciplined and organized. The penalties and interest from a late payment on the credit card, or from forgetting to pay it off in full after the 0%-interest period ends, will quickly wipe out any advantage gained.

Have you ever used one of these approaches, please comment and let us know how it helped!

Original Article Here - By Steve Gillman, Contributor

Risky Business: Marijuana Real Estate Boom or Bust?

The Denver Post recently did a story on how cannabis businesses are having to pay sky-high rents nationwide. In Portland, for instance, commercial real estate that typically rents for five dollars per square foot goes for three times that amount for cannabis businesses. Though rents for cannabis businesses in Washington and Colorado are stable, they are considerably higher than the lease rates for any other business, and real estate investors looking to lease to cannabis businesses are mostly betting this trend will continue.

Several things are pushing up cannabis rents, all of which decrease the available supply of cannabis real estate. The vast majority of commercial real estate mortgages contain a clause mandating that the property be used lawfully, but because marijuana remains federally illegal, a property with a cannabis business on it is not operating legally. This illegality entitles banks that hold the mortgage to deem their loan in default and to accelerate the principal so it’s all due immediately and to then foreclose if the borrower cannot find alternative financing to cover its outstanding loan balance. If federal cannabis laws stiffen under President Trump, many of the banks holding notes on cannabis properties likely will use these legal changes as an opportunity to call their notes in default. Because of this potential threat from banks, most cannabis businesses prefer to lease properties free of any bank notes and most landlords with financed property prefer to lend to federally legal businesses rather than risk their property being seized by a federal government asset forfeiture.

The diversity and the complexity of state and local cannabis regulations also helps drive up prices for marijuana business real estate. State laws that limit how close cannabis businesses can be to a school, a park, a church, or another cannabis business also limit the number of properties available to cannabis businesses. When you add in local zoning codes that often push cannabis businesses to heavy industrial areas and building codes that often require cannabis production facilities to have full fire suppression and air quality systems in place, the list of available properties for the marijuana industry plummets even further. With so many marijuana businesses fighting for so few spaces, it is no wonder cannabis real estate prices just keep rising upward.

There is also still a ton of money being invested into cannabis real estate from out-of-state and foreign investors. Many marijuana licensees who lack sufficient capital to build out their growing facilities look for turn-key real estate opportunities, often with deferred rent, where they are expected to pay out the nose when they start making revenue. These higher-priced turn-key cannabis grow operations tend to increase the price ceiling even for landlords who only offer bare warehouse space. Hardly a day goes by where my law firm does not get a call from someone on the East Coast or from overseas (Spain, Israel, Germany, South Africa, and Eastern Europe, mostly) asking one of our cannabis business lawyers about cannabis real estate opportunities in Washington, Oregon, or California. Even public companies are involved in the turn-key cannabis real estate market, including Innovative Industrial Properties, Inc., a cannabis-related REIT that did an IPO on the NYSE earlier this month.

There are some punctures in the ever-rising cannabis real estate balloon, though. Innovative Industrial Properties, for instance, managed to raise only $67 million after making clear it expected more like $175 million. The media has tended to blame President-elect Trump’s choice of Jeff Sessions to run the Justice Department for casting a pall on the cannabis real estate market, and though that is a real concern, there are also other factors at work.

In Washington State, cannabis businesses renting warehouse space in heavily populated King and Pierce counties are facing fierce competition from outdoor growers in Eastern Washington who are rapidly developing techniques to increase the quality and consistency of their cannabis. The continued trend toward oils and other concentrates also puts downward pressure on the market price for crafted indoor product.

Outdoor spaces in rural Eastern Washington counties tend to be significantly cheaper than urban or suburban warehouse space, and if more growers see growing outdoors as a real alternative for them, we should expect cannabis real estate prices (especially warehouse prices) to fall. And even if the Trump-Sessions administration makes policy choices that decrease cannabis availability, the long-term trend among our country’s citizens still inexorably leans toward legality, with cannabis looking more like other businesses. As the cannabis industry “normalizes,” we lease rates for cannabis businesses should begin to fall more in line with lease rates for other businesses.

Though the marijuana real estate bubble seems to be growing ever larger, it’s anyone’s best guess as to when it will actually burst. In the meantime, real estate investors should be careful not to overpay for cannabis properties based on the assumption that their lease market has “nowhere to go but up.”

Hilary Bricken, attorney at Harris Bricken, PLLC. Full story here.

Orlando-area home prices rise, projected to continue to climb

Local home prices were up in October, which is in line with state and national trends, a new report showed.

Single-family home sales prices in the Orlando-Kissimmee-Sanford metro area were up 7.4 percent in October when compared with a year earlier, and inched up 0.5 percent when compared with September, according to a new CoreLogic Inc. report.

Florida's year-over-year home price increase for October was the seventh-highest in the country at 7.8 percent, putting it in the top 15 percent in the nation, the report showed. Home prices nationwide increased year over year by 6.7 percent in October and increased 1.1 percent from September to October.

“While national home prices increased 6.7 percent, only nine states had home price growth at the same rate of growth or higher than the national average because the largest states, such as Texas, Florida and California, are experiencing high rates of home price appreciation,” CoreLogic Chief Economist Frank Nothaft said in a prepared statement.

Meanwhile, CoreLogic forecasted another increase of 4.6 percent by October 2017. Month over month, home prices are expected to increase by 0.2 percent to November 2017. “Home prices are continuing to soar across much of the U.S., led by major metro areas such as Boston, Los Angeles, Miami and Denver,” CoreLogic President and CEO Anand Nallathambi said in a prepared statement.

Prices are being fueled by a potent cocktail of high demand, low inventories and historically low interest rates. Looking forward to next year, nationwide home prices are expected to climb another 5 percent in many parts of the country to levels approaching the pre-recession peak.

Kathryn Deen, Staff Writer - Orlando Business Journal

Sneak peek at retail plans for Creative Village

Curious about what might be part of the Creative Village project in downtown Orlando? You're in luck, because Craig Ustler, president of Ustler Development Inc., gave a hint of what's to come regarding retail plans for Creative Village at OBJ's Doing Business in Downtown panel discussion on Dec. 2.  [Creative Village will be built where the original Orlando/Amway Arena was located, 600 West Amelia St.]

The $1 billion, transit-oriented private redevelopment of 68 acres on downtown's west side will focus on restaurants, coffee shops and bars for the "young, smart, creative people" Ustler expects the area to draw. In fact, Creative Village offers plenty of retail opportunities, with plans for housing for 1,200-plus students, 120,000 square feet of office space and a 290-room hotel.

Ustler said he was most excited about bringing a food hall to serve the planned $62.5 million, 250-unit market-rate apartment complex. "That's really where I think we start to get some legs on the creative side, the entrepreneurial side," Ustler said. "We create local authenticity. [It] gives you some street cred so to speak in that world." The apartment's food hall is part of the $431-million first phase of development at Creative Village, which will mainly cater to the 7,700 students expected to populate the University of Central Florida's future downtown campus.

About 12,000 square feet of ground-level retail and restaurant space sits at the bottom of the student housing complex that Ustler Development and KUD International LLC plan to build. Ustler said they are targeting fast-casual restaurants for the complex, such as coffee shops, Mexican food and hamburger joints, as well as a convenience store and a branch bank. "That's sort of the low-hanging fruit so to speak," Ustler said. "That'll go first and be driven by the critical mass of students on Day 1."

However, Ustler was quick to remind people that retail is not the focus of Creative Village, but rather one part of the bigger picture. "I don't want anybody to think that any of us are talking about downtown becoming a major retail destination as much as we are it's an integral part of the lifestyle as an urban amenity," Ustler said. "It doesn't ultimately take up a ton of square footage. It just really provides a lifestyle balance to what will largely be — because the young, smart creative people that are starting companies and what not, they drink coffee and beer, walk their dog and do that kind of stuff, so that's what you're going to react to, more than just saying, 'Hey we're going to build a Banana Republic because somebody wants to buy a shirt.' That is not what's going to happen in urban environments more or less.

It's going to be totally lifestyle-based and really be an urban amenity to a larger division." Creative Village is expected to generate more than $200 million in economic impact for the region. The UCF Downtown campus is planned to open in 2019, but construction could begin on some projects by 2017.

Kathryn Deen - Staff Writer, Orlando Business Journal

The upside of Florida real estate: 15 market positives

Let's take a look at some of the opportunities and positive indicators for the future of Florida's real estate market.

1. Great prices. Statewide, home prices have fallen about 20 percent in the past year. Florida Association of Realtors® statistics show the existing-home median sales price was $185,400 in the third quarter of 2008, compared with $233,200 in third quarter 2007.By the way, those numbers are still significantly higher than in the early years of the decade. In 2003, the third-quarter sales price was $163,700, which reflects an increase of about 13.3 percent over the five-year period. (The median is a typical market price where half the homes sold for more, half for less.)

2. The time is right. Home sales volumes are rising again -- a signal that the market recovery may be underway. In third quarter 2008, statewide sales of existing single-family homes were up 5 percent compared to the same period last year, according to FAR statistics.

3. High inventory levels. Conditions are ideal for buyers to find their dream home. Inventory is plentiful in all price ranges. But as sales volumes increase, inventory levels are likely to shrink. That reality translates into this advice for buyers: Don't wait too long.

4. Low mortgage rates. Mortgage rates are still at the lowest levels since the 1960s. Lower rates multiply a buyer's financial power. Even half a percent can make a sizeable difference. For example, on a $200,000 home, half of 1 percent could save the homeowner about $815 a year. Buyers can get more home for the money, which is a perfect scenario for families looking to upsize.

5. Incentives to buy. Federal, state and local housing programs can help buyers make that big purchase. The American Recovery and Reinvestment Act has increased the First-Time Homebuyer Tax Credit from $7,500 to $8,000 for purchases on or after Jan. 1, 2009, and before Dec. 1, 2009. Talk to a local mortgage lender about state and federal incentive programs.

6. A long-term-growth state. Long-term economic and demographic trends continue to favor Florida. By 2010, economists forecast that Florida will be the third-most-populated state in the country. Florida has been one of the 10-fastest-growing states in the U.S. for each of the past seven decades, and often the state has been in the top four, according to Census data.Population growth will continue to provide a foundation for other economic development, such as new jobs and growing incomes. All of these trends are positive indicators for real estate growth.

7. A migration magnet. Even with a slowdown in economic growth nationally, projections call for Florida's population to return to more normal growth levels of about 317,000 a year between 2010 and 2020, similar to the 1980s and 1990s, said Stan Smith, director of the University of Florida's Bureau of Economic and Business Research. That's a lot of new buyers coming into the market.

8. A favored retirement destination. Over the long term, Florida stands to benefit from the migration of the aging Baby Boomer generation, roughly 80 million strong. Demographic studies show that the Sunshine State's mild climate and outdoor amenities continue to make Florida a favorite retirement destination.

9. A diverse economy. Florida's economy, like the rest of the nation, is impacted by the recession. Some business sectors, though, appear promising for the Florida economy. The healthcare and technology sectors are quickly becoming an important economic force in South and Central Florida.The Milken Institute/Greenstreet Real Estate Partners ranked five Florida communities on its "Best Performing Cities Index 2008," which ranks U.S. metropolitan areas by how well they are creating and sustaining jobs and economic growth. Florida's business climate ranked fourth among executives and sixth overall on Site Selection magazine's 2008 Top State Business Climate rankings. 

10. Investment outlook. Every quarter, the University of Florida's Bergstrom Center for Real Estate Studies conducts a survey of industry executives, market research economists, real estate scholars and other experts. In the fourth quarter 2008 survey, the investment outlook for various types of Florida properties declined from the third quarter of 2008, although it is noted that the investment outlook remains higher than it was at times in 2006 and 2007."We have 40 pages of comments from our respondents, and although the dominant theme is the disruption of financing, perhaps the second theme, as one person put it, is people being on the sidelines with full pads and helmets just waiting to jump back in," says Director Dr. Wayne Archer, when referencing the 2008 third quarter results.

11. Homeownership has value. Realtors® believe -- and research supports the belief -- that homeownership provides a variety of tangible and intangible benefits to the community and homeowners. Studies show that home equity is still the largest single source of household wealth.

12. Greater sense of well-being. Owning a home leads to increased personal well-being. Research shows that people who own their own homes tend to show higher levels of personal self-esteem and life satisfaction, which in turn helps to make homeowners and their children more productive members of society.

13. Beneficial for kids. Studies show that children raised in homes owned by their families are more likely to stay in school and graduate high school. They're also shown to have a higher lifetime annual income.

14. Community involvement. People who own homes have a strong financial stake in what happens to their community and tend to become more involved in community and civic affairs. Studies show that homeowners also interact more with their neighbors and communities.Compared to renters, homeowners join up to 41 percent more civic and/or nonprofessional organizations, such as the PTA or Scouts; vote in local elections 15 percent more often; enhance their neighborhoods with gardens 12 percent more often; attend church about 10 percent more often; and have a 3 percent greater chance of being interested in public affairs.

15. An unsurpassed lifestyle. Finally, let's not forget the things that brought people to Florida in the first place, and will continue to attract them -- beautiful beaches, fabulous weather and a friendly business climate, with no state income tax. It's no wonder that Florida's combination of temperate climate, outstanding recreational amenities and economic opportunity has consistently put the Sunshine State in the top three of Harris Poll's "Most Desirable Places to Live" survey.

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