Here's this month's roundup of news and resources.
REACH YOUR GOALS
Buy-down Basics
Interest rate buydowns are becoming increasingly popular as mortgage interest rates remain above 6%.
Here's how a buydown can make your home purchase affordable during the first years of a mortgage's term, or for the life of the loan.
A buydown is a simple transaction - it's when a lower mortgage interest rate is purchased or "bought down". These lower rates, aka buydowns, can last for as little as one or two years, or for the entire loan term.
Temporary buydowns provide buyers with lower rates, together with lower monthly mortgage payments, for one or more years at the beginning of the loan's term. For example, a 2-1 buydown will provide the buyer with a 2% discount during the first year of the loan, followed by a 1% discount for the second year. At the beginning of the third year of the loan's term, the rate will revert to its original percentage.
Permanent buydowns are usually negotiated with the mortgage lender, although sellers may also finance these as a contingency offered to the buyer. This is a simpler transaction than a temporary buydown, as a single payment — often described as "buying points" — is made to the lender in exchange for a lower mortgage interest rate.
The costs of a rate buydown aren't easy to predict as they rely on several factors, including:
Current economic market factors, including interest rates
Whether a buyer qualifies for a loan that permits buydowns
A property seller's willingness to finance a buydown
If you're looking for strategies that make homeownership more affordable, contact me so we can discuss your options. I'm always ready to answer your home financing questions. 1
MORTGAGE IQ
Strategies To Kick High Mortgage Rates
In addition to interest rate buydowns, there are other ways to qualify for a lower interest rate. Here are a few more strategies to consider.
Bump up down payments. Your Loan to Value (LTV) ratio affects your loan's interest rate. Buyers who put down smaller down payments tend to end up with higher rates, as higher LTVs increase lender risk. That's why it's worth looking at ways to bump up your down payment. Fast fund-raising strategies used by other buyers include stock or cryptocurrency sales and selling a recreational vehicle.
Down payment assistance may be available from several sources. In addition to state programs, some counties assist people in certain professions, such as teachers.
A shorter loan term is another way to bring your rate down. If you can manage the payments for a 15- or 20-year mortgage, this will bring you closer to homeownership faster, at a rate that's most likely lower than a 30-year loan.
Take over an existing mortgage. Military veterans, some reservists and those still in active duty may be able to take over an existing VA loan. 2
FINANCIAL NEWS
Why Consumers Keep Spending While Prices Rise
While many consumers improved their bank balances during the pandemic — unable to take a vacation, attend a concert or visit a restaurant — inflation is having the opposite effect. This has resulted in more purchases being charged to credit cards, and more cardholders unable to pay the balance in full when it's due.
Soaring prices across the board have contributed to the rise in credit card use. According to the Federal Reserve Bank of New York, credit balances are up 15% from this time last year, which adds up to the biggest increase in over 20 years. Consumer debt has risen to pre-pandemic levels and now adds up to over 25% of personal income.
Investment strategists are concerned, as many believe that a key economic warning sign is when debt rises to more than 20% of personal income. And since interest rates are rising, this increases the overall costs of credit cards, especially when balances aren't paid in full every month.
While you may be thinking that holiday and discretionary spending habits are bumping up debt levels, this isn't entirely true. Many families are being forced to buy groceries and pay utilities with credit cards as inflation eats away at their buying power. Households with lower incomes have had to dip into savings.
Not all economists are painting a totally negative picture, though. Former Fed economist Claudia Sahm remarked that "The job market is really good." However, if unemployment rises, a few consumers could find themselves struggling with debt.
Until inflation is reined in, you may want to join the growing numbers of families (around 70%) who plan to reduce their holiday spending this month. Remember...mistletoe can be purchased online for under $10.00 if it doesn't grow near your home. 3
DID YOU KNOW?
Holiday Celebrations from Around the World
While you may be decorating a tree or lighting candles, other homeowners take a different approach to winter holidays. Here are a few that you may want to consider, especially if your family tree features ancestors from these countries.
Iceland: Instead of 12 Days of Christmas, children wait for the 13 Yule Lads to arrive. Similar to dwarves, the Lads leave gifts in children's shoes during the 13 nights leading up to Christmas day. Naughty children may wake up to a rotten potato in their shoe, left by Gryla, the 13 Yule Lads' mother.
England: While many cultures celebrate the Winter Solstice, only residents and visitors to the U.K. can celebrate at Stonehenge. Built during Neolithic times, the prehistoric site has intrigued visitors for centuries. This year's Winter Solstice will be celebrated on December 22nd, with entry beginning at 7:45 am.
India: Across northern India, the Lohri Festival begins in mid-January to mark the harvest season. In addition to songs and dance, many celebrants enjoy special treats like gur rewri, made of sesame seeds, butter, cardamon seeds and cane sugar.
The Bahamas: The holidays begin later here, with the traditional Junkanoo street festivals taking place on December 26th and January 1st across the 16 islands that comprise the Bahamas. Junkanoo began over 100 years ago and is a celebration of local culture, with costumed dancers spending the entire year preparing for the events. 4
PERSONAL FINANCES
Increase Your Charitable Support with One Simple Change
Whether it's the holiday spirit, or the end-of-year deadline for tax-deductible contributions, many of us wait until December to make charitable donations to one or more nonprofits.
However, did you know that if you plan for charitable contributions throughout the year—either as a monthly savings or donation plan—this will increase your overall impact? It may also be easier on your cash flow, too. Think of it as a subscription, where you'll receive good karma instead of magazines each month.
Let's say you plan to donate $200.00 to a local animal rescue this month. This works out to around $16.67 monthly. If you begin saving $25.00 next month for your annual donation, you'll have $300 ready to donate in December 2023. This adds up to 50% more than your 2022 plan, which will finance considerably more dog treats and cat food for the rescue.
You can even take it a step further and send your monthly savings as a contribution directly to the organization you want to support. Smaller charities often face the same cash flow challenges as anyone else, and it's a monthly reminder that you care enough to help all year long. 5
REAL ESTATE TRENDS
Design Trends on The Horizon For 2023
If inflation has reduced your decorating budget for the time being, several interior design experts have some good news for you.
Several design trends that are forecast for 2023 enable you to retain much of what you already have, or to "upcycle" bargain-priced items.
Move the Outdoors Indoors
If you brought more plants and greenery inside your home during COVID lockdowns, you're already off to a good start for 2023. Principal Designer Amy Youngblood doesn't see the biophilic trend - bringing elements of nature indoors - going away any time soon.
"The theme of incorporating nature in interior elements will continue to be prevalent," she says. "We will be seeing colors inspired by nature, like softer greens and blues that are calming and pleasing to the eye."
Moving the outdoors indoors can go much further than live plants. Unpainted wood is playing a major part, from natural wood tables to large tree stumps used as end tables.
Decorate to De-Clutter
Organization has been around for quite a while, with television shows like HGTV's Hot Mess House showing us how to organize every room in our homes.
Many professional decorators see this trend continuing well into 2023, including design expert Gina Kirk. "We're seeing a lot less desire for open shelving—that was a very big trend for a really long time—and glass front doors. We're seeing customers who want to close things up and organize them well."
Old Things Become New
Upcycling is another 2023 trend that became popular years ago, especially with budding DIYers. "Upcoming trends are really inspired by special memories or maybe heirlooms from families, and upcycling is a growing trend right now," Kirk notes. But they're not necessarily enhancing or embellishing on old pieces."
Finding materials for upsizing can be as simple as attending weekend yard sales. If you're looking for a specific or high-value item, furniture consignment stores are becoming more popular, especially in bigger cities. Refinishing these items can be as simple as stripping off any paint, then finishing your work with clear or colored furniture wax or lacquer. 6
Have any questions? Reach out to us. We are your home loan experts and are up to date with all the market industry information. kevnik@kevnikmortgage.com
Positively Changing Your Home Finance Experience. 🏠
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Sources: 1money.com; 2money.com; 3marketplace.org; 4jtbbusinesstravel.com; 5cnbc.com; 6thespruce.com
