Pop Quiz, Austin- What is Amortization?

October 25, 2008 | Leave a Comment

austin home buyer should know the basics, let us help!

Austin Homeowners Need to Know

Okay Austin, this is easy- in the widest definition possible, amortization (pronounced: am-ohr-tih-ZAY-shun) is the scheduled process by which a loan’s principal balance pays down to $0.

The opposite of an amortizing loan is an interest only loan for which there is no scheduled principal repayment schedule.

With respect to mortgages, amortization is what determines how much of a monthly payment goes to principal, and how much goes to interest. Amortization schedules are the same for all fixed rate, non-interest only home loans including 15- and 30-year fixed rate mortgages, as well as all non-interest only ARMs.

Monthly principal and interest payments on a mortgage are based on the mathematical formula above, where:

* P = principal
* A = payment
* r = monthly interest rate
* n = number of payments

Now, if you’ve ever paid on an amortizing home loan, you don’t need to use the formula to know that mortgage amortization schedules are dramatically front-loaded with interest.

Okay, I’m Getting It…

In other words, in the early years of loan, the interest due on a mortgage is relatively high versus the principal due. And, if you’ve ever heard someone say, “You don’t pay down much of a loan in the first few years,” now you know — mathematically — why that is.

This interest-heavy mortgage repayment schedule helps banks to collect as much loan interest as possible up-front, offsetting potential loan losses.

But, just because the bank sets an amortization schedule doesn’t mean that a homeowner can’t change it. In any given month, a borrower can prepay extra principal to the lender, thereby changing the formula and accelerated the loan payoff date.

There are calculators online that do the prepayment math for you, but before making extra payments, talk with your loan officer or financial advisor first. Prepaying your mortgage could trigger a stiff penalty from your lender, or put your liquid assets at risk. Prepayment is not a bad plan, but it may be a bad plan for some.

(Image courtesy: Mortgage News Daily)

Posted by Lani, Asset Director | Filed Under Austin Real Estate Blog, Mortgage 

Austin Has the Scariest Haunted House in US

October 23, 2008 | Leave a Comment

Scared to DEATH!

Look, I am terrified of haunted houses but I’m still hard to impress. I tend to talk to the actors and ignore things jumping out at me, but we went to the Mansion of Terror and while my husband and young’n loved it and wanted to go again, I was the one who made everyone laugh because I screamed the ENTIRE time and actually RAN out of the haunted house. True story.

The Mansion of Terror returns for its 5th season and was rated America’s scariest Haunted House by Liongate Films. Admission includes two separately themed haunted houses in the same location and you will be terrified in the Slaughter Circus with a truly twisted take on an 1800s sideshow and circus complete with claustrophobic passageways and bloody screaming clowns, AND the second house Blood Frenzy which reminded me of a much much scarier version of the Saw movies (seriously).

This picture was taken after we finished- note my dilated pupils. This is no joke, people.

Hacked Up Body Parts

It’s not all just hacked up body part props, it’s also charitable… the Mansion of Terror owner Norm Glenn is a firm believer in giving back to the Austin community (through charities like the American Cancer Society), “there is no sense in running a business here in Austin if you can’t give back to the people who need it in our local community.” So go, get the pants scared off of you and help your community. The creepy clown said you have to, so go to the Mansion of Terror in North Austin.

Posted by Lani, Asset Director | Filed Under Austin Events, Austin Real Estate Blog 

Austin Retail Affects Residential Home Sales

October 22, 2008 | 1 Comment

Plopping Down Subdivisions

In Austin, the theory is that home builders go out to the suburbs where there are a bunch of ranches, buy some land and plop down subdivisions, creating mini-cities within the suburban cities. For example, in Pflugerville, the Blackhawk area consists of Villages at Hidden Lakes, Falcon Pointe, Avalon, the Meadows of Blackhawk, and the Fairways at Blackhawk. What used to be there before a bunch of houses? Ranches. There are even still some ranches between the subdivisions, horses and all.

In Come The Starbucks

After the houses are built, the theory is that commercial retail will soon follow as it is now attractive to open up shop where all these people now live and survive somehow without a Starbucks and a Target. In the Blackhawk area which is at Hwy 45 and 130, ground was broken last year on a Home Depot anchored retail center with a Target soon to open and there are two HEBs within two miles to service this surge of population to the area.

With the current economic issues (we’ll avoid the “R” word here), the homes are already built and are often waiting on the retailers to come swooping in, but will they? Lance Morris, president of the Weitzman Group’s local office, predicts that retail rents and occupancy rates will be flat through 2009.

“I think it’s going to be a year or two before we hear any new big-box store announcements,” he said.

So What About Home Sales?

What does that mean for residential home sales? Buyers often look around at retail before putting up their down payment- how far of a drive to the store is it? Is there nearby entertainment? Are hospitals nearby? Some home buyers are looking to get away from the hustle and bustle of the city while others are seeking to be outside of downtown Austin yet have the convenience of shopping nearby. Therefore, as retail remains stable, residential resale could experience the same trend- we’re not expecting prices to drop or raise substantially, nor are we anticipating the days on market to go down in this quarter.

Call it stable, flat or level, it doesn’t matter- the tidbit people miss in the above quote from Morris is that he doesn’t say the announcements are gone forever, but that it will be a year or two before the bounce. Buying now, knowing that future development is planned could mean equitable growth in your home’s value, making it an outstanding investment.

Posted by Lani, Asset Director | Filed Under Austin Real Estate Blog, Selling 

Austin Housing Starts Slow Down

October 17, 2008 | Leave a Comment

Austin new home construction starts are down but it's GOOD news for buyers!

Austin Housing Starts Down

A recent study released by Residential Strategies and published in the Statesman reveals some predictable numbers about housing starts (how many new homes are starting to be built). It doesn’t take a psychic to assume that housing starts are down.

With the inventory of resale homes rising in Austin, new home builders are being forced to compete with home sellers. Other factors include credit tightening for consumers, some lenders requiring more money down as well as the perception of consumers that lending is impossible (which is untrue but reinforced by tv media), all leading to a small decrease in people buying houses nationally.

Also important to note is that the credit tightening isn’t just on consumers but also on commercial entities as well meaning that builders are finding lending to be less free flowing in current times as well.

To recap, here are three factors that led to decreased housing starts:

  • Builders must compete with higher number of resale homes on the market.
  • Credit is tightening for consumers.
  • Credit is tightening for commercial entities.

      • The Silver Lining

      In a market that is not in an upswing, builders have to be inventive in order to sell properties and buyers are in an awesome position for their agent to help negotiate free upgrades and city wide, you may see some prices cut as inventory has to be moved before the year closes out.

      Does this mean builders are desperate? No. Are builders hurried to move inventory for cash purposes? Yes. Are builders confident in a market recovery? Yes, which is why subdivisions and starts are on hold and not canceled.

      Posted by Lani, Asset Director | Filed Under Austin News, Austin Real Estate Blog 

      Austin Borrowers Get a Break

      October 8, 2008 | Leave a Comment

      austin real estate news isn't all bad right now

      Finally some good news for some Austin property owners:

      NEW YORK (New York Times) – Countrywide Financial, in an effort to resolve lawsuits against it, has launched the largest program ever to help struggling homeowners in Texas and ten other states.

      The lender, recently acquired by Bank of America, will provide a total of $8.7 billion to borrowers, $8.4 billion of which will be through direct loan relief that will affect about 400,000 people. Countrywide will also waive $79 million in late fees and $56 million in prepayment penalties, and suspend foreclosures on delinquent borrowers with the riskiest loans.

      A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four or more months behind on their payments or whose homes have already been foreclosed on. The company will also provide $70 million to help troubled borrowers relocate to rental housing.

      Additionally, Countrywide will reduce principal balances in some cases and cut interest rates in others.

      To qualify, the borrower’s first payment must have been due between Jan. 1, 2004, and Dec. 31, 2007. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

      source: RECON

      Posted by Lani, Asset Director | Filed Under Austin Real Estate Blog, Mortgage 

      Austin Homebuyers Glad Dow is Under 10K?

      October 7, 2008 | Leave a Comment

      The First Time Since 2004

      We’ve had calls of people in Austin that are nervous about what to do and not sure if the news is a good litmus test or not. Today, we’ll talk about the silver lining of the clouds:

      Monday, the Dow Jones Industrial Average closed below the psychologically-important 10,000 level for the first time since 2004.

      Despite the milestone-marker breach, however, there was a large group of Americans with reason to cheer. As stocks sold off, mortgage markets rallied to the benefit of home buyers everywhere.

      Good News

      Conforming mortgages rates improved yesterday.

      Most interesting here is that rates improved for the same reason that the stock market fell. Because of lingering concerns about the worlds’ economies, investors lost their collective appetite for risk Monday. In response, they sold their stock positions and parked the proceeds in the “safe haven” of U.S. government-backed debt.

      The extra demand for safe investments pushed up the prices on mortgage bond which, in turn, pushed down mortgage bond rates.

      Money Flow

      A vault may be the only safer place to park money than U.S. government-backed debt. Now, we can’t predict when the market’s risk appetite will return, but when it does, expect money to flow into stocks just as quickly as it left.

      All year long, with respect to stock markets, it’s been either “everybody in” or “everybody out” and, for now, it’s everybody out. This is why mortgage rates fell Monday.

      But, when the momentum shifts — and it will shift — mortgage rate shoppers would do well to be prepared. Be ready to lock that mortgage rate because as soon as the stock market reverses course, mortgage rates will head higher.

      If stocks recover as quickly as they tanked, expect mortgage rates to spike badly.

      source: bring the blog

      Posted by Lani, Asset Director | Filed Under Austin Real Estate Blog, Market Conditions, Mortgage 

      What If MY Mortgage Lender Fails?

      October 1, 2008 | Leave a Comment

      austin mortgage crisis

      Are My Payments Still Due?

      Thursday, federal regulators seized mortgage lender Washington Mutual. The Seattle-based thrift became the third “big name” lender to close its doors since July, joining IndyMac and Lehman Brothers.

      In 2007, these 3 lenders represented about 10 percent of the mortgage market and their subsequent failures are confusing American homeowners.

      The most prevalent question:

      If my mortgage lender fails, are my payments still due?

      And the answer is an unequivocal “yes”. If a mortgage lender is seized, goes bankrupt, or is otherwise closed, it doesn’t change the terms of the bank’s mortgages whatsoever — just maybe the mailing address.

      But Why?

      This is because a mortgage (and its corresponding note) is a legal contract between the lender and the lendee, signed on the date of closing. It is binding and cannot be altered by either party. The only way to “end” the contract is to pay the loan in full.

      This can happen in one of 3 ways:

      1. The home is sold and the mortgage is repaid
      2. The home is refinanced and the mortgage is repaid
      3. The home loan is paid down to $0 balance by the homeowners

      So, if a mortgage company fails, its doesn’t cause the loan to be paid-off and, therefore, the mortgage contracts is still valid. Payments are still due.

      However, because its mortgages are an asset, the failed lender will usually transfer them to a new lender’s servicing department. This means that homeowners will write the same check for the same mortgage but to a different company.

      Reducing Confusion

      To reduce confusion around transactions like this, the government puts two safeguards in place. First, it requires the former lender to send a 15-day advance notice of the change to the homeowner. And second, it requires the new lender to do the same.

      In situations like this, the onus is ultimately on the homeowner to open and read his mail, and make changes accordingly. It’s especially important for people who pay their bills online as opposed by paying them manually; you likely won’t get notified if you’re sending payments to the wrong place.

      Source: Bring The Blog

      Posted by Lani, Asset Director | Filed Under Austin Real Estate Blog, Mortgage