by First Integrity Team Supreme Lending | Mar 20, 2025
Deciding between renting vs. owning a home may be one of the biggest debates when it comes to housing. Both options offer unique advantages, but the key is to find which fits your personal goals and lifestyle. Let’s explore the pros and cons of each option and take a deep dive into the many potential benefits of homeownership and mortgage options that renters may not realize.
Pros and Cons of Renting
Renting offers flexibility and lower upfront costs, making it an appealing option for many. Here are some of the possible benefits and drawbacks of renting.
Pros of Renting
- Renting allows you to move more easily, ideal for those who frequently relocate or prefer not to be tied down to one area.
- Less Responsibility. When renting, your landlord or property management company is typically responsible for maintenance, repairs, and property upkeep. This saves you the headache of managing those tasks and additional costs.
- Lower Upfront Costs. When moving into a new rental, security deposits and first month’s rent are typically more affordable than a down payment for a home and other homebuying costs.
Cons of Renting
- No Home Equity. Making rent payments doesn’t build equity—unlike the potential for a home. No equity means you can’t take advantage of opportunities like cashing out on equity with a refinance.*
- Limited Personalization. Rental properties often have restrictions on renovations or even simple changes like painting walls and installing new fixtures.
- Rising Rents. Unlike a fixed mortgage, rent payments can oftentimes increase every year, sometimes significantly depending on your local market conditions.
Benefits of Owning
While renting may offer short-term convenience, owning a home comes with several potential long-term benefits that renting can’t match. Beyond simply having a place to live, explore these rewards of homeownership:
- Potential to Build Equity. Home values may appreciate over time. Unlike renting, homeownership may allow you to build equity as a future investment.
- Stable Payments. With fixed-rate mortgages, you have the confidence and peace of mind that your monthly payments will remain the same throughout the life of the loan.
- When you own your home, you have the creative freedom to really make it your own. You can make as many home renovations as you want to fit your unique style.
- Possible Tax Benefits. Homebuyers may qualify for potential tax deductions. Work with your tax advisor to learn more and see if owning a home could save you tax dollars.
- Pride of Ownership. There’s a unique sense of accomplishment and pride that comes with owning a home, allowing you to put down roots in a community.
Renting vs. Buying: Seven Key Questions to Consider
- How long do you plan to stay in one place? If you’re planning to stay in one location for several years, buying may be a smarter option.
- What’s your financial situation? Do you have enough savings for a down payment and closing costs? Evaluate your finances and get pre-qualified to determine your options.
- Are you ready for the responsibilities of homeownership? Owning a home comes with additional responsibilities than renting such as on-going maintenance, repairs, and upkeep.
- What’s your credit score? Your credit score plays a significant role in qualifying for a mortgage and getting favorable loan terms.
- What are the housing market trends in your desired area? Depending on your local area, it may make more sense to rent if housing prices are too high or out of your budget.
- Do you value flexibility or stability more? Consider your current lifestyle preferences. If you’re not ready to settle down, renting may offer the flexibility you need. However, if you’re drawn to a more stable living situation, homeownership may be the better option.
- What are your long-term goals? How could homeownership fit in with your broader financial and lifestyle goals, such as the potential to building equity, undergoing home renovations, investing in real estate, or creating a family home.
Down Payment Assistance & First-time Homebuyers
Don’t forgot to explore down payment assistance and first-time homebuyer programs that may help open the door to homeownership sooner than you think! FHA loans offer several benefits for first-time buyers, including lower down payment and credit requirements. While Conventional loans may only require as low as 3% down for qualified first-time buyers.
Ready to Stop Paying Your Landlord’s Mortgage?
Deciding between renting vs. owning a home is a big decision that depends on several factors such as your mortgage qualification, long-term plans, and personal preferences. While renting offers flexibility, homeownership may offer long-lasting benefits.
Ready to explore your homebuying options? Contact our team at Supreme Lending to discuss how to make your mortgage work for you!
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by First Integrity Team Supreme Lending | Feb 10, 2025
A reverse mortgage* is a unique loan designed to help eligible homeowners and homebuyers aged 62 or older convert some of their home equity into cash. This program may offer greater flexibility and financial independence, especially for those entering retirement. Reverse mortgages allow qualified senior homeowners to tap into their home’s value to meet other financial needs without having to sell their property or make monthly mortgage payments. What is a reverse mortgage, how does it work, and who may benefit from one? Here’s a breakdown.
What Is a Reverse Mortgage?
Reverse mortgages allow homeowners to borrow money using their home as security for the loan. Unlike traditional home loans where the borrower makes monthly payments to the lender, with a reverse mortgage, the lender makes payments to the homeowner. Reverse mortgages are experiencing a surge in popularity as more retirees may be considering them to supplement their retirement income.
How It Works?
The funds received with a reverse mortgage are based on the equity that’s been built in the home. Payments can be made to the homeowner in several ways:
- A lump sum
- A line of credit
- Fixed monthly payments
- A combination of all three options outlined above
The loan does not have to be repaid until the borrower sells or no longer lives in the home. However, the borrower must still meet all loan obligations including living in the house as a primary residence, keeping up with all property payments such as insurance and taxes, and maintaining the home’s condition.
What Can Reverse Mortgage Funds Be Used For?
A reverse mortgage may be a way for seniors to turn their home’s equity into cash to meet their financial needs while maintaining ownership of the property. The funds may serve various purposes, such as paying off other existing mortgages; covering healthcare, taxes, or insurance expenses; funding home renovations; and serving as a safety net for unexpected emergencies.
It may be an ideal option for seniors who:
- Want to stay in their home long-term.
- Need additional income to maintain their quality of life during retirement.
- Have significant equity built in their property but don’t want to sell or cash-out refinance** and take on monthly mortgage payments.
- Need to pay for in-house healthcare.
- Get a later in life silver divorce but want to stay in their home.
- Want to buy a home but are unable to pay all cash.
Frequently Asked Questions About Reverse Mortgage
1. Do I still own my home with a reverse mortgage?
Yes. When you obtain a reverse mortgage, you still retain ownership of your home. Your name remains on the title and the home is yours—just as it would be with any mortgage. You’re still responsible for paying property taxes, homeowners insurance, and maintaining the home.
2. When does the mortgage need to be repaid?
Once you no longer live in the home as your primary residence, the loan balance, including interest and fees, must be repaid. This is usually done by the homeowner or their estate that is selling the house
3. Will I owe more than my home is worth or leave my heirs with debt?
No. A HECM (Home Equity Conversion Mortgage) reverse mortgage is insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner or heirs if the home is sold.
4. What types of homes qualify for a reverse mortgage?
Single-family homes, FHA-approved condos, and multi-family homes (up to four units) are typically eligible, as long as the property is the borrower’s primary residence.
*A reverse mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). When the loan is due and payable, some or all of the equity in the property no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. Lender charges an origination fee, closing costs and servicing fees (added to the balance of the loan). Monthly service fees are not assessed in Texas. The balance of the loan grows over time and Lender charges interest on the balance. The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure. This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency
**By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by First Integrity Team Supreme Lending | Aug 20, 2024
When homeowners think about tapping into the equity they’ve built in their property, a Home Equity Line of Credit, also known as a HELOC, may come to mind. This alterative transaction mortgage can be incredibly versatile and useful for eligible homeowners to access funds. However, it’s important to understand exactly what a HELOC is and how it works when deciding if it’s the right option for you. Let’s explore how you may benefit from using a Home Equity Line of Credit.
What Is a HELOC?
A Home Equity Line of Credit (HELOC) allows homeowners to borrow against the equity in their home, essentially turning part of their home’s value into cash. Unlike a traditional home loan, a HELOC functions similar to a credit card. Homeowners can borrow, repay, and borrow again up to a maximum credit limit. A HELOC is meant to use toward large expenses such as home renovations, tuition, or paying down other debts with higher interest.
How Does a HELOC Work?
A HELOC has a designated draw period, which is the time during which you can borrow money. This period is typically the first 10 years of a 30-year term. During this time, you’re only required to make interest payments on the amount you borrowed, which is significantly less than other loan types. Although, you may be able to pay down your principal with no penalty, which can result in lowering your minimum monthly payment.
After the draw period ends, the repayment period begins. This is when you can no longer draw money out and need to start paying back both the principal and interest of the loan. This new minimum payment will ensure the balance is paid in full by the maturity date. Interest rates on HELOCs are variable, meaning they change over time due to market conditions and set margins. As a result, the monthly payments can fluctuate.
Who Might Consider a HELOC?
HELOCs are a flexible financing option that may be attractive for homeowners who need access to funds for various reasons, including:
- Home Improvements. If you’re planning to remodel your kitchen, add an extension, or make other home renovation projects, a HELOC could provide the necessary funds.
- Pay Off High-Interest Debt. HELOCs often have lower interest rates than credit cards or personal loans, which makes them a good option to pay off other debts.
- Education Expenses. If you or your children need assistance paying for tuition, a HELOC may provide a helpful solution.
- Unexpected Expenses. A HELOC can also serve as a financial safety net for unseen expenses, such as medical bills or emergency repairs.
Supreme Lending HELOC Options
Did you know that Supreme Lending offers different types of HELOC programs? In addition to a standard HELOC, there is also a program specifically designed for home renovations, which uses the home value after improvements. There is also an option to tap into a line of credit on current investment properties.
HELOC Pros and Cons
Pros:
- Flexibility. You can borrow as much or as little as you need up to your limit during the draw period.
- Interest-Only Payments. During the draw period, borrowers have the option to only pay interest, which results in lower monthly payments compared to traditional loans.
- Potentially Lower Rates. HELOCs typically have lower interest rates than credit cards and personal loans, offering affordability.
Cons:
- Variable Rates. HELOCs have variable interest rates, which means they can change. If rates increase, so will the monthly payments.
- Risk of Foreclosure. When using a HELOC, you’re using your home as collateral. Therefore, if you default on the payments, you could risk losing your home.
- Potentially Overspend. Easy access to credit and funds may lead to overspending, which could put the home at risk.
HELOC vs. Cash-Out Refinance: What Is the Difference?
A cash-out refinance* is another way to tap into your home’s equity, but it works differently from a line of credit. With cash-out refi loans, you replace your existing mortgage with a new one for more than you currently owe. In turn, you receive the difference in cash. Explore when you may want to choose a HELOC or a cash-out refinance.
Key Differences
- Loan Structure. A HELOC is a revolving line of credit, while a cash-out refinance is a one-time lump sum.
- Interest Rates. Refinancing can offer fixed interest rates to maintain predictable, stable monthly payments. Unlike a HELOC, which involves variable rates.
When to Choose One Over the Other?
- HELOC. You may consider a home equity line of credit if you have ongoing expenses or projects that don’t need all the funds at once. For example, home renovations, you can use the funds on an as-needed basis.
- Cash-Out Refinance. This is best if you prefer a fixed-rate and want a large sum of money upfront instead of opening a line a credit.
Frequently Asked Questions
How much can I borrow with a HELOC?
The amount you can borrow depends on your home’s value, the amount you owe on your current mortgage, your credit score, and the program’s guidelines. Typically, you can borrow up to 85% of your home’s equity if you qualify.
Are there fees associated with it?
Yes! Similar to closing costs with traditional mortgages, there may be fees for a HELOC such as an application fee, appraisal cost, and potential annual fees.
Can I pay off a HELOC early?
Yes, most HELOCs allow for early repayment with no penalty costs. Be sure to confirm the details with your loan officer.
How does a HELOC affect my credit score?
A HELOC can impact your credit score depending on how you manage the credit line. Timely payments may boost your score, while missed payments can harm it.
Is it tax deductible?
Interest on HELOC loans may be tax deductible. Please consult with your tax professional for more details.
What happens if I sell my home?
If you have a HELOC and then sell your home, you’ll need to pay it off in full. You could use the proceeds of the sale toward the HELOC.
Ready to Unlock Your Home Equity Line of Credit?
A HELOC may be a strategic financial tool for homeowners needing to access funds. Whether you’re paying for home renovation projects, education, or other significant expenses, a line of credit offers flexibility when you need it. However, it’s crucial to weigh the pros and cons, understand potential risks, and compare your options.
Want to learn more about HELOCs or other mortgage services? Contact your local Supreme Lending branch. We’re ready to help!
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by First Integrity Team Supreme Lending | Aug 14, 2024
There are several things to consider when deciding to refinance* your mortgage. It’s essential that you’re well-informed and ready to make an educated home financing decision to reach your goals. Once you’ve established how soon you can refinance, here are seven other important considerations.
1. Home Equity: The Foundation of Refinancing
One of the first things to evaluate when deciding to refinance your mortgage is how much equity you have built in your home. Equity is the portion of the property that you truly “own”—the value of your home minus your mortgage debt. Typically, lenders require that you have at least 20% equity in your home to qualify for a refinance. If you haven’t built up sufficient equity, you may not be eligible or you may receive less favorable terms. Your home equity is especially important when considering cash-out refi loans.
2. Credit Score: Your Financial Passport
Your credit score is crucial when it comes to your mortgage and loan program requirements. Your credit reflects your financial history. It also helps lenders determine a borrower’s potential risk. A higher credit score may help you unlock a more favorable mortgage. Before applying for a refinance loan, understand where you stand with your credit. Also, ensure that you’re up to date on making other debt payments.
3. Debt-to-Income (DTI) Ratio: Balancing Your Financial Obligations
Lenders will also review your Debt-to-Income (DTI), which is the ratio percentage of your monthly income that goes toward paying debts. A lower DTI ratio can demonstrate to lenders that you’re capable of managing your current debts and have the ability to repay your mortgage. Generally, a DTI of 43% or less is preferred but some loan programs and lenders can be more flexible and accept higher ratios.
4. Closing Costs: The Price of Change
Refinancing isn’t free. Don’t forget about the closing costs and associated fees that come when you refinance your mortgage. These can include application fees, originating fees, appraisals, and more. These expenses can add up to anywhere from 2% to 6% of the loan amount. It’s vital to review these costs to determine if refinancing makes sense for you. A breakdown of refinance closing fees will be included in your mortgage closing disclosure.
5. Break-Even Point: Calculating the Payoff
Understanding your break-even point is essential when you refinance your mortgage. This is the point at which your possible savings from a new loan exceed the costs of refinancing. To calculate this, divide the total cost of refinancing by the potential monthly savings from the new monthly mortgage payment. The result is the number of months it may take to recoup the costs. If you plan to stay in your home past the break-even point, refinancing may be very beneficial.
6. Interest Rates: When Is the Right Time?
Interest rates are also a driving factor when deciding to refinance your mortgage. A general rule of thumb is that refinancing is worth considering if you can reduce your interest rate by at least 0.5% or more. However, every borrower’s situation is different, so it’s important to analyze how a new rate will impact your unique financial picture and monthly mortgage payments. There are other reasons to refinance beyond the interest rate.
7. Private Mortgage Insurance: Can You Remove It?
If you put less than 20% down payment on your initial mortgage, you’re typically required to pay for private mortgage insurance (PMI). This protects lenders in case of a default on the loan. It’s an additional cost to your monthly payments. However, if you have more than 20% equity built in your home, refinancing may help remove the cost of PMI and reduce your payments.
At Supreme Lending, we understand that deciding to refinance your mortgage is a significant step, and you deserve significant service. By carefully weighing these seven considerations, you’ll be in a strong position to make a decision that aligns with your desired outcomes. When you’re ready to discuss your mortgage and refinancing options, our team is here to guide you every step of the way.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by SupremeLending | Jun 28, 2024
Understanding How to Use a Refinance Calculator
Refinancing a mortgage can be a strategic tool for many homeowners, but determining whether it’s the right move requires careful consideration and calculation. A refinance calculator can help you understand the potential costs and benefits of refinancing. Here’s an overview of what refinancing is, common reasons homeowners may consider refinancing, and how to use a refinance calculator to get an initial idea of potential related costs.
What Is Refinancing?
Refinancing a mortgage involves replacing an existing home loan with a new one, usually with different terms. The primary goals of refinancing are to change the loan term, reduce the interest rate, or tap into your home’s equity for cash. By refinancing, homeowners can potentially lower their monthly payments, pay off the mortgage sooner, or secure funds to use for other significant expenses. A refinance calculator can help breakdown the costs of refinancing and new estimated monthly payments.
Why Refi Today?
Even in today’s higher interest rate environment, there are still several reasons people may consider refinancing.
- Shorten Loan Term. Refinancing to a shorter loan term, for example going from a 30-year to a 15-year term, can help pay off the mortgage faster and save in interest over the life of the loan.
- Change Loan Type. Switching from an adjustable-rate mortgage (ARM) to a fixed-rate can provide more stability with consistent monthly payments. Borrowers may also refinance to change from a government-insured FHA loan to a Conventional mortgage or other eligible loan type.
- Cash-out Refinancing. This option allows borrowers to use the equity they’ve built in their home and receive the difference in cash to use for other expenses, such as home renovation projects, tuition, or additional large expenses.
- Lower Interest Rates. Securing a lower interest rate can reduce monthly payments and potentially save thousands of dollars in the long term.
- Life Changes. Major life events such as divorce or death may require refinancing to remove a co-signer from a loan. It’s important for married homebuyers to understand spousal states and ownership rights.
Using a Refinance Calculator**
A refinance calculator is a useful tool to help you understand and estimate potential costs associated with refinancing your current mortgage. Here are general steps to use a refinance calculator effectively.
1. Go to Supreme Lending’s online refinance calculator at www.SupremeLending.com > Learn > Calculators > Mortgage Refinance Calculator.
2. Input Current Loan Details, including the original loan balance, appraised value, interest rate, and loan terms.
3. Enter New Loan Information, including the proposed new mortgage terms, interest rate, and closing costs.
4. Calculate Monthly Payments. With the provided mortgage information, the calculator will provide an estimate of your new mortgage costs and monthly payment.
5. Compare Costs and Savings. The refinance calculator can help you review potential savings and total interest paid for the life of the loan. Consider the break-even point, which is the time it takes for your savings to cover the refinancing costs.
6. Evaluate Additional Factors. Consider any pre-payment penalties or other fees that may be applied to the current loan and the impact of extending or shortening the loan term. Additionally, if you used a down payment assistance program for your initial mortgage, be sure to refer back to the agreed upon terms. In some cases, the assistance may need to be paid back if refinancing before a specified period of time.
Calculate Refinancing Costs
When using a refinance calculator, it’s important to review associated costs to get an accurate picture of whether refinancing may be beneficial. Common refinancing costs include:
- Application Fee. This fee is charged to process the loan application.
- Origination Fee. The lender may charge a fee to process and originate the loan.
- Appraisal Fee. This is the cost of having a home appraised to determine its market value.
- Title Insurance and Search Fees. These are costs associated with verifying the home’s ownership and ensuring there are no outstanding claims on the property.
- Closing Costs. Other fees and charges may be included that can typically amount to 2-5% of the loan amount.
Determine Monthly Payments
The refinance calculator can also help you determine new estimated monthly payments. By comparing your current payment and the new projected calculation, you can see the impact on your loan and plan your budget accordingly. If the new payment is significantly lower, refinancing may be a great option. If the new payment is higher due to a shorter loan term or other factors, you may need to decide if the long-term benefits outweigh the upfront refinancing costs.
Refinancing a mortgage may offer benefits, but it’s essential to understand the costs and new loan terms involved. A refinance calculator may help you make an informed decision with a comparison of your current mortgage and proposed new loan. Take a step further and get pre-qualified with Supreme Lending today. Let us help you make the most of homeownership and explore your mortgage and refinancing options.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
**Results received from this calculator are designed for comparative purposes only, and accuracy is not guaranteed. Supreme Lending is not responsible for any errors, omissions, or misrepresentations.
