Bulls & Blogs

Important news before you get a HELOC

Owner-occupied, Regulations Comments Off

Feb 052018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

With rising home prices, you may be eyeing your increasing home equity with plans for remodeling or some other important need. However, before you do, take a few minutes to consider how the changes to the mortgage interest deduction might affect your tax bill.

It’s been well-reported that the new tax law reduces the max mortgage that qualifies for the mortgage interest deduction from $1m to $750k. For most of us, that’s not a big deal. The bigger deal is that starting this year, interest paid on a home equity line of credit (HELOC) no longer will be eligible for the deduction.

When you take cash out of your home, you have a couple options if you have an existing first mortgage. You can refinance the first mortgage adding to the balance the amount of cash you want, a so-called cash-out refinance, or you can use a HELOC, which typically is a 2nd lien on your home that leaves the existing first mortgage in place. Many folks prefer a HELOC because they have a really low rate for their existing first mortgage.

With the new tax law, the interest paid on a cash-out refinance is still eligible for the mortgage interest deduction. The interest paid on a HELOC is not.

So, before you decide which option to use, consider whether getting a new first mortgage would allow you to itemize your deductions. If it does, then you may find it’s a better financial decision to cash-out refinance your existing mortgage even though you may end up with a slightly higher interest rate.

Feds extend special refinancing program

Loan Programs, Residential Mortgage Comments Off

Sep 202017

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The Federal Housing Finance Agency (FHFA) announced that it’s extending the Home Affordable Refinance Program, or HARP, through next year. The program was set to expire at the end of Sep. FHFA estimates more than 143k homeowners still could benefit from the program.

HARP was created to allow homeowners to refinance to lower interest rates regardless of their financial situation as long as they were current on their mortgage payments. Of the myriad rescue programs adopted by the Feds during the depths of the financial crisis, it was one of the safest because a homeowner willing to make a mortgage payment at a higher interest rate is quite likely to continue doing so at a lower rate.

Remember that HARP only applies to mortgages owned by Fannie Mae and Freddie Mac and closed before June 2009. You can determine whether Fannie or Freddie owns your mortgage by visiting their Web sites, links to which are the end of my blog.

Fannie Mae: Click here
Freddie Mac: Click here

One way to cash out an LLC-held rental property

Investment, Loan Guidelines, Residential Mortgage Comments Off

Apr 162016

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Yesterday, we discussed how Fannie Mae has rescinded a portion of its loan guidelines concerning investors’ ownership of properties in LLCs. Specifically, according to conversations with Fannie, the change means an investor must move a property into his or her name 6 months prior to being eligible to take cash out of the property.

However, Fannie left open one avenue for cashing out a property in an LLC. It’s called the Delayed Financing program. If an investor purchases a property using cash, and holds the property in an LLC, the investor may pull out up to 75% of the equity within the first 6 months of ownership as long as all the members of the LLC will be on the cash out loan.

Note the two important conditions: It must be a cash purchase, and the cash-out refinancing must close within 6 months of purchase.

I suspect Fannie may eventually realize how silly the conflicting guidelines are, but the inertia that must be overcome to correct them is pretty grand.

In the meantime, please don’t forget that neither Fannie nor Freddie allow you to close a loan with an LLC holding title to the property. You must close in your name. Many investors move properties to their LLCs after closing, but be aware that doing so could trigger the loan’s “Due on Sale” clause.

Fannie makes it harder to cash out rental properties

Investment, Loan Guidelines, Residential Mortgage Comments Off

Apr 152016

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Investors who choose to hold their properties through LLCs need to be aware of a recent change Fannie Mae made to its loan guidelines. The guideline in question was called Continuity of Obligation, and Fannie enacted it in response to the financial crisis to combat fraud. The guideline established a timeframe a party must have owned a home prior to being eligible for refinancing.

For investors, the guideline specifically identified a property held by the investor in an LLC as meeting the requirement as long as that same investor was refinancing the property in his or her own name.

Earlier this year, Fannie rescinded the guideline in whole. The problem for investors is that means Fannie also rescinded the specific carve out for LLCs. Based on recent conversations with Fannie, without the carve out, an investor must first move the property into his or her own name prior to refinancing.

This becomes a big deal if the investor is trying to cash out the equity in the property. Fannie Mae still has a 6-month “seasoning” requirement for cash out loans. Without the LLC carve out, the investor now must move the property into his or her name 6 months prior to being eligible to take cash out of the property using a Fannie loan.

There still is one option available to investors using LLCs, and we’ll look at that tomorrow.

HARP refinance program extended again

Loan Programs, Residential Mortgage Comments Off

May 192015

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The Home Affordable Refinance Program or HARP has been a boon for homeowners wanting to refinance. The program targets underwater mortgages, but its reduced documentation requirements and favorable interest rates make it attractive to all homeowners.

The Federal Housing Finance Admin reports the program has helped 3.3 million homeowners refinance their mortgages since its inception in 2009, and it was scheduled to end at the end of this year. However, Mel Watt, Director of the FHFA recently announced a one year extension through 2016. Watt claims an additional 600,000 homeowners still could benefit from a HARP refinance.

Keep in mind the two most important restrictions of the program. To be eligible:

– Your mortgage must be owned by Fannie Mae or Freddie Mac. (Fannie and Freddie have a tool on their Web sites to help you determine that or give me a call for help.)

– And, your mortgage must have closed prior to June 1st, 2009.

If you still haven’t been able to refinance, you may want to give this program one more look. The expanded eligibility requirements might allow you to qualify even if you’ve run off the road a couple times in your financial past.