Fine-Tuning Your Mortgage: Can a Recast Loan Make Sense?

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A recast mortgage could be an option for homeowners who need to tweak their mortgage payments. Most big banks allow at least one recast for a client with a conventional (Fannie Mae or Freddie Mac) mortgage loan.

To recast the loan, the owner makes a lump-sum payment to the loan principal. The minimum amount that has to be made is the lender’s call. The lender then issues a new amortization schedule, now with lower payments. Reducing the debt left on the loan principal means there is now less interest to pay.

In short, the main idea with a loan recast is keeping the same loan terms — especially important to people whose loans already have low interest rates, and those who wish to avoid resetting the term of years — but lightening the monthly payment due from here on. A recast can be an appealing prospect for a homeowner who’d like to lower the principal in one fell swoop, leaving the length of the loan as it is, only with lower future payments.

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How to Replace Your Current Mortgage With Cash-Out Refinancing

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For a homeowner who has built up substantial equity, a cash-out refinance can free up funds for big projects. Lenders expect to see many requests for these loans this year. According to industry research, cash-out activity should spike in the second half of 2021, when the economy is on better footing, yet interest rates are still low.

A redesigned bathroom, a renovated kitchen, an addition to the floor plan, the installation of central air or a security system… These are the big-ticket items that cash-out refinancing supports. Assume a homeowner wants to do a $30K kitchen upgrade. There’s a balance of $100,000 on the current mortgage. The new, cash-out refinance mortgage will amount to $130,000. That’s $100,000, plus $30K in cash from the lender. Then the homeowner can do that kitchen upgrade, and do it at a better rate than credit cards typically offer.

So, the cash-out refinance creates a bigger mortgage — and may also extend its term of years. The bigger loan can mean bigger interest tax deductions if the money is used to build or upgrade the home, or install accessibility features.

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Interest Rates Are Low. Does That Make Refinancing a Good Deal?

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Today’s low interest rates are exciting, and many homeowners are thinking about refinancing their mortgage loans. There’s a sort of FOMO (Fear of Missing Out) in the rush to get loans. But for those who already have fairly low, fixed interest rates (say, 5% or under), saving money through refinancing can cost more than it’s worth.

The question: Given the costs of refinancing, will a reduced interest rate prove worthwhile? The answer: It all depends. Let’s take a look some pros and cons of refinancing now.

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The Partial Release of Mortgage: When You’re Only Selling Part of Your Property

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What if a potential buyer is interested in acquiring a part of your property, and you’re willing to sell?

If you’re a land owner with full rights in a piece of property, you may legally sell any part of it — unless bound by an agreement to the contrary. If a parcel is mortgaged, an owner may not subdivide parts to sell, thereby shrinking the loan collateral, without the lender’s approval. A homeowner who attempts to sell mortgaged property without the lender’s permission invites the risk of triggering the loan’s “due on sale” clause and having to pay off the full mortgage.

Thus, to transfer title to a part of a property, the owner must first receive a partial release of mortgage. This instrument allows the sale of a section of a property, free and clear, yet keeps the mortgage on the remainder.

How does the partial release process play out? In this article, we boil it down to a few key elements. We also offer some contextual questions to consider. By examining the context of a potential sale, a potential seller can avoid serious losses in value.

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On the Rise (and Protected From Prop 19): The Interspousal Deed in California

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A quitclaim deed is sometimes used for transferring a home between spouses, but another option in some states is the interspousal transfer grant deed (“interspousal deed”). It, too, can pass a house between spouses without a sale. The interspousal deed, whose entire purpose is to change the ownership on the title, is the preferred instrument for couples in California.

You can find California’s interspousal grant deed here.

Traditionally, interspousal conveyances are not subject to gift or transfer taxes. But in 2021 you might ask: What about California’s Proposition 19? Will that trigger a tax reassessment on interspousal transfer grant deeds now? The short answer is no.

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Escheat Homes and the Bizarre Business of Heir-Tracing

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There’s an old saying: Where there’s a will, there’s a relative. Like many old sayings, this one is nearly always true.

Still, what if someone dies, leaving no heirs to take title to a house left behind? In some cases, wills are found, but they either rule out or just fail to name any currently living heirs. What happens to the property?

If all else fails, the state has the right of escheatment. The government may ultimately take title to assets of deceased people who pass away without leaving any known heirs or instructions.

But again, this is a rare occurrence. Whether there’s a will or not, there’s almost always a way to find an heir.

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Buying a Home With a VA Loan

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Real estate buyers qualify for home loan benefits from the U.S. Department of Veterans Affairs if they’ve performed 181 consecutive days of active duty (90 consecutive days in wartime), or spent 6 years in the National Guard or Reserves. Surviving spouses of veterans who died in service, or from related causes, may also qualify. A knowledgeable lender can tell you if you qualify — and assist you in obtaining official confirmation, in the form of a VA Certificate of Eligibility (COE).  

Here, we lay out the nuts and bolts of the process.

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