10/17/24 – Golden Handcuffs with 2.75% rate

A client recently expressed frustration about being “stuck in Golden handcuffs” because I helped them secure a 2.875% loan in 2020. They’re in a four-bedroom home but feel cramped with three kids aged 12, 14, and 16 - mainly since Dad works from home and the boys share a room.

Here’s the financial situation:

• Current mortgage balance: $399,000
• Home value: $850,000
• Monthly payments: just under $2,700
• Savings: approximately $0.12 (not ideal!)
• Rental potential: $4,000/month

They’re considering a new home priced at $1,050,000. They could sell, buy, or hold their current property as an investment. Here’s a breakdown of their options:

Selling and Buying

• Purchase Price: $1,050,000
• Down Payment: $400,000
• Monthly Payments:

• 1. Principal & Interest: $4,002.16

• 1. Property Taxes: $1,094

• 1. Insurance: $400

• 1. Total: $5,496.16

Renting and Buying (Keeping Current Home as Investment)

• Purchase Price: $1,050,000
• Down Payment: 20%
• Monthly Payments:

• 1. Principal & Interest: $5,378.61

• 1. Property Taxes: $1,094

• 1. Insurance: $400

• 1. Total: $6,872.61

• 2nd Mortgage (for Down Payment): $220,000 at $1,975.86
• Current Payment on Old House: $2,700
• Total Payments: $11,548

With $4,000 in rent coming in, after expenses (let’s say $3,500), they’d have a gap of about $2,550.

Ways to Narrow the Gap:

1. The second Mortgage Pays Down Principal: ~$350/month reduction.
2. New First Mortgage Pays Down Principal: ~$160/month additional reduction vs. selling.
3. Second Mortgage Tax Write-Off: ~$300 back in pocket.
4. 4% Annual Appreciation on Current Property: Adds $2,833 to the monthly bottom line.

After considering all these factors, they could end up ahead by about $1,100 monthly.

10-Year Outlook:

Assuming no refinances and a 4% appreciation:

• If They Sell and Buy:

• 1. Owe: $547,000 /Value: $1,565,000

• 1. Equity: $1,018,000

• If They Keep the Current Property:

• 1. Investment Value: $1,267,000 / Total Owed: $343,873

• 1. Monthly Rent (with a 3% annual increase): $5,400

• 1. Owe:$714,000 / Value: $1,565,000

• 1. Combined equity: $1,774,000

If they keep the current property and rent, they have more equity and are collecting rent! They pay an extra $1400 a month, and the rental will cover the additional payment for the second. Even if the costs are $2000 more than selling and buying, they now have over $750K in equity ten years later and a profitable investment property.

I am available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property. My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text me, please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

But wait, there’s more!

It was a rough day for rates! I throw my hands in the air cuz it makes me crazy, but we got some strong retail sales, lower-than-expected unemployment, and Philly Fed numbers were shocking!  

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA/ USDA) are in the high 4’s to low 5’s
• Conventional Loans up to $766,550.00 are in the high 5’s to low 6’s
• High Balance Loans $766,550.01 – $ 1,149,825.00 are in the low to mid 6’s
• Jumbo loans above $1,149,625 are in the mid to high 6’s
• Bank statement loans - They are available with 10% down again, and larger down payments are in the 5’s.
• Profit and Loss Statement loans – 20% down – You don’t need bank statements, just a profit and loss statement!
• No income qualifier – 40% down with r serves In the 8’s!
• 0 down loans are in the high 6’s – 620 credit score min right now, up to $1,191,000.00.
• Private Money lenders - Hard Money Loans – 35% down!
• No Ratio Loans 30% down
• DSCR – Debt Service Coverage loans with as little as 15% down
• Bridge Loans - typically 7.99% with limited fees – and they get you where you need to go!
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice. The above are LA County Loan Limits.

Good News / Bad News on Condos – This section has been moved to MikeMeena.com. I will post updates here, but all the information on the naughty list is now on my website. Just go there and click about it, and you will find our most updated list.

Please let me know if you hear anything new on condos or townhouses.

I am still available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property. My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. y direct line is 661-291-2222 When you text me, please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow. Please call me when you have a client who needs to borrow!