Issue link: https://www.ifoldsflip.com/i/1321213
Whattothinkaboutifyouare consideringmovingclosertofamily Q: We expect to retire in the next year or so. We have owned our house for many years and have gotten the mortgage balance down to about $40,000. Our problem is that we have a 4.5% inter- est rate and would like to refinance. We can't find a lender to help us. What can we do? A: Small first mort- gages can be attractive to lenders. They likely have a small loan-to- value ratio. A small loan doesn't represent much lender risk, and that's a plus. Lastly, small loans tend to be very affordable, so bor- rowers can generally qualify. That said, small loans represent a big problem for lenders. Mini-loans are small by defini- tion, and lenders have fixed costs. The way lending rules are set up perfectly-qualified small-loan borrowers routinely cannot refinance. "Smallermortgages," explainsThePewChari- tableTrusts,"arenot inherentlyriskiertomake thanlargerloans.But lendersarenevertheless reluctanttooffersmall loansbecausemarketand regulatoryforcesmake smallmortgagelending unattractive.Specificfac- torsincludehighorigi- nationcosts;expensive regulatoryrequirements —regardlessofloansize; insufficientappraisaldata —particularlyinlower- costneighborhoods;and acompensationstructure tiedtothesizeofthe mortgage—thelarger theloan,thegreaterthe commission—meaning thattheamountofwork requiredtoissueand serviceasmallloanis aboutthesameasfora largeone,butthereturn ismuchless." Tohavea"qualified mortgage"underthe federalAbility-to-Pay rule,totalpointsandfees arecappedbyloansize. Forqualifiedmortgages, whichprovidecreditors withcertainliability protectionsunderthe Ability-to-RepayRule, themaximumthreshold fortotalpointsandfees in2020lookslikethis: •3%ofthetotal loanamountforaloan greaterthanorequalto $109,898; •$3,297foraloan amountgreaterthanor equalto$65,939butless than$109,898; •5%ofthetotalloan amountforaloangreater thanorequalto$21,980 butlessthan$65,939; •$1,099foraloan amountgreaterthanor equalto$13,737butless than$21,980; •and8%ofthetotal loanamountfora loanamountlessthan $13,737. Inotherwords,a lendercanchargefees andpointsequalto5% fora$40,000refinance. That's$2,000.However, accordingtotheMort- gageBankersAsso- ciation(MBA),itcost $7,138perloanonaver- agetooriginatethetypi- calloaninthesecond quarter.Thenumbers justdon'twork. Asanalternative, considerthis:Takethe moneythatwouldhave beenspenttorefinance anduseittoreduceyour currentloanbalance. Thiswillreducethedebt andtheinterestcost. Itmightpaytocallthe loanservicerandaskif theywillagreetoacur- tailment.Thismeansyou willmakeabigone-time paymentiftheywillmod- ifytheloanandreduce themonthlypaymentfor principalandinterest. Theymaysayyesorno;it doesn'thurttoask. Emailyourrealestate questionstoPeterMiller atpeter@ctwfeatures. com. Homeowners can't find lender to work with on their small mortgage MarketWatch By Peter G. Miller CTW FEATURES Maybeit'sthe monthsofFaceTime, butnoface-to-face contact.Ormaybeit's suddenly becomeclear thatyoudon'twant to travel hundreds of milestosee cherished familymembers. Whateverthe rea- son,this pandemic yearis gettingfamilies thinking aboutmoving closertoeach other. "Thishasbeen especiallyfor recent retireeswho retired withthespecific goal of sending more time withtheirgrand- children,"saysLynn Dunston, acertified financialplannerin Denver. Butrightnow,"we're findingpeoplearehold- ingoffonthosemoves becauseoftheriskin relocatingnow,"says KateGranigan,CEOof LifeCareAdvocatesin Newton,Ma. Butfamiliesare mulling thepossi- bilities,and that'sgood sincehonestdiscus- sion and planning are essentialtomaking a long-distancefamily- motivatedmove suc- cessful,Granigan adds. "Makesureyou have afamilymeeting beforehand and weigh everything carefully," agreesTeriDreher, owner of NShorePa- tientAdvocatesin Chi- cago. Among theissuesto discuss,advisesGrani- gan, aretheexpecta- tions youhave about whatyourcontactwith familywillbeonce you'recloserphysically —and whatother fam- ilymembers' assump- tions areaswell. It'salsoimportant toconsider thefuture aswellasthepresent, Granigan says,exam- ining issues such as whatwouldhappen ifagrandparent who moves nearbycouldno longer live indepen- dently. Moreover,sinceit's unrealistictoexpectthe familytofulfillevery aspectofyourlife,it helpsifyou'realso movingtoaplaceyou'll enjoy,saysKarenCon- dor,whoseworkwith ExpertInsuranceRe- viewsallowedherand herhusbandtomoveto Greenville,County,S.C., fouryearsago. Previously,career movesseparatedher fromherbrotherand hisfamily,andCondor wasanxioustorecon- nect,buthergrown nieceshadlimitedtime. "Reach out toes- tablishyourowncon- nections inyournew community,"Condor concludes. By The Numbers New homes rising up 11% The most recent U.S. Department of Housing and Urban Development (HUD) and Census Bureau numbers found September new-housing construction is up 11.1% when compared to September 2019. Residential new-home starts have been on the rise since midsummer, with a 1.9% increase from August 2020. Homes | AdvertisingSupplement 001 BAY AREA NEWS GROUP H7