How to Manage Florida Home Loan Debts
We’ve already discussed how to handle debt WITH your Florida home loan. But what about how to deal with debt FROM your Florida home loan.
Did you know the average homeowner owes $115,200? The issue of how to lower this amount is one all individuals face. In the fast, Florida home loan refinancing would be a no-brainer - but interest rates are currently high across the board.
With that option shelved at the moment, consider these three moves:
1. Refi the expensive HELOC
Home equity lines of credit were the crack cocaine of the home improvement binge of the past few years - and it’s easy to see why.
Three years ago, the minimum monthly payment on a $100,000 line of credit was just $333. But now that the prime interest rate (which is the rate most HELOCs are pegged to) has doubled to 8 percent, the minimum is $666.
If you can’t pay off the HELOC, you may be able to convert it to a conventional Florida mortgage loan.
Another solution is to refinance it and your mortgage into a single fixed-rate Florda home loan - if, that is, you can find a rate that beats what you are paying for both loans and saves you enough to cover refi costs.
2. Cancel PMI
With home prices rising so quickly, it’s been tough for buyers to cobble together a decent down payment.
If you put down less than 20%, you may have to pay private mortgage insurance (PMI). The extra cost - $16 to $50 a month for every $100,000 of debt - may seem so inconsequential that you forget you’re paying it, but it adds up over time.
If you took your mortgage out after July 1998, your Florida home loan lender must automatically cancel your PMI once you’ve paid off 22% of the loan. But as long as you’ve paid the Florida mortgage loan on time for two years, you can ask that PMI be discontinued when your equity reaches 20%.
Here’s where rising prices become your friend: You may hit the 20% mark sooner than you expected if prices in your area have risen significantly - all that gain belongs to you, not the lender.
You’ll have to spend about $350 for an appraisal to prove that your gains and principal payments add up to 20%. But just a few months of PMI savings could cover that cost.
3. Know when to prepay
There’s nothing like paying off your mortgage for a feeling of freedom. But that doesn’t mean it’s a good financial move.
Prepaying your Florida mortgage (or any debt) is economically the same as earning a return equal to the interest rate on the loan. However, recent low mortgage rates - you could be paying less than 6% on a 30-year loan - don’t outstrip what stocks have returned historically.
A better move now for older workers with poorly funded retirements and a lot of home equity may be to take on more debt, says Keith Gumbinger of HSH Associates. “If you’re planning on selling that four-bedroom behemoth when you retire, you could take money out of your home with a cash-out refi and invest it,” he says.
Options, options and more options. Be aware of all of them if you feel as though Florida home loan debts are piling up.
