In a recent discussion on Raw Real Estate, my long-time friend Andy Burton, one of the top mortgage lenders from Waterstone Mortgage in Minnesota, shared his insights on the current state of the real estate market. The conversation covered various topics, from the concept of recasting a mortgage to the potential impact of interest rates on the real estate market.
The Concept of Recasting a Mortgage
Andy Burton introduced the concept of recasting a mortgage, which can benefit well-qualified clients significantly. Recasting a mortgage involves making a large, one-time payment towards the principal balance of the loan, which can reduce the monthly payments while keeping the interest rate and term of the loan the same. This strategy can be particularly beneficial for clients who come into a large sum of money and want to reduce their monthly expenses.
Advising with Caution in the Current Real Estate Market
In the volatile real estate market, Burton emphasized the importance of advising clients cautiously. He stressed the need for a long-term approach, warning against making decisions based on short-term financial situations. There are instances, he noted, when advising against selling is the best course of action, particularly when the long-term financial stability of the client outweighs the potential financial gain.
Impact of Credit Scores on Mortgage Rates
One of the critical factors that can significantly impact mortgage rates is the borrower’s credit score. Burton explained the workings of loan-level pricing adjustments, a mechanism that adjusts the loan cost based on the risk associated with the borrower. A higher credit score can lead to lower mortgage rates, while a lower credit score can result in higher rates.
Predictions for the Housing Market
Looking ahead, Burton shared his predictions for the housing market in the year’s second half. While he acknowledged that there are differing opinions and perspectives, he believes that the market will continue to be influenced by factors such as interest rates, inflation, and the overall state of the economy.
Influence of State Taxes on Selling Properties
State taxes can have a significant impact on the decision to sell properties. Burton shared real-life examples of people moving out of high-tax states, a trend that could have long-term effects on the real estate market. He noted that this trend is particularly evident in states with high property taxes, where the financial burden can drive homeowners to seek more tax-friendly states.
Potential Impact of Interest Rates on the Real Estate Market
The conversation concluded with a discussion on the potential impact of interest rates on the real estate market. Burton explained how rising interest rates could affect home values and the psychology of homebuyers. He also discussed the possibility of rates going into the fours and how this could influence the decisions of potential homebuyers.
Conclusion
The insights shared by Andy Burton provide valuable guidance for anyone interested in the real estate market. Whether you’re a first-time homebuyer, a seasoned investor, or a real estate professional, understanding these complexities can help you navigate the market more effectively.
