Lender Talk: How To Finance Two Homes
We spoke with Gary Lehndorff. Gary specializes in helping first-time homebuyers, move-up buyers and investors secure mortgage financing for home purchasing, building, and refinancing. He prides himself on making the loan process a stress-free and financially rewarding experience. Gary is committed to stellar client care which he provides thorough attention to detail throughout the process and unparalleled support from the Univest back office.
We talked about people right now that are in their home, and have 30% or 40% equity. There are a lot of people that have a large amount of equity in their home or they have paid off their house, which I believe is generational, because that statistic is almost exactly in line with the population of the baby boomers, versus a percentage of the country, about 30% or 40%. It's really surprising.
There are a lot of people out there that because of Covid, their kids home, maybe some dogs running around, their significant other is home, and they decide they need a bigger house. But houses are selling, they can't find a house. They call Gary for help and Gary is helping them through the mortgage process. If they want to move up and they want to have some more room. He makes sure they are talking with a realtor because you want to talk about the market with them.
Gary will ask them about their home. Questions such as, what they think it would sell for, how much equity they would pull out, and what their income is. He looks to see if they can get into a new house without selling their current home first. Univest keeps their loans, so they can recast your loan and lower your payment. That would allow you to buy the house without a lot of money down, and there are all kinds of ways to structure that. Gary has got a lot of people, that, as long as they qualify financially to carry both mortgages for a period of time, they can, for example, do 95% financing and when they're done, they can sell their current home. They can take that huge equity that they were going to put in it, it sold it first and put it toward it at that point, and then we'll recast the loan, recalculate their payment based on the lower principal balance. A lot of lenders can't do that, because we're a community bank, we can, as we retain the servicing on our loans. So, that's a common scenario in this market with the people that have a lot of equity, it's, it's a way to make it happen.
So, let me, so walk me through that. For example, I'm in a $400,000 townhome and I want to buy a $600,000 home or I am in a $350,000 townhome and I want to buy a 550 single home, I could potentially, based on my income, put 5% down, which is roughly, $28,000 dollars and borrow $522,000, and I paid some closing costs so around $40,000 out of pocket if I have some cash to do that. Then I would get like a $528,000 loan or something of that magnitude, about $500,000 and then I would have this huge mortgage, but then I sold my townhouse, and now I have a hundred thousand dollars of equity that I got out of that townhouse, or that smaller home. I come back to you with the hundred thousand dollars and you do what?
We recast it, so what that means is you contact Gary at Univest, you say look I've got a hundred thousand, I want to put towards this what's that going to do to my payment? Well, it's going to lower it probably 500 dollars a month, pretty big, it's a big amount, so tell me when you've made that deposit, we've got a department for recasting with them and once they see that principal reduction, they will then alter your loan payment. It will be the same amortization track that you've been on, they're just going to lower the principal balance and lower the payment accordingly and it's great.
Is that like a refinance? It's not, no. There's some processing involved and Univest has to re-record the mortgage. It's three hundred dollars, that's what it costs period, and you don't have to refinance, which is amazing. Most people have never heard of recasting before but it's been around forever. Most people think you've either got to do a bridge loan or somehow pull the equity out of your home in order to jump to the next house, and the key here is just the ability to carry both. Some people just can't qualify, look you're going to have to sell your home first no matter what because you can't swing carrying two mortgages. If they can't for a period of time, then this is the least expensive way, most cost-effective way, for people to get out of it.
What about the PMI, well the PMI, once you pay the principal down, the PMI is going to go away, you don't have that either, so. That's what maybe, you know, I mean obviously, most homes can sell pretty readily these days you know priced right, marketed right. Actually, you know in any market Gary, I don't know if you know this, or anybody's ever told you this, but I don't care if the market's 2009 or today, a lot of houses can be sold in our market because we're the Mid-Atlantic market, we don't get too crazy, we don't get too low, we don't get too high, we're a very even keel market right, right. Right. Not like a Florida, or something where it could go down like 60% or something crazy. What I'm saying is in any market literally, if you do it the right way, a home can sell in 30 days. Yeah. You can literally get a home sold in 30 days, I think my days on market average in 2009 was like 42.9, even in a terrible market like that, Even in a terrible market like that. Because if it's marketed right, and it's priced right, and everybody follows the path, you can get things done. So my point is, the fear of the multiple payments often doesn't even really, sometimes, even kick in right because of the delay in the first payment, because of you know renting your money versus renting your house. Yeah. And then you know you got PMI, PMI is cheaper than I've ever seen it. I mean so that could be a hundred dollars a month, but if you're looking at multiple transactions that are hundreds of thousands of dollars, what's an extra mortgage payment or two. Its real money don't get me wrong, but you're talking about two or three thousand dollars and, you and I both know that if that is an issue, maybe we need to make a different housing decision
I asked Gary if he talked to 10 people about recast and that ability to do a move up, how many out of 10 would know, before you tell them, about recast. Gary said that he doesn't think he has spoken to anybody that knows about recast. So, do you think it's possible that guys like me are really missing the boat? We should probably know that right? Now you do.
If they're interested in hearing more about anything here, about recasting, about having the right amount of money, getting answers on getting a mortgage, contact Gary Lehndorff.
Watch the YouTube video for the whole interview. For more great information, you can subscribe to my YouTube channel: https://rem.ax/3qMIC3v
Gary Lehndorff Loan Officer,Univest Bank & Trust
200 N High St, West Chester, PA 19380
Email: [email protected]