Should you get an Orlando Refinance? Should you tap your assets?

The sure thing that uncertainty seems to bring with it…  more uncertainty.  With uncertainty, comes inaction.  This is good and this is bad.  I guess the proper [in]action is whatever you must do to keep your powder dry. For some people that may mean… do nothing.  For many more, it may mean getting things in order.  For some people, an Orlando refinance is the right move… others may need an Orlando FHA Short Refinance… others might need to consider making “hardship withdrawals” from their 401(k) plans.  Whatever option you choose… get professional advice.  Times of turmoil are times to tighten the belt, but not when it comes to best advice as to how to keep your powder dry. [Heck maybe that should have been the title of this mortgage blog.] LOL

Once FHA Short refinances are a bit more widely accepted among the major mortgage holders it may be a better choice for some, but right now it seems people are turning to their 401(k)s.  In fact, a major fund group cites a 15% up-tick in activity in ‘hardship cases’ from people needing access to some of their 401k funds in order to, among other things, stave off late mortgage payments, bad credit, foreclosure, short sales and medical emergency.

However, 401(k) loans should only be made with careful consideration.  If you need financial advice, I know several top-tier LOCAL Orlando financial advisers that I can introduce you to in order to field questions… simple  or complex.  People like  Jim Hasley, Dan Smith and John Ledford, among others, have all proven their value in such a tumultuous time for those that have come to rely on them.  Bravo, I say!   [Or is it ‘Woo hoo’, that I say?]

On the positive side, 401(k) loans don’t require a credit check like an Orlando cash-out refinance would. This is a helpful little nuance for people deep in debt, and who may have been late on a payment or two to their creditors. With no credit score requirement, a poor payment history won’t disqualify a plan participant.  Would credit repair and a refinance be a better option?  Possibly… but get that advice from the financial planner or the person that you lean on now for financial advice.  I don’t want the fact that I do Orlando Mortgages to be perceived as bias on my advice.  Those that know me, know it would not, but this blog has gained amazing amounts of traffic, so most of you don’t know me yet. =0)  Anyway, back to the 401(k) stuff…

In addition, most 401(k) loans can be arranged with just a phone call and a small stack of paperwork. There’s no “qualification process” like applying for a credit card or jumping into the mortgage qualification process. Money can be available, therefore, in as little as a day.

But there are negatives to 401(k) loans and the biggest one relates to taxation.  Financial planners, like Jim, Dan and John can help with this, or local CPAs like Craig Zokvic or Bob Biferie can be good resources as well.

If you take a 401(k) loan and can’t repay according to its terms, the IRS taxes the loan as ordinary income [oops] and slaps on a 10 percent penalty if you’re under 59 1/2. That can be very costly for a lot of people.

But, even if you do repay the loan on time, it’s still gets expensive. This is because 401(k) loan repayments are subject to double-taxation. [Don’t ask… call a tax professional! LOL]  Well… here is a snap shot of what happens… but still… I am not a tax adviser so check-out what I am saying here:

The first taxation occurs when the loan is repaid because the payback is made with post-tax paycheck dollars. A person in the 25% tax bracket, for example, would need a $1,333 paycheck to repay a $1,000 loan — the missing $333 goes to taxes.

And the second taxation occurs at retirement when the funds are finally withdrawn. The IRS taxes that money as ordinary income. [Jerks!] <——– Okay, when I say that it sounds funny… when you read it, your can’t hear the humor!

Now, this isn’t to say that taking a loan against your 401(k) is bad, it just may not be the best possible route for a person in trouble. Especially because of the costs. If you’re planning to withdraw from your 401(k) for hardship, be sure to talk with one of the qualified financial professionals above first.

If you’d like a referral to a trusted professional, call or email me anytime.

Chris

Tags: keepyou powder dry, orlando refinance, orlando fha short refinance, jim hasley, dan smith, john ledford, craig zokvic, bob biferie, 401k loans, orlando cash out refinance, orlando credit repair, financial hardship, orlando mortgages

Orlando FHA Short Refinance

An FHA Short Refinance is designed for people who owe more than their home is worth. Wow, this is more of us than eer anticipated is it not?

Well, when faced with this scenario, there are about three main options available which are determined by the process of negotiating with your current mortgage lender:

1. FHA Secure Refinance – This was put forth by Congress and unfortunately was more symbolic than it was substantive. Sorry… facts can be inconvenient. Anyway, this is typically the case when the borrower owes on two different mortgages that are now greater than the total of the homes current value. For an FHA Secure Refinance, the new lender will allow the second to remain as a subordinated lien but this is a very small box to fit in to be sure.

2. Short Refinance – A Short Refinance is also considered a Mortgage “Write Down” where the current mortgage company allows for a payoff that doesn’t add up to the current amount owed. There is a process of negotiating with the current lender to allow this transaction to take place.

3. FHA Secure Short Refinance – There are some unique occasions that the current mortgage company will allow the writing off a certain amount of the balance and arrange for an unsecured loan to be paid independently by the borrower. The benefit with this example would be to obtain a very low interest rate on the remaining balance that was not wrapped up into the new mortgage payment.

All of these options may need the help of an Orlando mortgage professional that has had experience negotiating FHA Short Refinances with the reeling banks.

In many cases, the borrower doesn’t have to pay for any of the fees at the time of that they make application and can wrap the normal costs into the new-born mortgage.

Written by Chris Brown, an Orlando Loan Officer. For more information about purchase loans or refinances on primary residences or investment properties, please contact me directly @ 407-377-0500 x 210.