A Quick Primer on Mortgage Discount Points

I’m working with a commercial investor who is weighing the loans he qualifies for. And typically by the time anyone asks me about loans they’re about ready to pull their hair out. This particular question concerned origination points. What are they? A point is a fee paid to the lender for working the loan. Typically you are charged one point for each percent of the loan. ($150,000 loan is 1.5 points which costs you $2,250.)

Let’s say my investor’s loan was a low $150,000 and he is considering two different loans. Both are for $150,000, and both are 30 year amortization.

DEAL #1 is 7.5% interest with 0 points for origination.

DEAL # 2 is 7% interest, but he wants two points to originate the loan.

       

What’s the ONE factor that will determine which loan is better? How long he plans to keep this loan! Here’s how he determines which deal is better…

1. Take the difference in monthly payments (principal and interest only) of EACH loan.

2. Multiply that amount by 12 months to get the annual amount of difference.

3. DIVIDE that amount into the $$ amount of points you pay to determine the number of years at which you recover the points paid up front. 

If the number of years is LESS than his anticipated time in the property, he’ll be better off paying the points and getting the lower rate.  If it’s higher than he plans to spend in the property, he should opt for the lower points.

I don’t have the space to show my work, but this is answer. The difference in monthly payments is $51 a month ($1049 - $998 = $51). $51 X 12 months is a savings on (approximate) interest of $612 per year. Total Cost Of Points divided by $612 is 6.13 years ($3,750/$612 = 6.13). 

My client (and you know who you are) needs to stay in the property for at least 6 years to recoup the cost of the origination points. If he wants to be there for only 5 years, the best bet is Deal # 1.

Savannah Police Say That A/C Unit Theft Increasing Again

Savannah Chatham Metropolitan Police Department advises that A/C unit theft from vacant "for sale" or "for rent" properties is on the rise again.  This goes for both commercial and residential properties.

I wrote about this in March and I mentioned this was occurring mainly in Southside and West Chatham.  See for yourself at http://www.raidsonline.com/.

The latest thefts don't just involve vacant buildings, but empty ones. A/C units were stolen from Skidaway Island United Methodist church, Isle of Hope Baptist and the Coastal Empire Council of Boy Scouts when no one was there.
Be vigilant! I have heard these criminals are bold. They show up with a truck or van, walk straight to the A/C, say they are doing repairs or an inspection if questioned and then carry it away.

I'm not suggesting you intervene, but talk to the neighbors of your vacant properties and ask them to call the police if they see anything suspicious.

Savannah's Permitting Process to Be Refined, Streamlined.

At the last Savannah/Hilton Head Realtor Commercial Alliance meeting a few weeks ago, city manager Rochelle Small-Toney was the main speaker. Instead of giving a presentation, she turned the meeting into a laid-back round table discussion. When asked about changes in the usually hectic permitting process, Ms. Small-Toney offered some hope for those in the process now or the near future.

She first acknowledged a decrease in inspections and permitting in Savannah due to a recovering economy. This has caused layoffs for many county inspectors who will be rehired when the number of permits increases. She replied to a comment that “the permitting process is crazy,” by explaining that the problem was mainly poor customer service. This created the appearance of chaos and a lack of information within the system. She said this was being addressed and that “we do know what’s going on.”

Another problem area that is being corrected concerns the permitting ombudsmen. Previously, they would visit a site, make a decision and then refer to someone else for approval. Now the ombudsmen “have the authority to make the call on site. They didn’t know that before,” she said.

To streamline the permitting process, the city is exploring the use of software to track a permitting project in real time. If implemented, permit seekers will track the project’s status, view comments, understand problems and find solutions immediately. This will eliminate dozens of phone calls permit seekers usually make to the city to try to find out where their permit is. This will be in addition to the Virtual Inspections and Permitting Systems already in place.

Savannah also offers free semi-annual workshops on the permitting process at the civic center. The next one will be in the autumn. Visit www.savannahga.gov/developmentservices for more information.

AVAILABLE: 115 Charlotte Road, Ste. C

Ste. C on 2nd floor.

642sf, $750 per month plus electricity.

Convenient to Publix, Walmart, restaurants, schools, Longpoint, The Marshes, Island Expressway, Johnny Mercer Blvd.

Other tenants include Whitemarsh Island Chiropractic and Islands Dance Academy.

Ideal location for educational, internet, computer, start-up enterprise.

Call 912-352-1222 and ask for me, Joseph Marshall.

Coldwell Banker Commercial Platinum Partners
912-352-1222
Connie F. Ray, Broker

OPEN HOUSE Tomorrow June 5th, 2-5 pm at 7 Garmany Lane

Come by and check out 7 Garmany Lane tomorrow in Isle of Hope! Four bedrooms 3.5 baths. Beautiful hardwood floors and a fantastic rec room with bar. Formal living and dining rooms, office and master suite on the main floor. An Isle of Hope Beauty offered at $575,000! Come by and check it out!

Coldwell Banker CEO to Case-Schiller: It’s Not the End of the Real Estate World

Posted by jim_gillespie in Market Report

So many of us giggled nervously as we thankfully avoided the end of the world a couple of weeks ago. But judging by the continued “end of the world” type coverage the Case-Schiller housing study got this week, maybe we are nearing the end.

Yes. I am joking, but I am amazed at the attention this report gets. It covers 20 markets, yes only 20, and that is just one of its many flaws. Yet many consider it “the be-all-and-end-all” economic indicator that defines our entire national housing picture. As we know, all real estate is local, and it is unfortunate that the reporting on a 20-city “national” index can have such a jarring impact on otherwise rational people.

Look at some of the headlines the other day:

“Home prices at lowest point since 2006 bust”
“Home values continue downward churn”
“No relief in sight’ for falling home prices”

And even in paradise – Maui- the front page headline in the paper screamed “Crash Spreads.”   And Maui isn’t one of the 20 markets. In fact the nearest market covered is San Diego, a mere 2500 miles away!

Shawn Daly, an agent with Coldwell Banker Residential Brokerage in Evanston, Illinois, had to calm down two skittish buyers this week.

One, who is currently working in Iraq, had initially placed on offer of $450,000 on a lakefront Chicago condo. The sellers countered with a price of $525,000. But after seeing Case-Schiller inspired headlines on the web, Shawn’s client emailed him to ask that he lower his offering price by $50,000. Shawn explained that the sellers did not agree with his first offer so if he went lower he wouldn’t get the home. The buyer calmed down and agreed.

Shawn correctly pointed that the Case-Schiller Home Price Indices are meaningless to individual buyers who are looking at specific houses, on specific streets, in specific neighborhoods.

Then yesterday, Shawn met another client for a tour of potential homes. They hardly said hello without telling Shawn they were more nervous than ever after seeing the report on the news.

You have a right to be nervous, but I can’t say this enough. Now is the smartest time in my 36 years in real estate to buy a home if you have the lifestyle reason, financial stability and viability to do so.

And it’s all about “Triple I…P”. Inventory, Interest rates, Incentives and Pricing. Start with inventory, because most communities have seen a rise in the amount of homes on the market, you have more choices. Interest rates for mortgages remain at near-historic lows and have actually trended down over the last 7 weeks, with Freddie Mac reporting 30-year fixed rates now averaging 4.55%. Incentives are the tax advantages to home ownership. And of course, there are prices. Prices are down from mid-decade highs, but in many, many markets are showing stability, slight declines or even increases. Home affordability remains near record levels and the price-to-value proposition in most markets is extremely compelling.

If you are interested in buying a home, you owe it to yourself to contact a real estate agent in the community you are interested in. Look at homes, do a rent vs. buy analysis, explore what is available in your price range.

Don’t just take my word for it. Do your homework.

You might just be surprised that the end of the world isn’t here yet … at least until next month’s report.

What do I need to know about liability protection when I hire a mover?

Under federal law, interstate movers must provide liability information outlined in the “Your Rights and Responsibilities When You Move” booklet.  The two options to protect your belongings (called valuation coverage) are:

Full Value Protection. Your mover is liable for the replacement value of lost or damaged goods in your shipment. They are permitted to limit their liability for loss or damage to articles of extraordinary value (items whose value exceeds $100 per pound), unless you list these items on the shipping documents.  Ask your mover for a written explanation of this limitation.

Released Value.  This option assumes liability for no more than 60 cents per pound per article and is offered at no additional charge. You’ll be compensated according to the weight of the item, not its actual value. If you don’t select Released Value, your shipment will automatically be transported at the Full Value Protection level and you will be charged appropriately.

If you pick Released Value, some movers may offer to sell or obtain for you separate liability insurance. This insurance is regulated by state law. You also may choose to purchase insurance from a third-party insurance company.

If you have any questions, or need capable and trustworthy representation, please call me at 912-352-1222.