Latest News, Jan 2022

As predicted, rates are starting to move upwards. It’s incremental and small and the increases may be slowed by Omicron for fear that market disruptions may occur from the effects of the new variant. But, overall, we can expect about a 0.75% increase in rates in 2022. Will that slow/stop/decrease housing prices? The short answer is no. Although, some very localized markets may see these issues, the nation will continue to see strong demand for housing. New construction will be strong trying to meet this demand, as well. But, experts say that it can take 8 years to build us out of this shortfall. So, expect demand and price increases (although somewhat chilled) to continue.

Because of these recent increases in prices of rental property values, it has created an unusual trend in the lending marketplace, especially on refi’s. Let’s say your tenant pays $1000 per month and, suddenly, the new recent appraised value of the property has gone up, significantly. The amount of rent may not cover the new payment on your cash-out refi. The DSCR ratio doesn’t work. Well, there are a few remedies for that in the lending world. There could be an Interest Only option for the first 5 years of the new loan. Or, you could buy-down the interest rate to lessen the payment. Another way is to take a lesser LTV on the cash-out. Regardless, keep this in mind when considering a cash-out refi on your rental property.

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