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Episode 84: Should You Refinance your Mortgage? with Scott Shelton

Scott Shelton is a Sales Professional with 10+ years of experience closing deals from cold contact through demonstration. Diverse experience tied together by entrepreneurial work ethic and deep understanding of advertising and marketing technologies.

Transcriptions:

Scott Shelton
[00:00:00] Scott Shelton: The mortgage business real estate overall is still extremely busy. In many, many parts of the country. Inventory is still low. Interest rates are at still a historically low average and that’s exciting news for first time home buyers. And even many buyers who want to read the Nance.

Welcome to the Jennifer J. Hammond Podcast Jennifer is a licensed realtor educator speaker and bestselling author. Jennifer’s goal is to help you find your yay in every day.

[00:00:38] Jennifer Hammond: So Scott Shelton he is, you know, I’m going to share a little bit about your story later. I want to jump right into it because you are a mortgage expert.
You’ve been doing this for many years. How many years? I should ask that

[00:00:50] Scott Shelton: 29 now.

[00:00:53] Jennifer Hammond: I’m a 24 years in real estate, real estate as a licensed real estate agent, but also as a real estate investor. And, you know, I love, love, love helping people and teaching people. So it’s one of the reasons that I’ve always been so passionate about, you know, sirius XM
for well over 10 years, and now I want always make sure that we’re helping Facebook, Instagram, all the different places, get the information out there so that people can make good decisions in real estate. And mortgages is one of the hottest topics out there. And so. I wanted to start we’re in and this is going to be dated.
I usually try to do as many evergreen things as possible, but I think one thing that’s really interesting right now is what is happening with mortgages in the year 2021? What are we going to say? The second year of this health pandemic? And we’ve had. So much craziness with the mortgage moratorium and interest rates have been historically low.
And it’s kind of been this incredible market, but I’m curious from your viewpoint, what are you seeing happening right now in year 2021? We’re in August, 2021. What’s happening from the mortgage side for you guys.

[00:02:07] Scott Shelton: Well, Jennifer, it’s always a pleasure to be with you. I we’ve known each other for so many years, so thank you again for allowing me to be a part of your team.
We’re more than halfway through 2021, and it’s already been an exciting year. I can honestly say that the mortgage business real estate overall is still extremely busy. In many, many parts of the country. Inventory is still low. Interest rates are at still a historically low average and that’s exciting news for first time home.
And even many buyers who want to refinance, we are starting to see more and more investors enter the market. So I’m really excited about where we are and where we’re going. We’re going to have a very busy end of the summer and a very, very busy fall 2020.

[00:03:05] Jennifer Hammond: Oh, I agree. I think it’s going to be, you know, and you and I are both in the Washington DC area, which of course we affectionately call the DMV Washington DC, which is not the driver’s license place.
If you’re listening from wherever you are in the country or anywhere in the world, the DMV is Washington, DC, Maryland, and Virginia. And our market is such an interesting market for so many reasons, but I’m curious, I want to dig into a few other things that, again, I know we’ll make this dated, but I don’t.
I want to ask a little bit about your viewpoint on, you know, the mortgage moratorium it’s been it’s been. So I say, first of all, for those who are not paying the mortgages, what are you seeing as far as many people we were talking about this last week, foreclosures and short sales, do you predict that you’re going to see a lot of those or has this really prevented that from happening?

[00:03:58] Scott Shelton: It is a mixed bag. I think that’s the best way to communicate it. It is a mixed bag. There are quite a few folks still suffering on being able to. Pay their mortgages. It is difficult to pay at the same time, delinquencies have not been astoundingly going through the roof. Jennifer, there is some talk that we’re going to have some possible or potential foreclosures hit the market when we don’t know, but there is a lot of talk that there are some foreclosures due to.
COVID-19 and 2020, and, and throughout 2021, that there is a room full of foreclosures that if I can phrase it that way, that could potentially be released and hit the market, which can open up the door for a lot of first time, home buyers and potential investor buyers. This moratorium. In all fairness, we never want to see people lose their homes.
We worked so hard to create a culture, a mortgage mortgage culture, a real estate culture, where everyone can have the dream. Of homeownership and due to this pandemic and due to employment issues. And it just has unfortunately devastated families jobs, but I do have some hope and I think we’re going to have a rebound.
So we’re going in the right direction. So we’re going to keep hope positive on this front.

[00:05:46] Jennifer Hammond: I like that. I know that I’m famous for my yeas and I just always,
so I love keeping hope alive and, but it is really interesting. The impacts that this market, not only the people who had the mortgage moratorium, but also I’m curious on the investor front, your viewpoint on. You know, now we’re looking at the, the, you know, the, well, of course there’s the federal, but then there’s, you know, I want to say statewide, but in DC, we’re not a state.
So barring that, that little bit of confusion. So what about the investors who had their tenants haven’t had to pay rent? What do you, what is your prediction? Do you guys, I don’t know if you’re following any statistics on that or any idea on what’s going to happen? With all of those properties. Do you think that they’re going to end up in foreclosure or do you have any metrics to be gaging?

[00:06:42] Scott Shelton: The short answer would be, yes, we do believe they’re going to fall into foreclosure. We do not specifically follow the metrics and statistics on those particular items, but, you know, investors purchase property. They purchase these properties with the hope of appreciation and with the hope that someone else can move into that property and help them pay off that property so that they can have a long-term investment. And now with folks now, Paint the mortgages or paying their monthly rent on these mortgages, to the investors that puts the investor in a very compromised position. I think we have a lot of savvy investors out there who want to keep their credit and great standing, so they don’t do what they need to do to keep that property float, but it really creates a very big challenge for them.
Financially and economically each and every month, three months, six months. Okay. But when we start to go 8, 12, 14 months, plus that’s a whole different ball.

[00:07:59] Jennifer Hammond: Yeah, it’s interesting because I see it from so many different angles and it makes me think of that. The, the idea that we are all connected, you know, if your neighbor is having a hard time, guess what it actually, it, it impacts you and I, so, you know, I think in the United States, we so often we individually, you know, we all try to kind of.
Close in. And, and not, I don’t know, it’s almost like a race horse we’re on this race and we put blinders on and we forget to look to our left and to our right, and to see what’s happening with the neighbors and really understanding that we’re all connected whatever’s happening is going to impact us.

[00:08:41] Scott Shelton: And how can we, that’s so interesting that this pandemic and we’re talking about economics and real estate and financial, but. This pandemic has want to cause us to kind of isolate and go inward. But the more we realize what’s really going on here, we’re so interconnected and we needed.

[00:09:07] Jennifer Hammond: Yeah, we need each other so badly.
And this is interesting, but when I look at the mortgages, you know, from the investor viewpoint, the, from the, even the first time home buyer from each different viewpoint, I realized that we are all connected and with the pandemic it’s made us. I think, you know, I always have been very, just, I love to get to know my neighbors and I constantly I’m.
I know, I know this. Isn’t going to surprise you because you’ve known me for so long, but I love to have to give and to provide random acts of kindness. So, so for where I’m living, I’ve been here a couple of years and every year on random days, I will leave like a potted plant on everybody’s if I live in a call, but call the SAC.
So my, my one block, little culdesac, I’ll go make sure everybody has a new potted plant or like in sometimes on Easter morning, I’ll go and get, you know, To lips or something and I’ll put it on everybody’s front porch. And sometimes I leave a note. Sometimes I don’t leave a note or I’ll just say, happy Easter.
I’ll just say, have a great day, have a yay day or something funny. But I realized even in my neighborhood, and I say, even in the fact that it’s amazing, if you observe, you will notice. I want to say it’s like every so often I’ll walk in my neighborhood and I’ll be like, oh, I never noticed that tree, but it’s a pretty big tree.
So it didn’t just arrive. And it’s the same thing with your neighbors? Oh, I, you know, did I notice that that house is actually. Vacant now. And I was like, and of course I’m a real estate. I’m licensed real estate agent, so I can look it up and I’ll be like, but anybody can look up in the public records. And I’m like, oh, so I didn’t even realize that that was actually a rental.
That person wasn’t an owner. And it made me start realizing, you know, from an owner’s viewpoint. From a real estate investors viewpoint. What are the things, how are we interconnected and how can we help each other and with the mortgages and stuff. So I know I really wanted to talk a little bit about kind of what’s happening out there right now.
And of course when we get at least halfway through to there, we’ll all open up to questions. So all those guys popping in, we see people popping in and popping out in clubhouse. We’ll definitely. You know, answer your questions in a minute, but I wanted to kind of get your idea about the, what was happening from your viewpoint.
The other thing is I want to shift and we’re going to kind of go backwards cause I want to shift and talk about refinances and then I want to shift and then talk about first time home buyers and all the there’s. So many programs out there that people do. Realize are out there. I’m always, I’m amazed. As you know, I love to do volunteer work for veterans and veterans.

[00:11:50] Jennifer Hammond: It’s amazing to me, how many veterans don’t know there’s a zero down payment mortgage for them with a USDA loan and they think, oh, I have to be a farmer. I can’t be, you know, and it was, I didn’t. So the misconceptions out there for first-time home buyers and the mortgages that are out there. I want to talk about that, but before we go there, And before we go to questions, let’s talk about refinance.
This is like the question over and over. I get. And as you know, I mean, I get flooded with hundreds and hundreds of emails about, is it a really good time to refinance? And I’m like, oh my gosh. Because I hate answering the question. Well, it depends as you know, it’s like a fingerprint, it depends on what their mortgages, what the situation is and all of that kind of stuff.
So how do you answer that question? When is it a good time to refinance? What are the indicators that someone should be looking for?

[00:12:51] Scott Shelton: You know, Jennifer, that’s a really good question for me, 29 years in the mortgage business. I generally respond. It’s always a good time to refinance. However, let’s look at the numbers to make sure that it makes sense. It has to make financial sense but it’s always a good time to refinance if the opportunity makes good financial sense. So if we can say. X amount of dollars per month, where we don’t eat into the equity of your home interest rates at an all time low. If you years ago, Initiated your mortgage with an arm and adjustable rate mortgage.
And now because 30 year fixed rates are so low and you want to refinance to a fixed rate now is a great time to do so. We have more people at home working at home. We have more people due to that because of the pandemic. They’re now taking cash out of the equity of their property and refinancing and doing home improvements.
And paying off debt or consolidating debt. So yes, refinancing is always a great opportunity, but you need to make sure that you’re speaking with a professional and experienced lender. That can provide you with the answers you need to make an informed decision.

[00:14:19] Jennifer Hammond: So two things, one of the most important questions, or one of the most, I should say frequent questions I get is, so for instance, what should somebody refinance?
If it’s a full interest rate or a full point lower on their mortgage, usually

[00:14:38] Scott Shelton: general rule of thumb, but. I always put in the caveat. What’s the balance on that property? Because if the balance is lower, let’s say 70,000, the impact is not as substantial as a balance. That’s 400,000. So again, you’ve got to make sure you’re getting.
And informed, educated response from the lender that you’re dealing with. That is so critical when it comes to refinancing.

[00:15:13] Jennifer Hammond: Yeah. W and the refill, and I financing so many people, I see that they they get excited about I want to say market or. Marketing or advertised rate. And again, it doesn’t always apply to their situation.
And so I think that what you just said is so critical to knowing if refinance is the right thing for you to do right now, or if it’s something you wait is you really have to look at those numbers. And confront your specific situation with your balance, with the, you know, what’s happening in the market, all that kind of stuff.
You have to talk to professional. As you know, I always talk about, you need to create your year. We want the team, every team person on there, every person that you. Higher. I want to say higher, whether it’s a licensed real estate agent an attorney, a mortgage specialist, you know, whoever it is, you need to make sure you’re talking to a professional.
Just like I, you know, if we had Linda isn’t here today, but my tax expert, Linda Damar, Lara, she’s a tax masters in Rockville, Maryland. And she’s funny. One of the things she always talks about is please do not use a software to advise you on your tax. Decisions and the same thing, you know, with real estate.
So many times people think, oh, well, we got all these great news sites. You know, I can go look at it myself and, and you don’t realize, oh dear, that can really get you into trouble because you’re, you’re missing the human element of having somebody really look at your situation and analyze it. And I know you have a team of people that, that helped with that.
And I mean, that’s not something that’s a long process, right? You can look at something really quickly and be able to help somebody and advise somebody that’s that’s true. I have a team of experienced loan officers that can take 20, 30 minutes to evaluate your situation and give you some. Pertinent feedback.
[00:17:19] Scott Shelton: This is, this is dollars and cents. I mean, this is your mortgage. One of the biggest, if not the biggest investment you have, you have made or will ever make. So it’s critical that you speak with someone who has the experience that can take the time, review your current mortgage statement, review your current interest rate.
What your current balance is. What’s your equity position. What the current rates are and do that comparison to say, this is how long it’s going to take you. If you refinance your mortgage, you’re going to be able to recoup your money in 12 months, or you’re going to be able to break even in 14 months and or you’re going to break even in six years.

[00:18:04] Scott Shelton: No that that’s not the answer to take advantage of a refinance opportunity.

[00:18:12] Jennifer Hammond: Yeah. And I hear that. I mean, from not only my friends, family, clients, they’ll say, oh, I just got this in the mail.
And it says that I could get my mortgage down to, I won’t even say some of the interest rates. And I’m like, okay, that’s a marketing piece.
That’s not necessarily truth for you. I know it has your name on it. Feel like that, that would be the honest truth. But, so I guess the other thing is, is when people are looking at refinancing, I, I think that it’s, it’s something where again, you need to have truth about what numbers are gonna matter. And one of the biggest factors is the closing costs on the refinance.
Will you speak to that a little.

[00:18:56] Scott Shelton: Sure you know, today with a lot of our systems, depending upon which program you’re looking at, refinancing into we can do appraisal property waivers depending upon the equity in your property. So. Appraisals generally costs several hundred dollars anywhere from three 50 to $500 on an appraisal.
That’s part of your closing costs. You have attorney’s fees, you have recommendation taxes. These fees, these costs, these charges. On a refinance are less than what it costs to do a purchase when you initially purchased your home. But when you add up these costs on the refinance, we want to make sure that you’re able to break even within, I always tell my customers within 12 months.
So if your current rate versus the new rate and you add in the closing cost, if that difference, doesn’t allow you to break even within 12. 1415 months. Then maybe this is not the right time to take advantage of a refinance opportunity.

[00:20:09] Jennifer Hammond: I agree. I agree. So it’s so that’s one of the things that I wanted to just, again, highlight was the refinance is so often I get that question.
Oh, it’s a whole 1% interest rate lower, and I’m like, okay. Well, where did you get that information? Did you actually talk to somebody or did you, and, and if you talked to somebody, did they actually look at your current mortgage or was it just a marketing, just like a marketing piece you might get in the mail getting the true information to.
Good decisions in real estate has to do with actually getting the real information so to speak. And so, so often people overlook that because again, we, I feel like we are like these horses with blinders on and we’re on a horse race and we’re not paying attention to the fact that we need to actually look at the details and make sure that whatever we’re looking at is the right.
You know, thing for us, whatever it is, if you’re looking at a refinance. So one other thing about refinance, and then I want to switch topics to first-time home buyers and veterans and such. And then if we have time, I want to switch over to investors and investor loans. And for those who are out there, but again, in this amazing, interesting world, a very interesting.
I just, I’m just gonna say interesting. That’s the best word I can come up with this very interesting year, 2021, but listen, one more thing about refinance. Of course. There’s so often people ask about PMI, private mortgage insurance, and refinancing so they can get rid of private mortgage insurance. Will you talk a little bit about that and why, what is private mortgage insurance, what it takes to get rid of it and what are some of the restrictive.
Of not being able to get rid of PMI. Oh yeah.

[00:21:54] Scott Shelton: There’s a lot of different ways to describe PMI. Private mortgage insurance is placed on a mortgage. A conventional loan is placed on a conventional loan when your down payment is less than 20%. However, we have some really great. Am I mortgage insurance companies today in today’s world, I’ve seen the evolution process over these last 29 years that you can make it down.
At 5%, not the required 20% because it’s, you don’t have to make a 20% down payment anymore to have a mortgage. As long as your credit is in good standing. And you have the ability to repay that’s the focus phrase, ability to repay, but by percent down, we can structure a loan with no mortgage insurance.
Wow, 10%. So 10% down, we can structure a loan with no mortgage insurance, no longer do you have to make 20% down or 20% down payment that had no mortgage insurance mortgage insurance is simply default insurance. Should you default on this loan? There’s a third party that will insure the mortgage lender that they don’t lose.
Their shirt on that loan. That’s the simple language, the best way I would communicate it in layman’s terms. So the mortgage insurance companies that we deal with today, do a fantastic job analyzing risk, no matter what the down payment is. So if someone came to me today, Hey, I did take out a mortgage. It has mortgage insurance.
Again, you’ve got to be talking to a mortgage specialist who is experienced and understands how to look at your situation. How long have you had the property? What’s the current market value of the property. What’s the current balance on your property and determine that equity spread to see what your loan to value is.
Which we, as an acronym calling LTV LTV. So once we determined some of these things, we then can make a decision or help you make a decision as the borrower on whether mortgage insurance can be dropped at this specific time. Or do you want to make a cash investment into your mortgage to eliminate PMI, private mortgage insurance?

[00:24:34] Scott Shelton: So again, a discussion. So with someone who’s experienced is so critical and so necessary.

[00:24:42] Jennifer Hammond: And it’s so interesting because again, these are financial decisions that will impact you for years to come. And that’s part of the reason that, you know, with. I want to have these conversations because so often I’m just absolutely amazed by, and I want to say it by people that I really look up to.
And then I realized, oh my gosh, they really don’t understand a refinance. And they really don’t understand. How to make that decision. So that it’s a good decision that helps them for years to come. And, you know, again, I’m in this field, I’ve been in here for, you know, many years now. And so for me, it just is second nature.
And I think it’s that way for whatever you do. If you’re a dentist or a doctor, or, you know, a construction worker, you, you think about the ins and outs as, as no big deal. And that’s one of the reasons that I want to always. Continue having conversations about some of the basics. And I want to call them the basics of real estate investing.
And one of the biggest barriers I have found in my life, as well as clients, friends, family, whatnot, is the. I already know all about it. You don’t have to tell me anything. And I’ve caught myself where I’m like, oh no, no, I know all about that. And then I’m like, wait a minute. I didn’t know that. And so it’s part of the reason that I, I know sometimes it seems so basic when I ask you some of those questions about refinancing a mortgage, but it’s really important to understand how to compare and contrast.
And see if a refinance is right for you at this time. So thank you so much, Scott. And.

[00:26:23] Scott Shelton: Thank you, Jennifer.

Hi, I’m Jack Canfield. You may know me as the coauthor of the chicken soup for the soul series. And if you want more help in getting from where you are to where you want to be. I want to encourage you to listen to the Jennifer Hammond show.

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Jennifer J Hammond

Discover real estate excellence with Jennifer J. Hammond, your guide to success in the DC, Virginia, and Maryland markets. With over 20 years of expertise, Jennifer offers empowering insights and personalized strategies through her books, podcasts, and courses. Experience the dedication and passion that make every real estate journey with Jennifer truly transformative.

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