Fixed-rate and Adjustable-rate Mortgage Loans: Information for first-time Homebuyers

Before embarking on the home buying process, knowing more about the different mortgage types available and their advantages and disadvantages can help buyers make an informed choice.

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Fixed-rate mortgage loans, as the name implies, have an interest rate that remains unchanged throughout the entire repayment period. Repayment periods for fixed-rate mortgage loans typically come in 10, 15, and 30-year terms. Thirty-year term fixed-rate mortgage loans are the most popular because the monthly mortgage loans are much lower. All fixed-rate mortgage loans are fully amortized, with the money paid to go toward interest costs and to pay off the loan principal. Because the amount they need to pay never changes, many buyers find it easier to budget around their monthly payments. One disadvantage though of fixed-rate mortgage loans is their relatively higher interest rates compared to other loan types.

Adjustable-rate mortgages (ARM) have interest rates that typically start low but are periodically adjusted according to an interest index and the margin agreed upon by the lender and the borrower. As such, mortgage payment can vary. ARMs can be attractive to first-time homebuyers, but it should be noted that the lower initial payments come with the risk of drastic changes in interest rates.

Hybrid ARMs are a popular type of ARM. With hybrid ARMs, there is a period in which the interest rate does not change. Once the fixed-rate period ends, the interest rate is adjusted based on the index and the margin. Fixed-rate periods can be as short as three years and as long as 10 years. A 10/20 hybrid ARM will then have a fixed period of 10 years where the interest doesn't change, followed by a floating period of 20 years, during which the interest rate can fluctuate.

Many real estate experts recommend ARMs to those who plan to sell their homes after the fixed rate period is over, while fixed-rate mortgages are typically advised to those who plan to keep their homes for the duration of the repayment period.

Other popular types of mortgages include government-insured loans such as FHA loans, VA loans for members of the US military and their families, and USDA/ RHS loans for rural borrowers.

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Buying a home is an important life decision. Homebuyers are encouraged to research their mortgage options carefully with the assistance of a trusted mortgage banker.

Steve Liefschultz heads Equity Bank of Minnetonka, a locally-owned financial firm. For more real estate news and articles, like this Facebook page.

Minneapolis And St. Paul Real Estate Market: a Year In Review

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The recovery of the real estate market in the Minneapolis and St. Paul area has just begun. The Minneapolis Association of Realtors (MAAR), an organization that provides research and a solid foundation for the real estate market in Minnesota, reveals a steady sales increase of luxury homes in the region in 2015.

According to the MAAR, the sales of upper-end homes had climbed to 491 by the end of October with 35 additional upper bracket homes sold in November alone. The sales record is higher compared to the unprecedented real estate boom in 2005, which recorded the purchase of 453 upscale homes in the St. Paul and Minneapolis real estate market.

Major factors such as employment play a key role in the real estate market's long-term stability. According to the Bureau of Labor Statistics, the Twin Cities rank among the top metropolitan areas with lowest unemployment rate in the country.

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Meanwhile, a study from the University of St. Thomas shows that the Twin Cities housing market is getting close to where it was prior to the global financial crisis several years ago. Due to the high demand in the housing market, experts believe that 2016 could even be better with a 6 to 8 percent increase in median home prices.

Despite the potential for an interest-rate adjustment and other factors, 2015 has been a positive year for the Minneapolis and St. Paul real estate market and it can even get better next year.

Steve Liefschultz is the CEO and chairman of Equity Bank, a Minnesota-based financial company that specializes in investment lines of credit and real estate loans. Follow this Twitter page for more updates in real estate.

Three Of the Best Suburbs in the Minneapolis Area

With nearly a 4 million residents, Minneapolis is considered one of the largest and busiest metropolitan areas in the United States. On the outskirts of the metropolis, however, lies a wide range of residential communities known as suburbs.

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Compared to inner-city neighborhoods, suburbs are typically much denser, peaceful, and spacious. On its list of the “50 Best Suburbs in America,” Business Insider ranks the following as three of the best suburbs in the Minneapolis area:

Arden Hills, Minnesota. Situated eight miles north of the Twin Cities, Arden Hills is one of best suburban places for workers. In 2014, Arden Hills was listed among the top employers in the area with an average median household income of $79,208.

Edina, Minnesota. Edina residents earn a median household income of $84,251. Average commute time to Minneapolis is 20.4 minutes. The suburb, which is recognized for its tight-knit community, is home to 40 award-winning public parks, which incorporate amenities such as basketball and tennis courts.

Eden Prairie, Minnesota. The bedroom suburb, which sits 12 miles southwest of downtown Minneapolis, is one of best places to work, providing residents a median annual household income of $93,828. The place is home to many large lakes and ponds.

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For those who plan to live near the Minneapolis–Saint Paul area, these suburbs are highly recommended.

Steve Liefschultz is the chairman and chief executive officer of Equity Bank, a Minnesota-based finance company that specializes in investment lines of credit and real estate loans. Follow this Twitter account for more updates about the company.

The Minnesotan Taxation Structure on personal Income, Sales, Excise, and Real Estate

Almost all states impose tax depending on the business income derived from the state. How this income from a specific business is taxed will be determined in part by the business’ legal background. In most states, corporations are subject to a corporate income tax, while income from “pass-through entities” such as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships is subject to a state’s tax on personal income. Sales tax can also be imposed, but some states do not levy on items like clothing, some services, or food items for home consumption. Tax rates among states vary widely for both corporate income and personal income.

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 In Minnesota, taxation is slightly progressive. One could conclude that the state’s business-tax climate compares favorably with other states—even with South Dakota. Minnesota also ranks 4th highest among states levying an individual income tax at 9.8 percent. While there are state-wide tax laws that must be followed, the state legislature has made some exceptions and allowed municipalities to institute local sales taxes and special local taxes, such as the 0.5 percent supplemental sales tax in Minneapolis. The cities of St. Paul, Rochester, Duluth, and St. Cloud have same taxes. Excise taxes, meanwhile, are levied on alcohol, tobacco, motor fuel, and items purchased elsewhere but used within Minnesota.

Minnesota has two major taxes that apply to business entities: (1) a corporation income tax that applies to traditional (C-type) corporations and (2) a tax called the “minimum fee” that applies to traditional corporations, S corporations, LLCs, and partnerships.

Minnesotan property owners pay real estate tax to their county, municipality, school district, and special taxing districts. The overall state and local tax burden is calculated to average 11.9 percent in 2006, ranking 4th highest in the country.

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Banking and finance pundit Steve Liefschultz offers clients a diverse array of options on how they could maximize the value of their money. He is the CEO of Minnetonka, Minnesota-based Equity Bank. More on his credentials can be read here.

Expensive home developments draw concern from residents in North Minneapolis

Amid a developer’s plan to build homes that would sell for up to $300,000 in North Minneapolis, residents of Lind-Bohanon—a northern neighborhood within the Camden community in Minneapolis—voiced out their concern over the project, stating that the price of the planned residential properties is far from the $110,000 median price of homes in the neighborhood.

According to the residents, if the plan pushes through, the houses will remain unsold considering that no one in the area has the capacity to purchase pricey homes.

“I don’t know how you expect people to go spend $300,000 even for a kick-ass house,” an anonymous community member explained.

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 To voice out their concern, residents of the area even penned a letter to the City Hall stating that the residential properties are nearly three times the neighborhood’s median single-family home value. Even with median values of $102,500, the new development project signifies a 19 percent annual jump to home prices, which is equivalent to 10 years’ worth of home value increase in the Lind-Bohanon neighbourhood.

The city officials, however, were quick to respond stating that the new real estate development plan is part of the city’s long-term goals for the area. The city’s development agency listed creating “high value, high quality housing” first among its greenway development goals.

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Furthermore, city officials emphasized that the greenway project stayed on hold until the area’s market sufficiently recovered this year, giving real estate developers the opportunity to expand their projects in the area. They also revealed that recent sales in the North Minneapolis have strengthened.

Steve Liefschultz is the chairman and CEO of Equity Bank, a locally owned and managed finance company that specializes in investment lines of credit and real estate loans in Claremont and Minnetonka, Minnesota. For the latest news in real estate, follow this Twitter account.

Exciting Times Ahead For Minneapolis' Housing Market

The city of Minneapolis is no stranger to real estate tumbles.  In late 2010, for instance, the city saw 60 percent of the homes in the market foreclosed.  It took about three years before the housing market started to show signs of recovery.  This year, however, Minneapolis real estate is expected to return to its former glory.  Realtor.com, in fact, included the city in its list of “10 hottest housing markets for 2015.”  Boosting this rosy outlook are the city’s extremely low unemployment rate, a healthy economy, and relatively affordable homes.  Even its household income of $83,000 (compared to the $64,000 national average) is attracting home buyers, especially young professionals.  In fact, Minneapolis is reported to be the second-largest market in the country for home-owning millennials.

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Things are indeed looking up for Minneapolis's housing market.  The most recent data collected by the Minneapolis Area Association of Realtors show new listings growing 23.2 percent in February, the largest year-on-year increase since July 2013.  Pending sales also jumped by 21.8 percent, registering the biggest pending sales figures since February 2005. 

There couldn’t be a better time for the city to execute an impressive housing market turnaround.  As The Atlantic has feverishly declared in this article, there exists “The Miracle of Minneapolis,” a city that mixes home affordability, employment opportunity, and wealth so well.

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For the latest news in real estate, follow this Twitter account for Steve Liefschultz,Equity Bank chairman and CEO.

Applying for a bank loan even with bad credit

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Applying for a bank loan even with bad credit is one of the frequent search engine inquiries. Financial and banking experts are also asked for tips and suggestions to expedite the application process.

Unfortunately, there is no hard and fast rule on getting a bank loan approved with bad credit. It must be understood that several factors come into play in the entire approval process. The most important to consider is how bad credit is determined in the first place. A person’s credit history is determined by several factors, including how often he or she pays his or her bills, whether they are paid on time, the amount of funds in an account for a certain amount of time, and other factors that determine how reliable that individual is as a bank client.

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Financial institutions differ in one or two of these factors, but in general, credit history is dependent on how well an individual keeps tabs on his or her finances. These factors are plugged in a general system which produces a score. It is this number that is fed across the national channel and determines a client’s credit value.

To speed up the application, the borrower should pinpoint the factor that dragged down the score. If for example, the bad credit is the result of a bill that remained unpaid for four months, the borrower should pay off this bill before applying for a bank loan. This does not necessarily guarantee an approval, but does improve the chances.

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Steve Liefschultz gives financial and banking advice to interested individuals. Learn more about banking and finance by following this Twitter account.