FROM EQUITY TO ESCROW: MORTGAGE TERMS TO KNOW
Buying a home can be exciting, but it can also be overwhelming at times, especially if you’re not familiar with all the specific words and phrases that are part of the mortgage process. This vocabulary can be a lot to learn and remember, even if you’ve bought a home before!
Below, we’ve broken down some of the more common mortgage terms you might encounter to help you navigate your next homeownership search with confidence.
Principal: The portion of your monthly payment that is used to reduce your actual loan balance.
Equity: How much of your home you own. In other words, how much of the principal loan you’ve paid off. As we’ve discussed in previous issues of this newsletter, you can find your equity by subtracting your outstanding mortgage balance from the current value of your home.
Seller Concessions: These are certain costs associated with homebuying that the seller agrees to pay. This can include repairs and/or closing costs.
APR: This stands for annual percentage rate, and is the cost of credit expressed as a yearly rate. APR is closely related to your interest rate, but they are not always the same. That’s because in addition to the interest rate, the APR may include points, fees, and other credit charges that the borrower is required to pay.
Discount Point: Discount points are optional fees paid at closing that lower your interest rate. Essentially, discount points let you make a tradeoff between your closing cost fees and your monthly payment. By paying discount points, you pay more in fees upfront but receive a lower interest rate, which lowers your monthly payment so you pay less over time.
Lender Credit: This is when a lender gives you money to offset your closing costs. This often happens in exchange for a higher interest rate, for example, in which case you’d pay less money upfront but more over the long run because of a higher rate.
Mortgage Rate Lock: A mortgage rate lock (or “lock-in”) is a guarantee that your interest rate won’t change from the time you’re approved for a loan to closing, as long as you close within the specified timeframe
and there are no changes to your application. If your rate is locked, that means it won’t change as a result of market fluctuations, although it could change if there are updates to your application – such as with your loan amount, credit score or verified income.
Escrow: Escrow plays two roles in the homebuying and mortgage process. First, it refers to a temporary financial arrangement where a neutral third party holds your earnest money until a home sale is finalized. Later, after you purchase your home, your Bell Bank Mortgage lender will set up an escrow account to collect funds for and pay property taxes and/or insurance premiums as part of your monthly mortgage payment*.
Subject to credit approval. Program guidelines are subject to change without notice. Not available in all markets. Other restrictions apply.
*Bell Bank Mortgage does not provide legal or tax advice. The information provided in this advertisement is intended for informational purposes only and does not constitute legal or tax advice.
THE GROWING TREND OF MULTI-GENERATIONAL HOUSING
In the last few years, multi-generational homes – where adult siblings, adult children, and parents or grandparents live with the primary homeowner – have increased in popularity. According to a 2024 survey from the National Association of Realtors (NAR), 17% of homes purchased in 2024 were multi-generational, up from 11% in 2021.
The top reason behind the increase in multi-generational living, according to the NAR report, is cost savings. Challenging economic conditions can make it harder to buy and own a home, for both younger potential homebuyers who often carry student loan debt to older generations with a limited income.
“Rising housing costs have made it harder for young adults to afford homes of their own, while retirees on fixed incomes may struggle to maintain independent housing,” NAR writes. “Sharing a home can ease financial strain for everyone involved.”
Another common reason is caregiving. According to the NAR survey, 25 percent of respondents who reported buying a multi-generational home cited taking care of aging parents as their top reason. Assisted living facilities are getting more and more expensive, and so for some families, living together may be a more feasible option.
“With an aging population, many families are stepping in to provide care for elderly relatives,” NAR writes.
The Sandwich Generation Multi-generational living can be especially challenging for the demographic known as the “Sandwich Generation” – middle-aged adults living with and caring for both aging parents and their own children. This is becoming a more common multigenerational household arrangement, according to NAR. Among those who cited caring for aging parents as their primary reason for purchasing a multi-generational home, 29 percent also had children under 18 in the household.
While having all three generations under one roof may be a practical living situation, members of the Sandwich Generation could find themselves navigating emotional, financial and caregiving burdens while juggling their own lives and careers.
“These home buyers are facing increasing challenges as the longer lifespans and the rising financial dependency are added to their responsibilities,” NAR writes.
Balance is Key for Multi-Generational Living
A multi-generational living arrangement could have clear benefits for families living together, but it likely would require effort from everyone involved to balance privacy needs and other personal issues.
“Multi-generational living offers families financial and emotional support, stronger bonds, and shared caregiving responsibilities. However, it also requires navigating privacy, space, and interpersonal dynamics,” NAR writes. “As this trend continues to grow, it reflects on how families are adapting to modern economic and social realities while rediscovering the benefits of living together.”
https://www.nar.realtor/blogs/economists-outlook/home-for-the-holidays-the-rise-of-multi-generational-home-buying
5 REASONS TO CHOOSE A CASH-OUT REFI
When it comes to your home’s equity, there are several ways that you can put it to use for you. One option is a cash-out refinance, where you replace your current mortgage with a new one for a higher amount –and you receive the difference in cash at closing.
For example: If you owe $200,000 on your mortgage, you might refinance for $250,000 and receive $50,000 in cash.
So, what can you do with the cash? Here are five smart and common reasons homeowners choose to refinance and use their equity:
Consolidate High-Interest Debt
Tired of juggling multiple bills? A cash-out refinance can help you consolidate debts, like credit cards and personal loans, into your mortgage.
Since mortgage rates are typically much lower than credit card rates, this move can reduce your overall interest payments and make monthly budgeting easier. Imagine replacing several bills with just one predictable payment!
Upgrade or Repair Your Home
You can also use your equity to reinvest in your home. Cash-out refinancing is a popular way to fund home improvements such as:
• Kitchen and bathroom remodels
• Roof, plumbing or electrical repairs
• Finishing a basement or attic
• Adding living space
• New flooring, appliances and paint
You don’t have to spend all the cash in one place – you could use some for upgrades and the rest for other goals, for example.
Cover Education or Major Expenses
Need help paying for college tuition or launching a business? Cash from refinancing can help fund major milestones or investments in your future, like:
• College or trade school tuition
• Starting a business
• Buying an investment or rental property
Using your equity to fund these types of expenses can help you put your equity to work for longterm growth and financial security.
Lower Your Mortgage Interest Rate
When you refinance, you get a brand-new mortgage. If current rates are lower than your existing loan’s rate, you might be able to lock in a better deal – saving you money over the long run.
Unlike a home equity loan or home equity line of credit (which are second mortgages), a cash-out refinance gives you one loan with a payment and potentially better terms.
Switch Loan Types or Terms
Cash-out refinancing is also a chance to change your loan’s structure. For example, you could:
• Switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more stability
• Extend your loan term to lower your monthly payment
• Shorten your loan term to pay off your mortgage faster and save on interest
If you’re interested in learning more, contact me today and we can discuss if a cash-out refinance would be right for your situation.
GET TO KNOW BELL BANK MORTGAGE
You trust us to help with your homebuying goals, but how well do you really know us as a company? Here’s a quick look at who we are, where we come from, and some of the values that are important to us.
Our History
Our roots are deep. In 1880, Bell Bank Mortgage was founded as Bell Mortgage by early Minneapolis, Minn., city leader David C. Bell. Today, as a major division of Bell Bank, one of the nation’s largest family- and employee-owned banks, Bell Bank Mortgage upholds a terrific reputation. Bell’s experienced lending team offers a huge variety of loan options and programs for homebuying, building or refinancing. And our in-house administration results in quick, accurate and smooth processes all the way to no-surprise, on-time closings.
In 2011, Bell Mortgage became a part of what was then State Bank & Trust, the largest independently owned bank in the Midwest. One year later, the entire company rebranded as Bell, taking a more unique name for our respected and growing brand. Bell embraces a simple yet powerful commitment, long embodied in our “bottom line” mission –“Happy employees! Happy customers!” Core values of family, unequaled service and giving back are at the heart of what we do.
Giving Back by Paying it Forward
An Award-Winning Company
We’re consistently recognized for our workplace culture and customer service. Here are a few examples of awards we’ve won:
• Great Places to Work – Fortune
• World’s Best Banks – Forbes
• Best-in-State Banks (Minnesota and North Dakota) – Forbes
• Best Banks to Work For – American Banker
• Top Workplaces USA – USA Today
• Top Workplaces (Minnesota) – Star Tribune
• Top Workplaces (Arizona) –AZ Central/Arizona Republic
• 100 Companies That Care – People magazine
• Top 3 Residential Mortgage Lending Companies (Minnesota) – Finance & Commerce
• 100 Best Companies to Work For (Minnesota) –Minnesota Business
• Community Impact Awards –Minnesota Business
• Integrity Award Finalist – Better Business Bureau of Minnesota and North Dakota
Bell pays it forward in so many ways – through volunteering, sponsorships of community events, and most uniquely through our company-wide Pay It Forward initiative. Every year, full-time employees receive $1,000 and part-time employees $500 to give as they choose to individuals, families and organizations in need. Since 2008, this program has changed lives by empowering more than $30 million in giving.
Bell Bank Mortgage actively supports a wide array of charities – including local programs that provide donations to nonprofit organizations for each mortgage closed, active volunteerism and financial support for housing programs, and neighborhood events that bring people together in community and philanthropy. We love to help, and it shows!
Interested in learning more about what makes Bell Bank Mortgage great? I’d love to share more about this company!
