Homeownership: A savings lifeline

Posted by at 12:30 pm

With home prices rising to all-time highs, many potential buyers may imagine drowning in a sea of monthly payments stretching across many years. Naysayers bob to the surface with harrowing tales of home-buying gone wrong. If the down payment doesn’t get you – well the property taxes, maintenance and insurance surely will! These so-called “savvy” investors say renters who dutifully put all money not spent on housing into stable investments – like mutual funds – may get a greater rate of return. Criticism of homeownership as an instrument of wealth-building has understandably become louder in the last decade, after a Housing Bust that put more than 10 million homeowners upside-down, and 4 million more into foreclosure. Though most underwater homeowners have swum back into positive equity, and many of those foreclosures are mortgage-eligible again, the math geeks remain in a...
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Unmarried couples sign cohabitation agreements

Posted by at 2:36 pm

Many couples aren’t waiting for the bonds of matrimony before entering another partnership with similar monumental responsibilities – buying a home. According to research from real estate website Zillow, 15 percent of unmarried couples between the ages of 24 and 35 are making the move to purchase a home together, up from 11 percent in 2005. Generally armed with lots of debt, but two solid incomes, the idea is to get into the housing market as soon as possible. To be sure, co-ownership can soften the financial blow. But a whole new set of problems can arise when and if couples break up. Many do. One or both parties will still be liable for the monthly mortgage payments. Unlike marriage and divorce, there is no legal process for dividing shared assets. A solution is the “cohabitation agreement,” which like a marriage “pre-nup,” protects a person’s...
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Know your fire insurance

Posted by at 3:58 pm

Despite constant public education, accidents – preventable or not – will happen. And thousands of American homeowners will eventually make claims on their home insurance. While claims related to weather are the most frequent, it’s home fires that do the most damage. “Partial losses,” where the home is not destroyed, are common. Damages can be difficult to assess. Make you know your policy well, and know how to handle a claim. Call the insurance company right away, and make an appointment for their investigator/adjuster to visit as soon as possible. The adjuster is legally bound to assess any “hidden damages,” including smoke, ash and air quality. If the fire required action by fire fighters, make sure foam and water damage is assessed, as well. Don’t be afraid to ask questions about things you don’t understand. Terms like “recoverable depreciation,” or...
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New construction constructs

Posted by at 10:53 am

Existing homes are a great way to add your own chapter to an ongoing story, but new construction is a way to start your own book. Whether custom-designed or built on spec in a new subdivision, you won’t have to worry about dealing with the emotional baggage of a former owner. And as the first person to live in a house, you can generally count on a lot of nice amenities – new, energy-saving appliances, efficient plumbing, lots of closet space and modern design. You don’t have to smell anyone’s old smells, see what kids scrawled on the baseboards or find any “treasures” under the house from long ago. You just have to deal with the builder. So be aware that most new home sales operations function a lot like car lots. The onsite salespeople are looking out for the...
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The best time to buy? Right now

Posted by at 12:58 pm

If you can find what you’re looking for, the best time to buy a home is almost always right now. One of the best kept secrets in the real estate market is that there is no “best time of year” to do home shopping. Don’t try to time the market – it’s impossible. The right time to buy is when you find the best available house in your price range. The common belief – maybe better called a common hope – is that house prices are correlated to interest rates. When the rates rise, the prices of homes for sale must fall, because otherwise those homes will become less affordable – right? Sorry. There’s no strong relationship between house prices and interest rates. No one can predict how long today’s historically low interest rates will last. Not everyone fits the...
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Fall into great deals on a new home

Posted by at 11:37 am

Fall can still be a great time to buy a home, with the wind of the summer season still at your back. The weather may be getting colder, but even with only a 4.7-month inventory of existing homes available, the market might be hotter than you think. Buyers will find the “move before school starts” competition has dropped out of the hunt, content to wait until the sun shines again. Lots of families don’t like to move in the rain or snow. And as the buying competition drops off, many sellers, in turn, get more serious and more motivated. Maybe they overestimated their home’s market value, and they’d rather make a sale than wait another six months. They may drop prices to elicit more offers. By late 2016, you can expect a new influx of sellers who up until now had been thwarted by negative equity...
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Being a Landlord Rules

Posted by at 1:39 pm

In today’s hot rental market, you may be considering becoming a landlord as a way to make extra money. Perhaps you can afford to move into a new home before selling your old one, and want to see if the old abode goes up in value before you put it on the market. This is fairly common for newly married professionals, who no longer need two places to live, but can now look at one of the properties as an investment. If you can secure significant rent, the extra house might be able to “carry itself.” You can pay the old home’s mortgage, taxes and insurance with the rent. In some situations, you may realize a tidy profit. And of course you can become a professional landlord, who buys and rents out property to help fulfill rental demand. In this tight housing market, the demand is...
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Budget wisely for home ownership

Posted by at 11:08 am

  At one time in American history, there was such a thing as the poorhouse, a community or government facility to provide support and housing to the indigent or needy. Today the phrase “in the poorhouse” remains a metaphorical way of saying: “Living deeply in debt or broke.” Today in America, there is a too common – and ironic – path to the poorhouse. It’s called being “house poor.” House poor people are homeowners who – for whatever reason – spend an inordinately high percentage of their income on mortgage payments. Now, being “house poor” is called “making sacrifices” is some circles. But those sacrifices can become a financial danger zone if there is nothing left at the end of the month after paying basic expenses. Percentage points Most lenders say monthly mortgage payments should be between 28 and 33 percent of...
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August 1st, 2016

Low rates rallying refinances

Posted by at 2:35 pm

  With today’s mortgage rates still hovering near all-time lows, many American homeowners are considering refinancing their home mortgage loans. Homeowners often refinance when interest rates drop below that of their current mortgage to cut the amount of interest paid over the life of the loan. The rate you know Let’s say you have a 30-year-fixed loan with a balance of $200,000 and an interest rate of 6 percent: Principal and interest total $1,119 a month. If you can get a hypothetical annual percentage rate of 4.2 percent, your new monthly payment goes down to $978, and you will save $73,585 in interest payments over the life of the loan. You’ll need to calculate what’s called the break-even point – how long it will take for your savings to be greater than your closing costs. Refinancing typically costs anywhere between...
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Reverse mortgages still relatively underused

Posted by at 10:17 am

  Despite several high-profile marketing campaigns, fewer than a million federally-insured Home Equity Conversion Mortgage (HECM) loans – reverse mortgages – have been written since the program debuted in 1990. Only 1 million in more than 25 years. Think about that. There were 24 million homeowners older than 65 living in the United States at the end of 2015! Not a whole lot for a remarkably innovative retirement planning tool. Consider this Studies show 41 percent of Americans ages 55 to 64 have little or no retirement savings, enough to be labeled a “crisis” by the Employee Benefit Research Institute. But nearly 75 percent of older Americans own homes and have equity in them. The HECM is simply a loan against the equity you’ve earned in the house. The reverse mortgage is available to seniors whether they own the home...
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