Most people agree that homeownership rules! When asked, people say they want a home they can call their own, to raise their family, share with their friends and to feel safe and secure. It also accounts for the majority of most people’s net worth.
These rules can help protect your investment and make homeownership more enjoyable.
- Don’t overpay for your home
- Maintain your home’s condition
- Minimize your assessed value to lower property taxes
- Make extra principal contributions to save interest and build equity
- Validate the insured value of improvements and contents
- Stay current on surrounding property values
- Make mortgage interest payments deductible
- Invest in capital improvements that increase market value
- Don’t over-improve the neighborhood
- Keep records of capital improvements and other maintenance
We want to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between.
Maybe you’re not ready to move into it but that doesn’t mean that you shouldn’t take advantage of the present opportunities to acquire the home you want to live in during retirement. The combination of the low interest rates, reduced prices and lower competition may never be this good again in our lifetimes.
The rental market is strong and a tenant could pay for your retirement home. The cash flows are attractive and the yield is bound to be stronger than what you’re currently earning. Even if you don’t retire to this home, it could be a placeholder to control the costs of the home you do move into.
One thought would be to finance it with a 15 year loan that will have a lower rate than that of a 30 year loan and it will obviously amortize in half the time. Even if you don’t have the home paid for by the time you retire, your equity will be larger.
Ideally, if you sell your current home when your move into this retirement home, you may be able to take up to $500,000 of tax-free gain for a married couple. That profit could be used to fund your retirement.
With home prices and mortgage rates certain to rise, this may be one of the best decisions you can make. We want to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between.
The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which is an amount the insured pays out of pocket before the insurance starts covering the cost of the loss.
In the process of managing insurance premiums, policy holders often consider adjusting their deductibles. Lower deductibles mean less money out of pocket if a loss occurs but obviously, results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger amount of the first part of the loss.
A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered because it is less than the 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered.
It is a good idea to review your deductible with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate.
Single-family homes used for rental property have distinct advantages over other types of investments.
An investor can borrow 75-80% at fixed interest rates on appreciating assets with definite tax advantages and reasonable control. The financing alone is attractive compared to some investments that require 50% cash and have floating rates at prime plus for one or two years.
Home prices have adjusted 30-40% around the country, mortgage rates are incredibly low and rents have risen in the past two years due to more demand and shorter supply. Indicators like these point to a strong and sustained rental market.
Consider you bought a $125,000 home for cash that would rent for $1,250 per month. With $15,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. You’d have an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 1.5% and a 10-year Treasury yield at 1.65%.
The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with some of the alternative investments. Please contact me if you’d like to know more about available opportunities.
The low interest rates secured by borrowers recently on FHA mortgages may become valuable in a different way in the future. FHA and VA mortgage are assumable at the existing interest rates subject to buyer qualification.
Buyers wanting to assume an existing FHA mortgage must be owner-occupants and meet the current FHA guidelines. Applicants should have a minimum 600 credit score, total debt with house payment to be assumed not to exceed 41% of their monthly gross income and meet other standard income, credit and qualifying requirements.
The benefits are not only assuming a lower interest rate resulting in lower payments but the closing costs on an assumption are much less than originating a new loan. The fact that the mortgage is already into an amortization schedule and that lower interest rate loans amortize faster than higher interest rate loans make it build equity faster than a new mortgage.
When interest rates eventually rise, assumptions will provide an opportunity for buyers to lower their cost of housing significantly while improving their wealth positions.
Home is a place you should feel safe and secure. Sometimes, we take it for granted and unfortunately, we do need to remain vigilant about things we do that could compromise our well-being. Here are a few tips you might want to consider.
- Everyone loves an inviting home including burglars. Make sure it looks occupied and is difficult to break in.
- Always lock outside doors and windows even if you’re gone only a short time.
- Leave lights on when you leave. Consider timers to automatically control the lights.
- Keep your garage door closed even when you’re home; don’t tempt thieves with what you have in your garage.
- Suspend your mail and newspaper delivery when you’re out of town or get a neighbor to pick it up for you.
- Posting that you’re out of town or away from home on social networks is like advertising your home is unprotected.
- Equally dangerous could be allowing certain social network sites to track your location.
- Don’t leave keys under doormats, in flowerpots or the plastic rocks; thieves know about those hiding places and even more than you can think.
- Trim the shrubs from around your home; don’t give criminals a place to hide.
Automatic thermostats can lower your monthly utility costs while conveniently regulating your comfort by adjusting temperatures on your heating and cooling systems. These can be particularly effective in homes with zoned systems where you live in one area during the day but sleep in a different zone.
There are programmable thermostats available at home improvement stores that can make the adjustments for specific times during the day and specific days of the week. They’ll allow you to override the setting when needed without tampering with the programming. They’ll even remind you to change your filter.
An exciting development is the Wi-Fi enabled thermostat that allows adjustments from any Internet connection such as computer or Smartphone. Imagine how convenient it can be to change your temperature from the car before you get home.
Reasonably priced under $100 for most models, it makes it easy to recapture the cost of the thermostat quickly. Most of the thermostats are designed for do-it-yourselfers; however, you can always have a heating and cooling professional install it for you.
A recent U.S. Tax Court ruling clarified the IRS position that the $1.1 million limit for mortgage interest deduction applies per residence and not per taxpayer as some high-priced homeowners were hoping.
A married homeowner filing jointly can have fullly deductible interest on a mortgage of up to $1,000,000 of acquisition debt and up to an additional $100,000 of home equity debt. If the married couple files separately, each party is limited to deducting the interest on half of those maximum amounts.
The court case came about when two unmarried individuals who owned a home together as joint tenants felt that they were entitled to deduct the interest on $1.1 million of debt each. IRS did not agree with their understanding and neither did the Tax Court. The Court ruled that the limits apply per residence, not per taxpayer even if a home is co-owned by unmarried taxpayers.
The result for the taxpayers in this case was that their deduction was cut in half resulting in much more income tax due. While this situation only affects a few taxpayers, homeowners in this position should have a discussion with their tax professional.
Knowing the current value of your home is important when you’re considering a move, refinancing or getting a home equity loan. Prices are determined by recent sales and the supply and demand of current inventory.
The process of selecting comparable properties involves matching similar features like bedrooms, baths, square footage and updates. In addition to price, there are other factors that affect the value and ultimately, the sale of a home.
Location plays a significant role because of the unique combination of improvements and land. Beneficial considerations would be convenience to schools, shopping, transportation and proximity to freeways. Undesirable concerns could include being in the vicinity of busy streets, high-tension lines, commercial property and other things.
To receive a computerized estimate on the value of your home that includes prices of comparable homes that have sold recently and homes currently for sale, click here.
Value is not totally objective and does require a certain amount of subjective considerations. If you have questions after you receive your report by email, contact us and we’ll be happy to talk to you about your concerns.
The American Dream of owning a home is still alive. People still want a place of their own; where they can raise their family; share with their friends; feel safe and secure. Homeownership creates emotional and financial benefits.
The government supports that dream by allowing deductions for mortgage and home equity interest as well as property taxes. The capital gains exclusion on profits from a home is incredibly generous and a low long-term capital gains tax rate applies to excess profits.
It’s reported that some of the social benefits of owning a home include higher voter participation, better physical health, higher student test scores, lower teen delinquency, neighborhood stability and pride in the community.
If for no other reason, the decision to buy a home should be considered when it costs much less to own a home than it does to rent. With the unusually low available mortgage rates, the payment is generally less than comparable rent. However, the decision becomes more obvious when the other benefits are considered like amortization, appreciation and tax savings.
It’s not uncommon for the net cost of housing to be half of the actual mortgage payment. In most cases, it is significantly more to rent than to own which could amount to more than the down payment in the first year alone. Calculate your cost of Renting vs. Owning.