Wednesday, July 25, 2018
Lack of Listings Slowing Down the Market
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Wednesday, July 18, 2018
Owning Makes More Sense
When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.
Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.
There are additional expenses for owning a home that renters don't have like repairs and possibly, a homeowner's association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.
The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 more to rent at $2,500 a month than to own. In a year's time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home.
With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Check out your own numbers using the Rent vs. Own or call me at . Owning a home makes sense and can be one of the best investments a person will ever make.
Wednesday, July 11, 2018
A Word Homeowners Need to Understand
Acquisition Debt is the amount of money borrowed used to buy, build or improve a principal residence or second home. Under the new tax law, mortgages taken after 12/14/17 are limited to a combination of $750,000 on the first and second homes. The mortgage interest on this debt is tax deductible when itemizing deductions.
It is a dynamic number that is reduced with each payment as the unpaid balance goes down. The only way to increase acquisition debt is to borrow money to make capital improvements.
Prior to the new law, homeowners could additionally borrow up to $100,000 of home equity debt for any purpose and deduct the interest when itemizing deductions. Mortgage interest on home equity debt is no longer deductible unless it is for capital improvements.
Acquisition debt cannot be increased by refinancing. Some confusion occurs because mortgage lenders are concerned in making home loans that will be repaid according to the terms of the note and using the home as collateral. That does not include making a tax-deductible mortgage.
Another thing that adds confusion to the issue is that the lenders will annually report how much interest was paid in a year but only the amount that is attributable to acquisition debt is deductible.
Even if the interest on the cash-out refinance is not deductible, it may be advantageous to pay off higher interest debt such as credit card debt and replacing it with lower mortgage debt.
It is the responsibility of the taxpayer to know what part of their mortgage debt is deductible. The challenge becomes more difficult after a cash-out refinance. Homeowners should keep records of all financing and capital improvements and consult with their tax professional.
Wednesday, July 4, 2018
Unexpected Expenses
It's common for Sellers to consider offering a home warranty or protection plan to make their home more marketable. A growing number of homeowners are now purchasing this type of protection for themselves to limit the unexpected expenses of repairs and replacements.
A home protection plan is a renewable service contract that covers the repair or replacement of many of the components in a home. Some homeowners especially like the convenience that it organizes a qualified service provider as well as the cost of the repairs or replacements.
There are a variety of companies that offer home warranties and the coverage may differ but the majority of things will include heating, air conditioning, most built-in and some free-standing appliances, as well as other specific items. Additional specific coverage may be available for other items like pool and spa equipment.
Some investors are even placing this coverage on their rental properties to limit the amount of repairs during the year. It is a viable way to manage the financial risk and the stress dealing with unexpected expenses.
Call me at if you'd like a recommendation of available programs.
Wednesday, June 27, 2018
Don't Let a Killer In
Carbon monoxide is a silent killer you don't want in your home but because it is colorless and odorless; you may not even be aware the deadly condition exists. The Center for Disease Control says more than 400 people in the U.S. die annually from carbon monoxide poisoning and over 10,000 require medical treatment each year.
Unmaintained furnaces, water heaters and appliances can produce the deadly gas. In addition, other sources could be leaking chimneys, unvented kerosene or gas space heaters or exhaust from cars or trucks operating in an attached garage.
The Environmental Protection Agency suggests the following to reduce exposure in the home:
- Keep gas appliances properly adjusted
- Install and use an exhaust fan vented to the outdoors over gas stoves
- Open flues when fireplaces are in use
- Do not idle car inside garage
- Have a trained professional inspect, clean and tune-up central heating systems annually
Headaches, nausea, vomiting, dizziness and feelings of weakness or fatigue are a few of the most common symptoms. Lower levels of exposure to carbon monoxide may be mistaken for the flu.
Carbon monoxide alarms should be on every level of a home and especially, in sleeping areas. The alarms can be purchased for as little as $25 and plugged into the wall like a night light.
Regardless of the government requirements, no one would want to put their family, guests or themselves at risk for something so deadly.
Wednesday, June 20, 2018
Waiting Will Cost More
An economist responded when asked how interest rates would change: “They may fall some and then, rise and after that, they’ll fluctuate.”
Just because interest rates have been low for ten years doesn’t mean they are supposed to be low. The Federal Reserve has raised interest rates twice this year and are expected to go up twice more plus three times next year. Mortgage rates have risen from 3.95% to 4.62% since the first of January.
Increased rates directly affect the payments on homes but so does the price. With inventory levels remaining low, the prices will continue to go up. When interest rates and prices rise at the same time, it costs buyers a lot more.
If the mortgage rates go up by one percent and prices increase by five percent in the next year, the payment on a $250,000 home could go up by $200 a month. In a seven-year period, the buyer would pay $18,000 more for the home.
People planning to buy a home, need to investigate the possibilities of accelerating their timetable to take advantage of lower rates and prices. Use the Cost of Waiting to Buy calculator to see how much more it could cost you to wait. Call if you have questions about what can be done now.
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