The last two months of the new normal stay at home has led many homeowners to rethink the way they live in their home. It has now become an office for working at home; a school for children; a gym to stay in shape; and a place for recreation. The repurposing has people evaluating whether their home still meets their needs or if some changes are necessary. In some cases, adult children have moved back home, and, in others, there are parents who have moved in for the first time. Staying at home and sheltering in place is necessary but how much togetherness can one family take and how long is it going to last? Temporary is stretching into longer than expected and even when vaccines and treatments are discovered, will things really go back to the way they were? A home is a place to call your own; to raise your family, share with your friends and to feel safe and secure. Covid-19 has changed the scope of feeling safe and secure at home and may now be considered a sanctuary of … Continue reading...
Annual Advisory
Homeownership is a privilege and a responsibility. Even after decades of owning a home, you may still need some help to handle some of its challenges by focusing on the three "M"s of homeownership: maintenance, minimizing expenses and managing debt and risk. While many people recognize the benefits of annual wellness, financial, vehicle and equipment maintenance visits, an important checkup that you may not have considered is an annual homeowner advisory or real estate review. Why would you treat the investment in your home with less care than you treat your car or your HVAC system? Consider exploring the following: Do you know the current value of your home? (You can, by obtaining a list of comparable sales in your immediate area, as well as what is currently on the market for sale.) Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes? Even if you've refinanced in the last two years, can you … Continue reading...
Why Keep Track of Home Improvements
Homeowners receive a generous exclusion on the gain of their principal residence up to $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. Most people probably consider the gain or profit in a home to be the difference between the purchase price and the sales price. IRS allows a taxpayer to lower the sales price by the selling expenses before calculating gain. Normal expenses like real estate commission, title policy, attorney fees, and other sales expenses may be included if they are normal and customary. Another significant adjustment is that capital improvements made during the holding period can be added to the cost basis. Normal maintenance like repairs are not considered improvements. IRS says that if the expenditure materially adds value (features) to the property, or appreciably prolongs the useful life of the property, or adapts a portion of the property to a new use, it can be considered a capital improvement. Examples could include … Continue reading...
Why have a mortgage during retirement?
You don't have to watch TV for long before Tom Selleck, Henry Winkler or Robert Wagner will tell you why seniors should consider a reverse mortgage. However, there are a seniors who are resisting the conventional wisdom of having their home paid for and opting for a mortgage with payments on their home. In some cases, seniors will downsize into a smaller home and have a large amount of equity to pay cash for the new home. In other situations, they may have their home paid for and decide to do a cash-out refinance which will require making payments. The logic behind either of these examples could be motivated by the fact that since mortgage rates are so low currently, the owners can reinvest the money at a higher yield and make money on their equity. This will give them more money for their retirement income. A common question that is asked by owners considering such a strategy is whether they'll be able to qualify for the new mortgage since they may no longer be employed. … Continue reading...
Shopping for a Mortgage
A lower rate will not only result in a lower payment, it will amortize the loan quicker. A $250,000 mortgage at 4.5% for 30 years will have a $1,266.71 principal and interest payment. At 4%, the same loan will have $1,193.54 payment saving $73.18 a month and the unpaid balance would be $1,776 lower at the end of five years. Mortgage lenders tend to price their mortgages based on the credit score of the borrower. The higher the credit score, the lower the mortgage rate. There is an inverse relationship that the lower the credit score, the higher risk and therefore, a higher rate is needed to balance the risk. In order to get a valid rate that will be available to you with your credit score, you need to be pre-approved. The process of making a loan application before you find a home, allows the lender to verify your credit, income, and ability to repay the loan. Lenders usually only charge the cost of the credit report for this type of service. Be … Continue reading...
Get Ready to Garage Sale
A well-planned garage or yard sale can give you extra space in your home, get rid of unused items and make some money but it needs some of the same considerations that any business needs to be successful. Start early to research and plan Promotion is key Display items attractively Price items right Organize checkout Determine the date of your sale, remembering that there are exceptions, but Saturdays are generally the best day. Experienced garage-salers believe that a well-planned one-day event will do as well as a multi-day event. Serious purchasers will look for the "new" sale and most people don't come back multiple days. Recognize that the first day of the sale will have the most people. Everyone will be looking for a bargain but some of them actually want to purchase things for them to resell at their own sales. Advertise in local newspapers and free online classified sites like Craigslist. If several families are … Continue reading...
What kind of properties are these?
It is the way the property is used that determines the type of property it is, not what it looks like. Based on the intent of the owner, the property could be a principal residence, income property, investment property or dealer property. A principal residence is a home that a person lives in. There can be only one declared principal residence. It is afforded certain benefits like deducting the interest and property taxes on a taxpayers' itemized deductions, up to limits. Up to $250,000 of gain for a single taxpayer and up to $500,000 for a married couple filing jointly can be excluded from income if the property is owned and used as a principal residence for two out of the previous five years. An income property is an improved property that is rented for more than 12 months. The improvements can be depreciated based on a 27.5-year life for residential property or 39-years for commercial property. This is a non-cash deduction that shelters income. When the property is … Continue reading...
Why Put More Down
The least amount in a down payment is an attractive option when people are thinking of buying a home. A common reason is to have cash available for furnishing the new home and possible unexpected expenses. Some people don't have any options because they only have enough for a minimum down payment and the closing costs. For those fortunate buyers who do have extra money available, let's look at why you'd want to do such a thing. Most loans in excess of 80% loan to value require mortgage insurance to protect the lenders for the upper portion of the loan if the home were to go into foreclosure. FHA requires an up-front premium of 1.75% of the amount borrowed plus a monthly amount of .85% on the balance. FHA mortgage insurance premium must be paid for the life of the loan. Mortgage insurance on conventional loans varies depending on the borrowers' credit and the amount of down payment being made. Unlike FHA, when the unpaid balance reaches 78% of the original amount … Continue reading...