Saturday, July 23, 2016

Renovation Reality Check

So often we become inspired by the renovation shows we see on television and we gather up motivation to do the same in our homes. More often than not we are faced with the brutal reality of the renovation world, and that is it is much harder, more costly, and more time consuming than what is portrayed on television.  There are other concerns as well. This is a renovation reality check.

High end finishes in a low end area-
Concern one is make sure you understand your home and its market value! Not planning on selling? Doesn't matter, you still need to know. Why? Because not knowing what your local housing market is doing with regards to improvements and finishes can come back later on to bite you. Always, always do what you love, but understand what you love may not always pay off later, even if you aren't trying to sell. High end finishes are beautiful and seem like the way to go provided you have the budget for it but if no one else in your area are doing high end finishes don't assume your high end finishes will necessarily command top dollar.  The bathroom photograph to your left shows improvements made to a starter home. No high end finishes were needed, just an improvement in this homes function and pleasing to look at was all it took to get this little starter home sold after three showings. Incidentally this bath renovation was done under the assumption that the homeowner was not moving any time soon. However, as this post states, life can change on a dime, and this renovation was done in keeping with what the market in the area would bear, and thus paid off.

Your home's "potential price point "-
Your potential price point may suggest that most buyers will not necessarily expect nor want to pay for high end custom cabinets, etc. Still think you don't need to -concern yourself with what a buyer may want?  Remember the future is the great unknown. Life changes on a dime, sometimes we're forced to sell due to illness, changes in lifestyle, jobs, etc. So even if you don't think you're in the market, design and plan your renovation as if you were, it's just smart thinking.

Your home's "potential buyers" -
Know your potential buyer. Again, regardless of whether you think you are going to sell or not this is a good guide in place for your renovation reality check. Ask yourself if your home would likely sell to well established large families, couples just starting out, or something downsizing retirees would gravitate towards. Why is this necessary? Well a big home with 3 or more bedrooms would likely appeal to a family with teens, and middle aged parents, a smaller home with 2 or more bedrooms would appeal to young first time buyers, a home with 2 or less bedrooms and on the small side might appeal to downsizing retirees. All ages will have different expectations with regards to form, function, layout and finishes. Young first time buyers may want modern looking upgrades, but not necessarily expensive high end. Chances are if it looks modern, even if it isn't expensive they will appreciate it.  Middle aged established families will notice the size and bedrooms of your home and  no doubt expect a little better quality in the design and finishes. Not necessarily high end, but cheap will get passed by.

Don't go on  a sentimental journey-
Knowing your homes market value is tricky. Do not let sentimental value effect your judgement. This can mean loss of money not a gain. Check online realty sites like, Trulia, etc. and look up homes in your area. Many that are for sale have multiple pictures. Focus on the homes in your area that are same size square footage and are similar with regards to bedrooms, etc. Study the photographs, what sort of finishes are they using in their homes for the price they're asking. Try to be analytical, not critical.  Notice what selling features are mentioned in the listings. Does your home fall inline with these features? Whether you go high end or not, as a homeowner you can not afford to make costly errors in judgement.

Friday, July 22, 2016

Private Mortgage Insurance, Homeowners Insurance, and Home Warranties Oh My..

So you've bought your home and can't wait to start designing and decorating it to make it truly feel like home.  Owning a home is a huge undertaking and responsibility, so in this article I'd like to talk about something a little different but important to know as you start living in your dream home.

There are three things you are probably becoming aware of and they are the following:  Home owners insurance, PMI insurance and Home Warranties. If you purchased a home recently you've no doubt been required to not only have PMI insurance and  Homeowner's Insurance on your new home. PMI is for Private Mortgage Insurance and it is added to your mortgage payment and is required by your lender to protect them and their held interest in your home in the event you should default on your mortgage.

Sadly enough it does very little for you in return. If you default your credit will not be protected nor will the insurance make good on your default loan amount. It is simply money you will pay to get the Mortgage company to assume the risk involved with loaning you the necessary funds you need. That is it. In a nutshell. So for new home owners do not assume it will protect you in any way. It is typically required for loans where a less than 20 percent down payment is offered toward the purchase of the home.

Home Owners Insurance is paid to cover damage to your property from various occurrences like fire, storm damage, etc. The key thing to remember here there is a deductible involved that will come off the top of any claim you may have, not to mention once a claim is filed, if the amount is high, there is a very good chance you will see a hike in your mortgage payment at some point as a result. You'll want to think long and hard before going this route should your home suffer damage. Especially damage that you may be able to pay for and repair yourself.

The other caveat is that your Mortgage company controls the claim funds. In almost every case your Home owners insurance company will make the insurance check out to both yourself and your mortgage company. Here's the issue, you can't cash the check without the Mortgage Companies endorsement, which means you have to endorse it and send to them. Think they'll endorse and send right back? No. Your mortgage company will want to make sure that any damage the property has sustained was in fact repaired before they send you all of your funds. Typically speaking they will require loads of paper work from both your insurance company and your contractor. They will then send you a portion of the check to begin work and withhold any funds until they've inspected the completed job. This will not happen over night either.

Does it end there? Not necessarily. If you're behind on your mortgage while they have the insurance claim funds in their possession, they can apply the money to your loan and not send you the remaining money. Be sure to stay current during the entire process. Sounds frustrating and potentially not worth it? Well it is something to consider beforehand.

An option to filing a homeowners insurance claim is to find a reputable Home Warranty company and consider going that route for home repairs. Be mindful, most of the Home Warranty programs out there do not become effective immediately and they all range in price but do offer flexible coverage options and monthly payment plans. This may be a better route to go, but be prepared to wait out that period before your policy becomes active. Read the fine print too to make sure of exactly what your coverage includes and does not include.

Wednesday, July 6, 2016

Refinancing your home

Homes are staying on the market longer and home owners are struggling with finances.  In these economically stressful times, homeowners are constantly looking for ways to save money. It is important to make  financially sound decisions that will have a positive impact on what seems to be an uncertain future. There are many things to consider if you are currently wrestling with the idea of what makes sense, and what may not make sense regarding your biggest investment. Here are a few things to consider:
What is the objective?
Lowering your monthly obligation-
If you are looking for relief on monthly payments on a current 30 year mortgage, refinancing could be a smart move, especially if you are considering switching from a conventional to an FHA mortgage. FHA has somewhat easier terms to qualify for and you can qualify for future streamline refinancing each time the interest rates drop.
Note: If the rates are less than 1 percent of what you are currently are paying, give plenty of thought to this move. Refinancing will bring up your pay off amount and this is a factor. Be prepared. You will have to have your home appraised and or inspected. Make sure you do the necessary steps to get your home in order first.
Cashing In-
Tapping into home equity-
If you are looking to cash in on your home's equity, refinancing at a lower rate while pulling
cash from the home's value   could be an alternative as well. If your home is in need of updates, new furnace, air conditioning, roofing, etc. this would be a good time to take advantage of a cash out refinance. This option is great for those who have either lived in their home a while, or paid a large down payment when they purchased their home. Make sure to put some of the cash into updating long overdue improvements.
Your home's pay off should be considerably less than what the market value is  for this to make sense financially. A word of caution though, most homes have experienced a drop in their market value over the past few years and you may be in for shock when your home is appraised. In a courtroom, lawyers should know the answer to the questions they ask in advance, and you should have an idea of home value before you fork out appraisal fees. This is especially true if your loan approval/refinance will be contingent upon your home appraising at a certain amount.
Visiting sites like Cyberhomes and Zillow should yield some reasonable idea of what your home may be worth currently. Also consider your current credit status. Don't wait until your credit is in bad shape to suddenly run and try for a cash out refinance. Banks have tightened the reins and even Credit Unions are not as forgiving as they once was regarding credit. Never wait until you are desperate to try and save a sinking ship. Try to spot the storm in advance and make your move while you still have a chance at success.

Shortening that mortgage term- Switching from 30 years to 20 or 15 years-

If you bought a home a little later in life and you went for the 30 yr. fixed rate deal, you probably did not consider the fact that you may not live to see your home paid for. If you bought your home with no down payment/100% financing your equity will be long in coming. Shortening your mortgage note at a reduced interest rate may yield a slightly higher payment, but could mean spending your golden years traveling and having fun instead of paying a mortgage on a fixed income.

A man of fifty would be wise to consider shortening a 30 yr. fixed rate note to a 15 or 20 year mortgage at a reduced rate. He will build equity faster,  which can come in handy later on if an emergency arises. Many banks and finance companies are now offering bi-weekly payment options your new 20 or 15 year mortgage can actually be paid of in an estimated 16.5 years and a 15 yr. mortgage in 13.5 years.

In about five years time your mortgage pay off will actually be less than it would have been if you had not refinanced at all, even with the hike in the Principle balance from the refinance. The bi-weekly option pays your home off faster due to the 52 weeks in a year, which actually seamlessly allows you to pay more than you realize without feeling the impact of it financially. Now consider that your home may increase in value in a five year period,(with emphasis on "may")you are way ahead of the game.

  1.  At closing remember, you will need a certain amount of cash and typically you will be required to have a witness present. The witness must be atleast 18 years of age.
  2. 2. Check your credit report and pay down credit cards and debts prior to a refinance. Make sure there are no negative errors that can hinder or impact your refinance ahead of time. Try going to sites that offer free credit reports.  
  3. Have some savings. Try to have some money in your savings account, ideally $1000.00 wouldn't hurt.
  4. Research your homes value, make lists of current improvements you've made that are not included on sites that give a market value. You want these improvements to be noted.
  5.  Make improvements, etc. to your home prior to appraisal and inspection. Be ready to answer questions about your homes roof and how old it is, and make sure outlets, smoke detectors are all in working order.
  6. Shop around, different lenders offer different packages. Do not be so sure your bank or credit union has the best deal, just because you're a customer or former customer. Loyalty does not always translate into a better deal for you.
  7. Pay close attention to the fees involved, and note how much this will increase your pay off on your home. Make sure if you go with a lender that they are an approved FHA lender, and have a good reputation. There are sites online that you can investigate customer satisfaction. Do so.