7 Out of 50 Could Save Money



It is estimated that seven million out of 50 million homeowners could save money by refinancing their existing mortgages. Obviously, if the replacement mortgage has a lower rate than your existing one, you will save money.

If you bought a home before 2011 and are paying mortgage insurance, you should investigate refinancing to eliminate that requirement. Even if you don’t get a lower interest rate, the savings could amount to hundreds of dollars a month.

If a home you purchased since 2011 has appreciated enough, it could easily justify refinancing to eliminate the required mortgage insurance. Most loans don’t require mortgage insurance if the loan-to-value is 80% or less. There are some programs for 90% mortgages that don’t require mortgage insurance. It is certainly worth investigating with a trusted mortgage professional.

Continuing to pay mortgage insurance that could be eliminated is like having a broken cell phone and continuing to make the monthly payments for something you can’t use and don’t need.

If your current mortgage is several years old, instead of getting a new 30 year mortgage, you might consider a 15-year term. The money you save with a lower interest rate could help you to retire your loan in a shorter time so that your home would be paid for.

More Money in Your Paycheck

A homeowner’s tax savings benefit is generally realized when they file their federal income tax return after the money has been spent for the interest and property taxes. Some people look forward to the refund as a means of forced savings but some people need to realize the savings during the year.

It is possible to adjust the deductions being withheld from the homeowner’s salary so they realize the benefit of the savings prior to filing their tax returns in the form of more money in their pay checks. Employees can talk to their employers about increasing their deductions stated on their W-4 form.

By increasing the exemptions or deductions, less is taken out of the check and the employee will receive more each pay period. If a person over-estimates their exemptions and therefore, underpays their income tax, they might incur interest and would have additional tax to pay when they filed their tax return.

Buyers considering this strategy should seek tax advice and discuss it with their human relations department at work. Additional information is available on the Internal Revenue Service website about Completing Form w-4 and Worksheets.

How Earnest Are You?

"If I tell you it's going to rain, you can put the buckets on the porch." If you grew up in the south, you made have heard this expression when a person is testifying to the veracity of his word. If you know a person and/or their reputation, you know whether you can trust their word or not.

However, with a stranger such as a buyer, the seller doesn't know whether they'll live up to the terms of the contract or not. Buyers submit earnest money along with a contract to demonstrate their commitment to the terms of the offer.

The more earnest money that the buyer deposits indicates to the seller a higher level of commitment to the contract. Except for stated contingencies in the sales contract, if the buyer fails to close on the sale, the earnest money may be forfeited. Significant earnest money makes the seller feels more secure that the contract will close.

There certainly are a lot of things that can dictate how much earnest money is appropriate. Local customs, price of the home and type of mortgage can all help to determine the proper amount. In some areas, it may be common for it to be 1-5 percent of the purchase price. In other areas, it might be a specific amount like $1,000 to $10,000 depending on the sales price. It really comes down to whatever the buyer and seller agree is the proper amount.

Another strategy is to put up an adequate amount initially until you get through the inspections or contingency period and then, to put up an additional amount when the contingencies have been removed.

The earnest money demonstrates the buyers' sincerity in making the offer and proceeding according to the agreement so the seller can take their home off the market and start making plans to move and give possession of their home. Ultimately, both parties want to close as anticipated according to the contract and the earnest money helps facilitate that.

Your home may be worth a lot more than you think

Real estate lost a lot of value during the recession but most areas have rebounded considerably.  In some cases, the homes are worth more than they were before the housing bubble burst.

The dynamics are classic for this type of market: inventories are low, mortgage rates are low and demand is high.  All price ranges are on the rise with some at an even higher rate because the short supply is causing competition among buyers.

Another reason many homeowners' may have more equity is simply not staying current with what is going on in the market.  In a recent FNMA study, it indicates that 23% of owners believe they have negative equity in their home when actually, it is 9%.  37% believe they have greater than 20% equity in their home when actually 69% of homeowners do.

Even if you're not planning to sell your home, knowing the value helps you understand your financial position better.  Home equity debt up to a $100,000 limit is tax deductible and can be used for any purpose.  Owner's commonly refinance to eliminate mortgage insurance, consolidate mortgages, pay off higher interest rate debt like credit cards or student loans or to buy out an ex-spouse's equity.

Be aware that an automated value model like Zillow Zestimates uses algorithms to determine a price and while it might be in the ballpark, AVM results may only be accurate about 20% of the time.  A comparable marketing analysis or broker's price opinion will be more accurate due the subjective approach that will be used by an agent with personal experience in the area.  An agent will consider factors like condition, floorplan, marketability and demand.

You may never stop paying for some improvements



You've saved the money and are ready to pay cash to build a new pool for your home.  However, that's just the beginning of your soon to be increased expenses which will include maintenance, higher utilities and higher taxes.

Homeowners obviously benefit by a larger equity when their home increases in value due to appreciation.   A not-so-obvious effect that will also more than likely take place is that their property taxes will increase.  In most cases, a property's assessed value is generally tied to market value to calculate the property taxes based on the tax rate for that year.

Similarly, a homeowner can affect the value of their home by making capital improvements.  Some small items may never be recognized by the taxing authority but items that require a permit, certainly are brought to their attention.  Items such as a fence, roof, remodeling, windows, new rooms or swimming pools can easily increase the assessed value of a property.

Most states have an established time frame in which to challenge the current tax assessment for that year.  The process is relatively simple and doesn't require professional representation.  It generally involves showing that there is an error which has overstated the value or that current comparable sales indicate a lower value.

If you'd like more information or need the comparable sales data, please let us know.  We would be happy to help you investigate the possibility of lowering your property taxes.