Financial tips for Homeowners

Five Reasons to Refinance Right Now

The following is based on an article in December 28, 2016’s Realtor.com,

When the Federal Reserve raised interest rates for the first time in years, the question about refinance your present home loan bears some inspection. Here are five reasons to re-finance. You are cautioned that the worst reason to re-finance is to get your hands on some fast-cash.

#1. Interest rates on credit cards are still much higher than home loan rates. If you have a large balance on credit cards, you might consider changing your debt which is deductible if it covered by a home loan.

#2. According to David Schneider, a certified financial planner and founder of Schneider Wealth Strategies in Manhattan, money you can pull out from re-financing could be added to your 401K retirement plan which may be matched by your employer. There are tax advantages worth considering.

#3. HARP program to aid homeowners underwater on their mortgage will be available only for the next year. You can check for your eligibility here.

#4. As a homeowner, it’s always prudent to keep an eye on mortgage rates because little percentage differences in the long run are significant. To check for details on your situation, here is a refinance calculator.

#5. If you have an adjustable rate mortgage, it’s an excellent idea to look at ways to move to a safer low-rate fixed mortgage. Consult a mortgage loan professional.

Tips for Homeowners

Below are some ideas for homeowners to help with home ownerships such as de-cluttering; reviewing personal finances that involve all sources and plans of expenditure; recording home improvements, etc.

  1. Making Room in Your Rooms
  2. Personal Finance Review
  3. Reverse Mortgage
  4. Record Improvements Now

These are among many tips you can find in a homeowners guide for “dummies,” meaning that information isn’t about rocket science. You can understand the concept and follow the suggestions.

Making Room in Your Rooms

Want some motivation to de-clutter?  Realize that the more things you have, there is more to store and to take care of.  The “clutter” can also get in the way of things you may want to find.  Therefore, it’s an excellent idea to go through all storage areas:  cabinets, drawers, closets, storage area.

With each item, make a decision:  retain or remove.  Use these questions:

• When was the last time you used it?
• Do you believe you’ll use it again?
• Is there a sentimental reason to keep it?

Options for things you want to remove?  Someone you know may need it; give them a call and make a gift.  You can sell such items through Craigsslist or in a garage sale.  Or, donate it and get a tax deduction.  Or, trash it.

For example, begin with your clothes closets:  if you haven’t used it in the last 3-5 years, out it goes.  Then bring the criterion down to 2 years, and ask yourself what is the likelihood of your wearing it.

Another wonderful tactic is to remove all those item from your active that you haven’t used for awhile.  After a year, then go through that other clothes and start culling heavily.

Now with financial records and receipts—you might want to scan them and store them on the computer; offline in the cloud.  In this digital stage, digital store makes sense. e you need.  It will certainly be cheaper and more convenient than using the mini-storage building.

Personal Finance Review

If you pay at the rate of 50% for income taxes, you’ll have to earn $2 for every $1 you spend.  On the other hand, every bit of what you’ve paid on personal expenses cannot be taxed because taxes were already paid.

Periodically, it’s an excellent idea to review your expenditures with an eye to find savings.  Once started, you will learn that although it may seem timely, you’ll be rewarded for taking the time, i.e., you will find savings.

•    All insurance needs to be checked:  act as if you are getting it for the first time for your car(s), home, etc.
•    Check our utility options and compare pricing and servicing
•    cell phone plans should be reviewed; when you call, you often get discounts
•    The same for Internet plans, various cable TV or satellite options–what are the latest promotions?
•    Are here any property tax discounts?
•    Check out various refinancing packages on your home for a lower rate, shorter term?
•    See if refinancing cars makes sense
•    Lower rates for credit cards may be obtained through a call.
•    Look at all the charges on your credit card and investigate cards that have no fee
•    Check your credit card statements for late fees that are regularly being paid; call and question them.
•    Similarly check your bank accounts and debit cards for any charges that can be reduced and eliminated.

Reverse Mortgage

Celebrity spokespeople have been on the air talking about reverse mortgages. And why not? Our population of homeowners are at the age when they can consider this option: more than 25 million of them.

A reverse mortgage is an option that allows homeowners age 62 or older who currently live in
their home a way to use some of the equity accrued through the years.  What is available for a reverse mortgage depends on factors such as current interest rates, current price of the home and the borrowers’ age.  A single lump-sum payment can be taken or payments can be paid out periodically.

When the loan closes, the costs can either be paid for in cash or can be included in the loan amount.  While the owners doesn’t have monthly payments, responsibility for property taxes, maintenance and other home costs, and insurance still remain.

The home is sold when the borrower dies or when there’s a failure to fulfill the loan terms. If the home sale proceeds exceed what is owed to the mortgage company, the homeowner or heirs receive the remainder.

Different from qualifying for a usual mortgage, the amount of the loan isn’t determined by the borrower’s income or credit.  The borrower must live in the property as his primary residence and free of major encumbrances or show sufficient equity.

While reverse mortgage is a way to generate funds or income they also come with risks.  HUD who insurers most reverse mortgage is concerned about how HECM (Home Equity Conversion Mortgage) is described–which can be deceptive and misleading.  On June 18, 2014 forward the FHA is limiting reverse mortgages to a single one-time draw when the loan is closed.

Mortgage, conventional or reverse, is an important financial decision the requires gathering all the information, consulting with advisers and doing due diligence.

For more information, start by calling your real estate professional.

Record Improvements Now

If you are making an improvement to your home that increases the value of your home and prolongs its life, these expenses are probably tax deductible. That is, when you sell your home, these improvements should be recorded as adding to the value or equity in your home, unlike repairs that maintain the condition of your home.  Whereas, owners who rent can deduct repairs as operating expense.

In addition, when you make improvements or additions that have a useful life of more than a year, these expenses adds to the cost of your home.  Other expenses that can be added are special assessments that may come with repair to sidewalk and street.

You can read more about improvements and see examples beginning on the bottom of page 8 of IRS Publication 523.  For a form to keep track of money you spend, print this . Improvement Register

These are only four tips that could have been included in a homeowners guide for dummies. Here are two more: 1) Realizing tax savings sooner . 2) Reducing interest expense.

What topics would you like to learn about?

 

These articles have been archived in their original form in the archives, see sidebar.