Paying off your mortgage can provide peace of mind and is a worthy goal but is it the best thing for you to do at this time.

Do you have higher interest rate debt currently? If you have credit card debt with double-digit rates or personal, car or student loans, you’ll probably save more money from interest by paying these things off before you pay off your mortgage which is usually one of the lower rates on debt.

Many financial advisors recommend funding your annual retirement contribution before paying down a mortgage. If your company offers matching funds for your contribution, you would be leaving money on the table by not making the contribution to your retirement. For instance, you would be getting a $10,000 value by putting $5,000 into your retirement if your company matches it.

Creating an emergency fund is another favorite of financial advisors. When the rainy day arrives and you need funds, it may be difficult to get money from the equity of your home, especially if you have lost your job. Six months’ worth of living expenses is a good target to have available should you need it and a year’s worth would be even better.

Children’s college funds may be another priority that takes precedent overpaying off the mortgage. Whether you’re saving or investing to pay for their education, it is going to cost more than it did when you were in school.

When you are ready to start paying off your mortgage, decide on the best way to do it. Regular principal contributions on a monthly basis are very predictable and will get the job done. Setting up an automatic bill pay with your bank will assure that you don’t re-prioritize that extra amount every month because there is always going to be something else to do with extra money.

It is important to be sure that the lender applies the additional payment amounts to the principal and not to the escrow account.

Use the Refinance Analysis to see what extra amount you’d have to pay to retire your mortgage in a certain time frame or by making a specific additional amount each payment, you can find out when the loan will be paid. Regardless of which way you go, prepaying a loan will save interest, build equity and shorten the term on a fixed-rate mortgage.

Homeowners still have considerable advantages from the amortization of the mortgage and the appreciation enjoyed by most homes even with taking the standard deduction instead of itemizing to take the interest and property tax deduction.

There is an adage, “Rent or buy, you pay for the house you occupy.” You either pay for it yourself or for your landlord. The people who have job security, sufficient income, good credit and the funds for the down payment and closing costs can enjoy the many financial and emotional benefits of homeownership.

Looking at a $350,000 home purchased with an FHA mortgage with 3.5% down payment at 3.25% interest for 30-years, the total payment would be $2,420 a month. During the first year, the average monthly principal reduction is $573 a month which build the owner’s equity in the home.

At an estimated 3% appreciation, this home would increase in value at the rate of $875 a month during the first year which again builds the owner’s equity in the home.

Even if you consider the buyer will now be responsible for repairs and possibly homeowner’s association fees, the monthly net cost of housing in this example is $1,122 or less than half the monthly payment. The difference goes to equity which a tenant does not benefit from.

If the buyer were paying $2,750 monthly rent, they would be paying $1,628 more each month to rent than to own. In a year’s time, they would lose $19,500 of equity by continuing to rent. The down payment in this example is only $12,250 which would leave $7,000 to pay for buyer’s closing costs.

Purchase Price	$350,000
Down Payment	$12,250
Total Monthly Payment (PITI + MIP)	$2,420
Less Monthly Principal Reduction (average first year)	$573
Less Monthly Appreciation (average first year at 3% annually)	$875
Plus Estimated Maintenance & HOA	$175
Net Cost of Housing	$1,122

The equity for the homeowner in this example at the end of seven years would be almost $140,000 based on the appreciation and amortization of the mortgage. Whether you rent or buy, you pay for the house you occupy.

Use this Rent vs. Own to plug in your own numbers for the price home you’d like to buy. If you need help with it, contact me and we can do it over the phone at (612) 532-4273 or in an online meeting.

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 save money and recapture the cost of refinancing in the length of time you plan to remain in your home?
• Have you considered reducing your mortgage debt with low-earning cash reserves that will not be needed soon?
• Do you have a record of the improvements you’ve made to your home since you purchased it? Do you know what items can be included?
• Have you considered investing in rental homes in good neighborhoods to increase your yields and avoid the volatility of the stock market?
• When was the last time you updated your home inventory of personal belongings? Do you have pictures as well as written documentation?
• Do you need recommendations of repairmen and other service providers?

This service is part of my point of difference as a real estate professional to provide information to help homeowners not only when they buy and sell but all the years in between too. My goal is to create lifelong relationships with our customers as their “go to” person whenever they have a real estate question.

My strategy is to provide reliable, consumer-based information about homeownership on a regular basis through email and social networking. If it benefits you by helping you be a better homeowner, maybe you’ll consider us your real estate professional.

When you don’t know the answers to real estate questions, you know where to get them.

We’re always here to serve your real estate needs. By helping you with the three “M”s of homeownership, we can earn your confidence and trust for the next time you move or a friend of yours needs a recommendation.

If you’d like to have a list of the market activity in your area or any of the other information mentioned, please contact me at (612) 532-4273 or pam.howard

 

When installing a new roof, the biggest decision you’re going to face (aside from choosing a roofing pro) is which materials to use. If you’re replacing an existing roof, your decision is easy — just match the current materials. But, if you’re building a new home, the debate over roofing materials can get a bit more complicated. Before jumping into the pros and cons of each material, consider the size and layout of your roof.

Not surprisingly, the size of your roof will play a large role in determining your overall budget. If you’re using a roofer, it’s helpful to understand how your pro will measure your roof. While many contractors base their estimates on square footage, roofing pros go by squares (each square is 100 square feet). The more squares, the more your project will cost.

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Pricing your own home is hard, what with all the history and hopes this magic number entails. Of course, you want to make a profit. Of course, all that money you spent installing a swimming pool or a half-bath will be recouped, because you’re leaving your digs in better shape than when you bought it, right? Right?

Well, not necessarily. Too many home sellers fall prey to myths about home pricing that seem to make sense at first, but don’t jibe with the reality of real estate markets today. To make sure you haven’t bought into any of this malarkey—since the buyers you’re trying to woo sure haven’t—here are some common pricing myths you’ll want to rinse from your brain so you kick off your home-selling venture with realistic expectations. It’s time to get real, folks!

1. You always make money when you sell a home

Sure, real estate tends to appreciate over time: The National Association of Realtors® estimates that home prices will jump 5% by the end of 2017 and continue rising 3.5% in 2018. But selling your home for more than you paid is by no means a given, and your return on investment can vary greatly based on where you live. Continue reading →

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Source: 5 Reasons Why Selling Your Home Without a Realtor is a Terrible Idea (Written by a Non-Realtor)

Written by Patrick O’Brien

Given my background as a career mortgage banker, I often find myself in conversations with people seeking advice when they’re shopping for a home. Occasionally people casually mention that they’re going to “save a ton” by selling their home For Sale By Owner rather than listing with a Realtor. While I admire their confidence, I often (strongly) advise against it. I’ve financed (literally) thousands of transactions so I know the process well, yet I’ve paid tens of thousands of dollars in Realtor commissions over the years and I feel it’s money well spent. Here’s five reasons why:

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6 Shocking Things Your Home Inspector Won’t Check

an article by Lisa Gordon

Home inspectors are quite thorough. Before you buy a house, they’ll scrutinize things you never thought to look at in your many walk-throughs, from cracks in stucco to how well the toilet flushes. In fact, their checklists include over 1,600 features, all with the goal of helping you decide whether the home is in good enough shape for you to close this deal—or whether you should back out while you can. Given that a basic home inspection costs $300 to $500 but could save you thousands in repairs, that’s a sweet deal!

And yet, home inspectors don’t check everything.

For one, conditions such as mold, radon, or asbestos that require laboratory samples or equipment are the stuff of specialty inspections, which cost extra or must be conducted by other specialists.

Here’s what home inspectors conducting a basic search aren’t eyeballing, and what you can do if you want to make sure your prospective new home checks out on all counts.

Electrical outlets behind heavy furniture

For one, basic home inspections evaluate only the stuff these professionals can see or access easily. That means if furniture is blocking certain areas, your home inspector isn’t about to throw out his back to lug it aside.

“I’ve had china cabinets in front of an electrical panel, and there’s no way we’re going to move that stuff,” says Frank Lesh, executive director of the American Society of Home Inspectors, headquartered in Des Plaines, IL. Instead, ask the home seller to move such items in advance so the inspector can do his work without heavy lifting.

Roof

Home inspectors will gamely climb onto your roof and check for missing or warped shingles and make sure flashing and gutters are in good shape. There’s one huge caveat: Your roof should be less than three stories tall and not too steep. If it is, they’ll probably pass. After all, if they fall, it’s a long way down!

“We’ll go up on roofs if it’s safe,” says Lesh. “But if it’s raining or it’s too high, we’re not able to get to it.”

It’s reasonable to worry about the roof, which is a big-ticket item. You can hire a specialized roof inspector for $500 to $750 to examine roofs that a regular inspector will avoid. Some, hoping to get business if they turn up issues, will even inspect it for free; others charge according to location, roof height, and material. If they can’t climb onto roofs, they can perform an infrared inspection that assesses temperature differences along your roof to determine where heat is escaping.

Fireplace and chimney

Home inspectors will typically open and shut dampers to make sure they’re working, and shine a flashlight up the chimney to check for big obstructions like a bird nest. But that’s typically where their inspection ends.

Want more? A fireplace inspector can perform a Level 1 inspection to look for soot and creosote buildup, which could start a chimney fire. This extra inspection will cost about $80 to $200. If the home has experienced an earthquake or major storm, a chimney inspector will perform a Level 2 inspection, which adds visits to the roof, attic, and crawl space to check for damage ($100 to $500).

Ground beneath your home

While home inspectors will thoroughly check the home, the ground beneath it might go largely ignored. So if you’re worried about the land’s structural integrity—or whether it shifts, tilts, or has sinkholes or a high water table—you’ll need to hire a geotechnical or structural engineer.

These professionals test the soil for an array of problems, but it’ll cost you: Basic testing costs $300 to $1,000, and drilling a bore hole for deeper investigations can cost $3,000 to $5,000. That’s a lot to pay for a hunch, so if money is tight, go to PlotScan, a free site that will tell you the history of sinkholes and other natural catastrophes in the vicinity of your home—and help you assess whether more research should be done.

Swimming pool

Basic home inspectors will turn on pool pumps and heaters to make sure they’re working. But inspectors won’t routinely evaluate cracks or dents in the pool. For that, you’ll need a professional pool inspector, who will run pressure tests for plumbing leaks. He’ll also scrutinize pumps, filters, decking surfaces, and safety covers. The cost will hover around $250 or could be free, if you end up hiring the pool company for regular maintenance.

Well and septic system

If your inspector works in areas where wells and septic systems are common, for an extra fee ($150) he might test your well water and check that your septic system is running correctly.  But if most houses he inspects are on public well and water, you’ll have to hire a well inspector.

Well inspectors—typically employed by companies that install or repair such systems—will collect water samples for lab analysis for coliform, arsenic, and other harmful bacteria and chemicals. They will ensure that well parts such as seals, vents, and screens have been properly maintained and that the well and pump can produce enough water. This will cost around $250.

Does the home have a full-on septic system? Then for $100 to $200, a septic system inspector will check your tanks, baffles, and piping; evaluate the inside of septic tanks using a camera to check on concrete conditions; and make sure wastewater is going into the tank, not leaking to the surface.

Source: 6 Shocking Things Your Home Inspector Won’t Check

Kim Palmer, Star Tribune

Want to make your neighborhood friendlier? Consider adding a front-yard patio … some pavers, a few plants, a couple of comfy chairs — and, voilà! — instant summer socializing.

That’s the way it seems to be working in one St. Louis Park neighborhood, Minikahda Vista, where front-yard patios have become contagious in recent years. Continue reading →