Why trust us in finding home insurance? Research methodology To make our recommendations for the best homeowners insurance companies in 2021, we used our proprietary SimpleScore system to rate insurers on accessibility, coverage options, customer service, discounts, and support. The research was supported by inputs from experts from renowned third-party market research companies such as […]
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If you are a homeowner with a mortgage, you might have heard about your right to redemption. For those who have been struggling to make their house payments, this is one route that can be taken to avoid foreclosure.Â Â
What is the Right of Redemption?
If you own real estate, making mortgage payments can be hard, but foreclosure is something that most people want to avoid. The right of redemption is basically a last chance to reclaim your property in order to prevent a foreclosure from happening. If mortgagors can manage to pay off their back taxes or any liens on their property, they can save their property. Usually, real estate owners will have to pay the total amount that they owe plus any additional costs that may have accrued during the foreclosure process.Â
In some states, you can exercise your right to redemption after a foreclosure sale or auction on the property has already taken place, but it can end up being more expensive. If you wait until after the foreclosure sale, you will need to come up with the full amount that you already owe as well as the purchase price.Â Â
How the right of redemption works
In contrast to the right of redemption, exists the right of foreclosure, which is a lenderâs ability to legally possess a property when a mortgager defaults on their payments. Generally, when you are in the process of purchasing a home, the terms of agreement will discuss the circumstances in which a foreclosure may take place. The foreclosure process can mean something different depending on what state you are in, as state laws do regulate the right of foreclosure. Before taking ownership of the property through this process, lenders must notify real estate owner and go through a specific process.Â
Typically, they have to provide the homeowner with a default notice, letting them know that their mortgage loan is in default due to a lack of payments. At this point, the homeowner then has an amount of time, known as a redemption period, to try to get their home back. The homeowner may have reason to believe that the lender does not have the right to a foreclosure process, in which case they have a right to fight it.Â
The right of redemption can be carried out in two different ways:
You can redeem your home by paying off the full amount of the debt along with interest rates and costs related to the foreclosure before the foreclosure sale OR
You can reimburse the new owner of the property in the full amount of the purchase price if you are redeeming after the sale date.Â
No matter what state you live in, you always have the right to redemption before a foreclosure sale, however there are only certain states that allow a redemption period after a foreclosure sale has already taken place.Â
Redemption before the foreclosure saleÂ
Itâs easy to get behind on mortgage payments, so itâs a good thing that our government believes in second chances. All homeowners have redemption rights precluding a foreclosure sale. When you exercise your right of redemption before a foreclosure sale, you will have to come up with enough money to pay off the mortgage debt. Itâs important that you ask for a payoff statement from your loan servicer that will inform you of the exact amount you will need to pay in order save your property.Â
Redemption laws allow the debtor to redeem their property within the timeframe where the notice begins and the foreclosure sale ends. Redemption occurring before a foreclosure sale is rare, since itâs usually difficult for people to come up with such a large amount of money in such a short period of time.Â
The Statutory Right of Redemption after a foreclosure saleÂ
While all states have redemption rights that allow homeowners to buy back their home before a foreclosure sale, only some states allow you to get your home back following a foreclosure sale. Known as a âstatutoryâ right of redemption, this right as well as the amount of time given to exercise it, has come directly from statutes of individual states.Â
In the case of a statutory right of redemption, real estate owners have a certain amount of time following a foreclosure in which they are able to redeem their property. In order to do this, the former owner must pay the full amount of the foreclosure sale price or the full amount that is owed to the bank on top of additional charges. Statutory redemption laws allow for the homeowners to have more time to get their homes back.Â
Depending on what state you live in, the fees and costs of what it takes to exercise redemption may vary. In many cases during a foreclosure sale, real estate will actually sell for a price lower than the fair market value. When this happens, the former owner has a slightly higher chance of being able to redeem the home.Â
What You Should Know About the Right of Redemption is a post from Pocket Your Dollars.
A lot of homeowners are looking to refinance their mortgages at the moment. Thatâs abundantly clear based on the record volume of refis expected this year, per the MBA. And while mortgage rates are in record low territory, thus making the decision to refinance an easy one for most, it still pays to shop around. [&hellip
The post If a Mortgage Lender Reaches Out to You, Reach Out to Other Lenders first appeared on The Truth About Mortgage.
The benefits of incorporating a Roth IRA into your retirement strategy are often praised by financial advisers, citing the ability for money to grow tax-free for decades and provide tax-free income in retirement. While a Roth IRA conversion is one way to take advantage of this savings tool, the tax implications of converting investments from a traditional retirement account to a Roth IRA typically deter most people. Yet the effects of new legislation and persistent market volatility make a Roth IRA conversion worth considering, and paying for it doesnât have to break the bank.
A Roth IRA conversion uses assets from a traditional or rollover IRA, 401(k), SEP or Simple IRA to fund a Roth IRA. Unlike regular contributions to a Roth IRA, which are constrained by income limitations and annual contribution caps, there are no restrictions when converting retirement assets to a Roth IRA. Any amount can be converted regardless of your age, income, or employment status. But the Roth IRA conversion doesnât come without a cost.
When you convert pre-tax assets in a traditional retirement account to your Roth IRA, the conversion is treated as income and you must pay taxes on the assets converted. The amount you pay in taxes depends on your income tax bracket for the year. In some cases, a substantial conversion in one year could boost taxable income by multiple brackets. To help manage that liability, a series of partial conversions over several years could be planned to keep the distributions within a targeted tax bracket.
For many retirees, income from a traditional IRA or 401(k) can create a tax headache, especially when required minimum distributions (RMDs) raise their tax bracket. Thatâs where a Roth IRA comes in.
A Roth IRA provides the flexibility to take tax-free withdrawals in retirement when you want and in whatever amount you want. This is unlike other retirement accounts that have RMDs beginning at age 72. The RMDs are taxable income, which means that in addition to your tax bracket they can also impact your Medicare premium bracket and the taxation of your Social Security benefit, whereas distributions from the Roth IRA will not.
This year the CARES Act temporarily pauses RMDs from traditional retirement accounts. So, if you are 72 or older and you donât take your RMD then your income will be lower. This provides a potential opportunity to make a larger conversion while maintaining the same income tax rate.
Additionally, since the Secure Act of 2020 eliminated the stretch provisions for inherited retirement plans, the Roth IRA is also a great estate planning tool. Non-spousal heirs can no longer take distributions over their life expectancy, but rather all distributions must be taken within 10 years. While this is true as well for an inherited Roth IRA, the distribution would not be a taxable event.
The cost of an IRA conversion can be daunting, but it doesnât have to be. Conventional wisdom is to pay the resulting tax bill with non-taxable assets from outside the retirement plan. Using plan assets would defeat the purpose of the conversion as you will permanently give up a portion of the capital that is accumulating on a tax-free basis. In addition, if youâre under age 59 Â½, the portion of plan assets used to pay for the conversion could also be subject to a 10% tax penalty.
If you have the cash on hand, thatâs likely the best way to cover the tax implications. But depending on the size of the conversion and your tax bracket, the up-front costs could be significant. Another option is to take out a loan against your life insurance policy. While this permanently reduces the policy value if not repaid, the loan doesnât count as taxable income so long as the policy isnât surrendered, doesnât lapse, and the amount owed doesnât exceed the premiums paid. If any of these do occur then the tax implications will likely be even larger than the taxes paid on the Roth IRA conversion.
Considering a reverse mortgage
Alternatively, tapping into your home equity can provide the means to pay the taxes. You could leverage current low interest rates and get a home equity line of credit (HELOC), though many banks have stopped accepting applications for HELOCs in recent months. Additionally, a HELOC will require a monthly mortgage payment, decreasing your cash flow.
For homeowners age 62 or older, a reverse mortgage could pay the tax liabilities from the Roth IRA conversion, creating tax and cash-flow flexibility and potentially a higher net worth.
With a reverse mortgage, the available line of credit grows and compounds at a value that is tied to current interest rates. This can be particularly beneficial with a series of partial Roth IRA conversions as it provides a growing resource to pay future tax bills. The line of credit also provides flexibility to convert a greater portion of your retirement assets during market plunges, so you only pay taxes on the lower value at the time of the conversion and not on any gains in the Roth IRA when the markets recover.
Since there are no principal or interest payments required for as long as you live in your home, the line of credit from a reverse mortgage provides the liquidity to pay for the Roth IRA conversion with no impact on household cash flow or the need to sell other invested assets.
A good rule of thumb is to use a reverse mortgage if your home equity is less than or equal to the value of the retirement assets you plan to convert. If the home represents a major portion of your net worth, a reverse mortgage may not be the best option to cover the tax bill. In this case, the reverse could better serve as a tax-free source of supplemental income, or to pay for in-home care, or other retirement expenses that distributions from the smaller invested assets may not be able to cover.
Evaluating the use of a reverse mortgage also depends on the projected costs in comparison with the projected returns. For example, if interest rates on a reverse line of credit are at 3%, and your home appreciates at a 3% rate, you could borrow 50% of your home equity and still maintain a 50% retained equity position throughout the duration of the loan. Even if the home only appreciated at a 1% rate, you would still have a retained equity position.
Projected returns on the Roth IRA conversion would also need to be evaluated. For simplicityâs sake, let us assume you borrow a total of $250,000 from your reverse line of credit to pay the tax bills on $1 million conversion. If you accrue interest on the line of credit balance at a 3% rate and the Roth IRA grows at a 6% tax-free rate, the return could be quite compelling over time.
Of course, there are no guarantees on any projections, which is why you should consult a financial professional and evaluate your specific situation. A number of âwhat ifâ scenarios should be considered including changes in interest and tax rates, home and investment growth rates, and legacy desires. These considerations will help determine if using a reverse mortgage to take advantage of the benefits of a Roth IRA conversion could be a retirement strategy that makes sense for you.
The post How Tapping Home Equity Can Pay the Taxes on a Roth IRA Conversion appeared first on Real Estate News & Insights | realtor.comÂ®.
To make sure they were financially on the mark, Hynd, a marketing executive for HR software company Youmanage, decided to do some research on how to afford a dog on a budget, shortly after Chewie settled in. He was glad he did: He found that the costs of dog ownership added up to much more than he originally anticipated. Fortunately, there was still time for him to adjust.
But Hynd’s foresight is not always top of mind for new dog owners. Getting a dog can be an emotional, knee-jerk decision, and you may not think about the expenses that go along with it or how to budget for a dog. The cost of owning a dog over the average lifespan of 12 years ranges from $5,000 to $20,000. The majority of dog owners underestimate this figure.1 That’s the kind of misunderstanding that can leave you short on funds for things such as vaccinations and preventative careâeven food and toys.
So when asking yourself the question, “How much money should I budget for a dog?” you’ll be glad to know that a little financial preparation can go a long way toward making sure you’re ready for the responsibilities that come with pet ownership. The information that follows can help you and your new pooch share a happy, healthy friendship for years to come.
Welcome home: First-year costs for your pup
“Before getting my dog, I made sure to save as much money as possible,” says Danielle MÃ¼hlenberg, a professional dog trainer and blogger at PawLeaks, a site that focuses on dog training and dog behavior. MÃ¼hlenberg paid $1,300 for her 115-pound rottweiler Amalia. A safe approach when thinking about how to budget for a dog is to “always put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs,” she adds.
MÃ¼hlenberg outlines the first-year expenses new dog owners should expect as they resolve how to afford a dog on a budget and some suggestions on managing costs:
Purchase/adoption fees and dog license
The purchase of a purebred puppy from a breeder can cost anywhere from $800 to $1,500 or moreâwhich makes a pure-blooded hound the most expensive type of dog to own. At the other end of the spectrum are the many shelter or rescue dogs in need of a home; they can generally be adopted for as little as a few hundred dollars. You will also need a dog license to bring home your pup, which runs from $10 to $20 on average (and needs to be renewed annually).
Pro Tip: Once you bring your tail-wagger home from the shelter or breeder, research local vets. Offices in one neighborhood or town can be much pricier than what you’d find if you’re open to a commute.
Upfront medical costs
It can cost between $200 and $800 to spay or neuter a dog at a veterinary clinic. You can typically pay less at a shelter or humane society, where such procedures are often subsidized by donations. In other costs, puppies need an initial exam and special vaccinations that typically run between $75 and $100 (rabies is the only shot required by law, however). Microchipping, while not mandatory, is recommended to help identify your pet if it’s lost or stolen. This procedure costs around $40.
Pro Tip: Plan to have your dog spayed or neutered. Otherwise, you may pay higher boarding fees and license fees, as well as release fees if your pup is taken in by animal control.
Comfort, training and grooming supplies
Expect to spend another few hundred dollars for a collar and leash ($6 to $50), food bowls ($10 to $50), waste bags ($6 to $20), a crate and bed ($25 to $250), doggie shampoo and brushes ($5 to $10), training pads ($16 to $35), toys ($10 to $200) and the first month’s supply of food ($40 to $60).
Pro Tip: Supplies like a dog crate or bowl can be found secondhand for a lower cost, sometimes for free. Check online listings for yard sales and giveaway events, where used or unwanted items are given away instead of being sold or thrown away.
Lost time at work
A new puppy needs a lot of attention, which can add to the cost of owning a dog. One in five dog owners took time off from work to care for a new puppy.2 Some puppies have a harder time on their own and can chew up your home and belongings, so it’s worth knowing this upfront in case your pup needs a sitter.
Pro Tip: Prepare for “puppydom” ahead of time by banking extra personal days or asking about short-term, work-from-home opportunities.
Ongoing expenses for your furry companion
Annual, ongoing costs of owning a dog can vary widely depending on your situation. Why the disparity? It’s due mainly to dog size. For instance, larger dogs eat more food, and if you’re the type of owner that chooses premium kibble over a lower-cost option, that can really add up. Groomers also charge more for larger dogs because of the extra time and care needed to handle them.
MÃ¼hlenberg spends about $1,200 per year on her Rottweiler’s high-end food and another $600 annually for twice-weekly social training sessions. A pricey diet and puppy play camp may fall in the “nice to have” category of dog ownership for some. Dog owners worried about how to afford a dog on a budget can minimize these costs by choosing less expensive canned food and kibble or by making their own dog food. To save on other expenses, MÃ¼ehlenberg grooms her dog at home, makes her own toys and treats and buys pet supplies in bulk.
To help relieve the financial burden of how to afford a dog on a budget, you may want to open a savings account for emergencies. MÃ¼hlenberg puts a few hundred dollars aside each month, which can be tapped for unplanned household repairs due to any damage the dog may cause, dog sitting for unexpected travel or illness or other pup-related surprises. The Discover Online Savings Account is one place to hold cash for a dog-only emergency fund and grow your savings.
You earned it. Now earn more withÂ it.
Online savings with no minimum balance.
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Invest in keeping your pooch healthy
As you can see, there are a lot of annual costs to consider when determining how to afford a dog on a budgetâand they can really add up, particularly when a pooch gets sick or is involved in an accident. Preventative care such as flea, tick and heartworm medication, which can cost a total of $64 to $320 monthly, and regular vet visits can decrease the risk of an expensive health condition.3
For larger or recurring costs, consider pet insurance (an annual policy costs about $360 to $600).2 Some unexpected expenses can be offset by a pet insurance policy, which “is kind of like a forced savings account,” says Sara Ochoa, DVM, veterinary consultant for product review site DogLab. “You pay the insurance company, and they will pay for most of your pet’s medical bills.” This might go a long way in resolving how to budget for a dog.
For example, a typical pet insurance policy may cover accidents, illness and conditions that are genetic, congenital and chronic, as long as these conditions were not present at the time the policy was purchased.5
âAlways put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs.”
Ochoa is often able to witness the financial benefits of pet insurance firsthand. She cites one example of a client whose dog had emergency surgery and spent a few nights in the hospital. According to Ochoa, the bill would have cost the owner around $7,000. With their pet insurance, they paid somewhere around $1,000.
Create a happy home for your four-legged friend
In the end, how to budget for a dog just takes some advance planning and preparation, which can help manage the upfront costs and monthly cash cushion required to ensure a happy and healthy dog. By understanding the cost of owning a dog as much as possible, you’ll have less financial stress and more time to focus on play time with your pup.
“Even with the associated costs,” Hynd says, “I don’t for one moment regret our decision [to bring Chewie home].” MÃ¼hlenberg agrees: “Bringing a dog into my life has always been a goal and dream of mine. The love and affection you receive back from a dog are priceless.”
1“The True Cost of Owning a Dog or Cat,” Credit.com 2“The True Cost of Getting a Puppy in 2019,” Rover.com 3“The True Cost of Getting a Dog,” Rover.com 4“5 Reasons to Get Your Dog Licensed,” Cesar’s Way 5“Pet Insurance Coverage: What You Need to Know,” ConsumersAdvocate.org
The post Fido-Proofing Your Budget: Managing the High Cost of Owning a Dog appeared first on Discover Bank – Banking Topics Blog.
Thereâs something weird happening with the real estate markets today. Normally in a recession, demand for rentals goes up while demand for houses goes down. But if thereâs anything 2020 has taught us, itâs that everything is turned on its head right now.
Instead, weâre seeing an interesting trend: despite the ongoing pandemic, home-buying is experiencing higher demand now than they have been since 1999, according to the National Association of Realtorsâ (NAR). If youâve been hoping to buy a home soon, youâre probably already aware of this weird trend, and excited. But is it the same story everywhere? And is a pandemic really the right time to buy?
How the Pandemic is Changing Homeownership
This pandemic is different from any other in history in that many people â especially some of the highest-paid workers â arenât being hit as hard as people who rely on their manual labor for income. This, coupled with an ultra-low mortgage rate environment and a new lifestyle thatâs not fit for a cramped apartment, is creating the perfect storm of high-dollar homebuyers.
âI didnât want to pay someone elseâs mortgage to have three roommates,â says Amy Klegarth, a genomics specialist who recently purchased a home in White Center, a suburb of Seattle where she was formerly renting. âI moved because I could afford to get a house with a large yard here for my goats, Taco and Piper.â
Whether you have goat kids or human kids (or even no kids), youâre not the only one looking for a new home in a roomier locale. According to the NAR report, home sales in suburban areas went up 7% compared to just before the pandemic started. In some markets, itâs not hard to understand why people are moving out.
Where Are People Going?
Apartments are small everywhere, but theyâre not all the same price. For example, homes in cities tend to be 300 square feet smaller than their suburban counterparts. Some of the hottest home-buying markets right now are in areas where nearby rents are already too high, often clustered around tech and finance hubs that attract high-paid workers. After all, if you canât go into the office and all of the normal city attractions are shut down, whatâs the point of paying those high rental costs?
According to a December 2020 Zumper report, the top five most expensive rental markets in the U.S. are San Francisco, New York City, Boston, San Jose, and Oakland. But if youâre ready to buy a home during the pandemic, there are nearby cheaper markets to consider.
If You Rent in San Francisco, San Jose, and Oakland, CA
Alternative home-buying market:San Diego, Sacramento
Average rent: San Francisco, $2,700, San Jose, $2,090; Oakland; $2,000
Average home value (as of writing): San Diego ($675,496) and Sacramento ($370,271)
Estimated mortgage payment with 20% down: San Diego ($2,255) and Sacramento ($1,236)
Big California cities are the quintessential meccas for tech workers, and thatâs often exactly whoâs booking it out of these high-priced areas right now. Gay Cororaton, Director of Housing and Commercial Research for the National Association of Realtors (NAR), offers two suggestions for San Francisco and other similar cities in California.
First, is the San Diego-metro area, which has a lot to offer people who are used to big-city living but donât want the big-city prices. An added bonus: your odds of staying employed as a tech worker might be even higher in this city.
âProfessional tech services jobs make up 18% of the total payroll employment, which is actually a higher fraction than San Jose (15.5%) and San Francisco (9.3%),â says Cororaton.
If youâre willing to go inland, you can find even cheaper prices yet in Sacramento. âTech jobs have been growing, and account for 7% of the workforce,â says Cororaton. âStill not as techie as San Jose, San Francisco, or San Diego, but tech jobs are moving there where housing is more affordable. Itâs also just 2 hours away from Lake Tahoe.â
If You Rent in New York, NY
Alternative home-buying market: New Rochelle, Yonkers, Nassau, Newark, Jersey City
Average rent: $2,470
Average home value (as of writing): New Rochelle ($652,995), Yonkers ($549,387), Nassau ($585,741), Newark ($320,303), or Jersey City ($541,271)
Estimated mortgage payment with 20% down: New Rochelle ($2,180), Yonkers ($1,834), Nassau ($1,955), Newark ($1,069), or Jersey City ($1,807)
Living in New York City, it might seem like you donât have any good options. But the good news is you do â lots of them, in fact. They still might be more expensive than the average home price across the U.S., but these alternative markets are still a lot more affordable than within, say, Manhattan.
New Rochelle and Yonkers
Both New Rochelle and Yonkers are about an hourâs drive from the heart of New York City, says Corcoran. If you ride by train, itâs a half hour. Both New Rochelle and Yonkers have been stepping up their appeal in recent years to attract millennials who canât afford city-living anymore (or donât want to be âhouse poorâ), so youâll be in good company.
âNAR ranked Nassau as one of the top places to work from home in the state of New York because it has already a large population of workers in professional and business services and has good broadband access,â says Cororaton. If you have ideas about moving to Nassau youâll need to move quickly. Home sales are up by 60% this year compared to pre-pandemic times.
Newark or Jersey City
If you donât mind moving to a different state (even if it is a neighbor), you can find even lower real estate prices in New Jersey. This might be a good option if you only need to ride back into the city on occasion because while the PATH train is well-developed, itâs a bit longer of a ride, especially if you live further out in New Jersey.
If You Rent in Boston, MA
Alternative home-buying market: Quincy, Framingham, Worcester
Average rent: $2,150
Average home value (as of writing): Quincy ($517,135), Framingham ($460,584), or Worcester ($284,936)
Estimated mortgage payment with 20% down: Quincy ($1,726), Framingham ($1,538), or Worcester ($951)
Boston is another elite coastal market, but unlike New York, thereâs still plenty of space if you head south or even inland. In particular, Quincy and Framingam still offer plenty of deals for new buyers.
If you like your suburbs a bit more on the urban side, consider Quincy. Although itâs technically outside of the city, itâs also not so isolated that youâll feel like youâre missing out on the best parts of Boston-living. Youâll be in good company too, as there are plenty of other folks living here who want to avoid the high real estate prices within Boston itself.
Framingham is undergoing an active revitalization right now in an effort to attract more people to its community. As such, youâll be welcome in this town thatâs only a 30-minute drive from Boston.
âNow, if you can work from home, consider Worcester,â says Cororaton. âItâs an hour away from Boston which is not too bad if you only have to go to the Boston office, say, twice a week.â Worcester (pronounced âwuh-sterâ) is also a great place for a midday break if you work from home, with over 60 city parks to choose from for a stroll.
Average Rent for 1-Bedroom Apartment
Housing Market Options & Avg. Monthly Mortgage*
San Francisco, CASan Jose, CAOakland, CA
San Diego ($2,255) Sacramento ($1,236)
New York, NY
New Rochelle ($2,180) Yonkers ($1,834)Nassau ($1,955)Newark ($1,069)Jersey City ($1,807)
*Average home mortgage estimates based on a 20% down payment.
Should You Buy a House During a Pandemic?
Thereâs no right or wrong answer here, but itâs a good idea to consider your long-term housing needs versus just whatâll get you through the next few months.
For example, just about everyone would enjoy some more room in their homes to stretch right now. But if youâre the type of person who prefers a night on the town, you might be miserable in a rural area by the time things get back to normal. But if youâve always dreamed of a big vegetable garden or yard for the family dog, now could be the right time to launch those plans.
Another factor to consider is job security. And remember that even if youâre permanently working from home today â and not everyone has this ability â living further from the city could limit your future opportunities if a job requires you to be on-site in the city.
Finally, consider this: most homes in outlying areas werenât built with the pandemic in mind. For example, â… open floor plans were popular, pre-pandemic,â says Cororaton. âIf the home for sale has an open floor plan, youâd have to imagine how to reconfigure the space and do some remodeling to create that work or school area.â
Here are some other things to look for:
Area for homeschooling
Broadband internet access
Proximity to transport routes
Office for working from home
Is It More Affordable to Buy or Rent?
There arenât any hard-and-fast rules when it comes to whether itâs cheaper to rent or buy. Each of these choices has associated costs. To rent, youâll need to pay for your base rent, pet fees and rent, parking permits, deposits, renters insurance, and more. To buy, youâll have an even bigger list, including property taxes, maintenance and upgrades, HOA fees, homeowners insurance, closing costs, higher utility bills, and on.
Each of these factors has the potential to tip the balance in favor of buying or renting. Thatâs why it makes sense to use a buy vs. rent calculator that can track all of these moving targets and estimate which one is better based on your financial situation and the choices available to you.
In general, though, most experts advise keeping your housing costs to below 30 percent of your take-home pay when setting up your budget. The lower, the better â then, youâll have even more money left over to save for retirement, your kidâs college education, and even to pay your mortgage off early.
The post Popular Housing Markets During the Pandemic appeared first on Good Financial CentsÂ®.
Yes,Â home equity lines of credit (HELOC) can have an impact on your credit score. Whether that impact to your credit score is negative or positive depends on how you manage your HELOC. It also depends on your overall financial situation and ability to make timelyÂ payments on any amount you borrow via yourÂ homeÂ equity line of credit. Find out more aboutÂ how a HELOC affects a credit score.
What IsÂ a HELOC?
HELOC stands forÂ homeÂ equity line of credit. If you haveÂ equity in your home, you can use it to take out a line of credit up to that value. Whether or not you’re approved forÂ a HELOC depends on your credit history. However,Â a HELOC is not a secondÂ mortgage.
Unlike aÂ mortgage, you can take outÂ money from your HELOC as you need itâusing only the amount you needâand paying yourÂ loan back in a revolving manner or inÂ monthly payments. It works a lot like aÂ credit card but with a larger availableÂ credit limit. For example, if you have $40,000 inÂ equity and get approved forÂ a HELOC for the total amount, you can take out up to that much in funds.
You might take out $10,000 to put siding on your house and begin paying back that amount according to your lending agreement. Later, you might want to cover some of your child’s college tuition, using another $5,000 of the HELOC. You continuouslyÂ payback what you borrowed on theÂ equity line unless you have paid back all of the balance.
It’s important to note thatÂ a HELOC is credit that is extended based on your home’s value. That means if you default on yourÂ homeÂ equity line of creditâyou take outÂ money and never make the requiredÂ paymentsâyou could eventually be dealing with a foreclosureÂ situation.
How isÂ a HELOC Different from aÂ Home Equity Loan?
HELOCs andÂ home equity loans do share some similarities. In both cases, you’ll be taking out aÂ loan from yourÂ homeÂ equity. But while yourÂ home equity loan will give you theÂ money all at once,Â a HELOC gives you a set amount ofÂ money, as you need it, that you can borrow andÂ payback.
Home equity loans are similar to any otherÂ loanâanÂ equity loan you take out will have aÂ fixed interest rate,Â lump sum, etc. On the other hand,Â home equity lines of credit do have an interest rate, but they’re typically lower and only applied to the amount ofÂ money you take out.
Is aÂ HomeÂ Equity Line of Credit a Good Idea?
Whether or not any type of credit is a good idea depends on your personal financial situation. If you’re drowning inÂ debt and using yourÂ homeÂ equity toÂ pay the bills, you’re just swapping one type of financial issue for another. But if you’re using your HELOCÂ toÂ payoff high-interestÂ credit card debt so you only have a single, lower-interestÂ debt to worry about, this might be a smart move.
Only you can decide if aÂ homeÂ equity line of credit is a good idea for you. However, if you have a poor credit scoreÂ or other negative factors, you may not get approved forÂ a HELOC. Or, the HELOC may come with unfavorable terms that make it too expensive to use as a form of credit. You may want to work on fixing your creditÂ before applying forÂ homeÂ equity lending.
How Does a HELOC Affect a Credit Score?
Any type of credit you use can impact your credit score. When you take outÂ a HELOC, you extend how much available credit you have. If you open the line and don’t use any of the credit, your credit utilization rateÂ will be improved, which could also potentially improve your credit score. And if you make timelyÂ payments on credit you borrow from thisÂ equity line, those are positives that can be reported on your credit history.
On the other hand, if you take out a large portion of yourÂ equity line, you have a higher credit utilization rate, which can hurt your score. Failing to make timelyÂ payments could also potentially drop your score. SinceÂ HELOC rates can be variable, you must plan for fluctuating payment requirements to avoid this issue.
Do UnusedÂ Credit Lines Hurt Your Credit Score?
UnusedÂ lines of credit typically improve your utilization rate, which would improve your credit score. However, HELOCs are a type ofÂ revolving credit, just like aÂ credit card.
If you have a huge amount of unused credit, some lenders might see you as a potential riskâespecially if you don’t have the income to back up this credit. This is because you could suddenly take out a large amount on thisÂ equity line without the income toÂ pay it back, putting your other debts at risk too.
What Are the Benefits ofÂ a HELOC?
Just like any otherÂ loan, there areÂ pros and cons to taking outÂ a HELOC. The benefits of aÂ homeÂ equity line of credit include the ability to get a large amount of credit based on your home’s value and flexible options for managing that credit. You can use it as you need it, which gives you more control over what type ofÂ payments you need to make at any given time.
What Are the Disadvantages of aÂ HomeÂ Equity Line of Credit?
The biggest disadvantage ofÂ a HELOC is that it’s tied to your home, which means there’s a slight risk of foreclosure or a home lien if you don’t make yourÂ payments. TheÂ payments may also work on a variable interest, which means this isn’t always the most affordable credit option for homeowners.
It can also look like a largeÂ credit card account on your report, so if you only need a small amount of credit on a short-term basis, you might want to consider personalÂ loan optionsÂ instead.
The post How Does a HELOC Affect a Credit Score? appeared first on Credit.com.
If youâre new to real estate, or preparing to make an offer on your first home, you might be wondering what mortgage is best for a novice home buyer. While both seasoned homeowners and first-time buyers may wind up with the same exact home loan, there are additional options to consider if youâve never bought [&hellip
The post Whatâs the Best Mortgage for First Time Buyers? first appeared on The Truth About Mortgage.
The Department of Veterans Affairs (VA) has proposed a new loss mitigation method to help homeowners with VA loans in COVID-19 related forbearance get back on track. The new program, known as the COVID-19 Veterans Assistance Partial Claim Payment program, or COVID-VAPCP for kind of shorter, somewhat mirrors existing programs offered by the FHA and [&hellip
The post Partial Claim May Be Option for VA Borrowers Exiting COVID-19 Forbearance first appeared on The Truth About Mortgage.
Years before I ever dreamed of homeownership for myself, I was an HGTV connoisseur. In college, I double majored in âProperty Virginsâ and âHouse Huntersâ and spent hours glued to the TV with my roommate, ogling other peopleâs granite countertops.
Fast forward nearly a decade, and the time had arrived for me to purchase my own home. (No granite countertops hereâmy house was more like the âbeforeâ scene in an episode of âFixer Upperâ).
Not surprisingly, TV homeownership didnât prepare me for the real thing. There are lots of lessons Iâve had to learn the hard way.
If youâre gearing up for your own journey into homeownership, turn off the TV and gather ’round. Iâll fill you in on a few things I wish I had known beforehand, and a few surprises (some happy, some frustrating) that I encountered along the way.
1. A beautiful yard takes work
I never met a succulent that I didnât kill. Even my fake plants are looking a little wilted right now. But even though I donât have a green thumb, landscaping and yard maintenance are forever on my to-do list.
Each spring, I spray Roundup with impunity, attempting (and failing) to conquer the weeds. My husband handles mowing and edging.
Iâve slowly started to learn which plants can endure abuse, neglect, and a volatile Midwestern climate. I still have a long way to go in my landscaping journey, but all this work has given me a new appreciation for other peopleâs lush, beautiful lawns.
When you’re house hunting, keep in mind that those beautiful lawns you seeâand that outdoor space you covetâcome at a steep price. Either your time and frustration, or a hefty bill for professional landscapers, will be necessary to keep things presentable.
2. You might get a bill for neighborhood improvements
Your property taxes should pay for every improvement to the neighborhood, right? Not necessarily.
When my neighbors came together to petition the city for a speed bump on our busy street, the cost was passed on to us homeowners. It wasnât covered by property taxes, so we got a bill in the mail a few months later. Surprise!
When you’re preparing to buy a house, make sure you budget for homeownership expensesânot just repair and HOA costs, but those pesky fees that crop up when you least expect them.
3. Brush/trash removal? It works differently in every city
As a kid, I spent many fall weekends scooping leaves into yard waste bags that we left on the curb for pickup. But when I became a homeowner, I realized that my early brush with brush removal was unique to the suburb where I grew up. Every city handles it differently, if the city handles it at all.
In Milwaukee, where I live, homeowners can put leaves on the curb for pickup on designated days. For big branches, you need to request a pickup, or potentially dispose of them yourself. Check with your city to find the ordinances and regulations where you live.
4. Youâll want to clean (or hire someone to clean) your nasty windows
Window maintenance was never on my radar as a renter, probably because I never had more than a few windows in an apartment. But then I became the proud owner of many, many windowsâand all of them were coated in a thick film of gunk after years of neglect.
After we moved in, I started to tackle the cleaning on my own. But I quickly realized I was getting nowhere fast, and there was no way I could safely clean the exterior windows up in the finished attic.
So, I swallowed my pride and hired window washers. It was some of the best money Iâve ever spent.
5. You may feel a sudden urge to stock up on seasonal decorations
I never looked twice at a $50 wreath or decorative gourd before becoming a homeowner. Now, I have a burgeoning collection of lawn ornaments in the shape of snowmen and spooky cats. Sometimes I don’t even know who I am anymore.
6. Youâll need to create a budget for Halloween candy
At least I did in my Halloween-loving neighborhood, where the trick-or-treaters come out in droves.
I spent upward of $100 on candy my first year as a homeowner, and most of it was purchased in a panic at the Dollar Store after I noticed that our supply was dangerously low just halfway through the evening.
Now, I stock up in advance and shop with coupons to save a few bucks.
7. DIY renovation is equally rewarding and soul-crushing
For the first few months after we closed on our house, my husband and I spent every free hour after work and on the weekends ripping out carpeting, pulling nails one by one from the hardwood floors, and scrubbing away at generations’ worth of grime in the bathrooms and kitchen. It was some seriously sick stuff.
Being frugal and ambitious means we can accomplish a lot on a small budget. But acting as our own general contractors became a full-time job on top of both of our full-time jobs.
Simple pleasures like âhaving a social lifeâ or âFriday night with Netflixâ became distant memories. Itâs easy now to say it was all worth it, but at the time, I daydreamed about winning the lottery and hiring a team of pros to handle our rehab.
Watch: Here’s How Low You Can Go in Making an Offer on a Home
8. My impulse to check real estate listings lingered for a while
When I started house hunting, I obsessively searched for new home listings every day, poring over MLS descriptions and swiping through photos. Reaching for my phone to refresh the realtor.com app became muscle memory.
But after we closed on our house, my impulse to follow the market didnât disappear overnight. Even though I was a homeowner, I also had a phantom limb where âchecking the real estate listingsâ used to be.
A friend of mine put it best when she wrote about the sensation of loss she experienced when she âno longer had an excuse to occupy [her] free time with these real estate apps.â Itâs surprisingly challenging to turn off your home-buying brain after months of being on high alert.
9. Youâll never want to go back to sharing walls
I like my neighbors. I like them even more because, for the most part, I canât hear them. Gone are the days of people above me making bowling sounds late at night.
Now, I enjoy the sweet, sweet silence of detached livingâno adjacent neighbors blasting music or loudly quarreling. All the yard work in the world is worth it for this level of quiet.
The post 9 Things I Wish I Had Known About Owning My First Home (Before I Bought It) appeared first on Real Estate News & Insights | realtor.comÂ®.