Feb 14, 2020 | Mortgage
Investing in real estate is a great way for someone to diversify his or her assets; however, there is a common hurdle that almost all real estate investors face. This comes in the form of a down payment.
It can be a challenge for someone to come up with enough cash to fund the down payment on a home or piece of land, let alone multiple properties. At the same time, how big of a down payment does someone really need? There are a few factors that someone is going to need to consider.
The Conventional Mortgage
There are plenty of investors who like to stick with a conventional mortgage for their investment properties. This makes sense because this is a format they are familiar with. For a conventional mortgage, the down payment is going to fall between 10 and 25 percent.
When taking out a conventional mortgage for an investment property, the lender is typically going to want a larger down payment. For a single-family property, most lenders are going to expect at least 15 percent of the purchase price. This number can be as high as 25 percent of those who are investing in an apartment building, condo structure, or any multifamily unit.
Those who are looking to put down a smaller down payment will need to finance the investment property as a second home. While this might be an interesting thought, anyone looking to purchase an investment property as a second home will need to spend at least some of their time at this location. For a second home, someone might be able to get away with a 10 percent down payment.
A Smaller Down Payment For Multifamily Buildings
There is another way that someone might be able to successfully apply for a smaller down payment. FHA mortgages tend to have higher fees; however, they require smaller down payments. For example, even a multifamily property may only require a 3.5 percent down payment with an FHA loan.
In this example, someone could purchase a multifamily building for $600,000 and only have to put $21,000 down. Those who are willing to stomach higher fees might want to check out the possibility of an FHA loan.
If you are interested in purchasing an investment property, be sure to consult with your trusted real estate professional.
Feb 13, 2020 | Mortgage
Many individuals and families are looking for ways to reduce their energy consumption. Running the heater during the winter and the air conditioner during the summer can have significant impacts on someone’s energy consumption and costs. It should come as no surprise that many people are trying to reduce their HVAC usage to save money; however, there is a better way.
Individuals and families can permanently reduce their fossil fuel usage and carbon footprint by investing in home improvements. Better yet, local, state, and even the federal government wants everyone’s home to be more environmentally conscious, or “green.” Many utility companies want people to act in the same way. That is why there is a slew of incentives for homeowners who are willing to make their homes more Earth-friendly.
Government Tax Credits For Green Initiatives
Many of the tax credits the government is offering for “going green” are going to run through the end of 2021. They are available to any homeowner in the United States who files a federal tax return. Applying for tax credits is done by filling out Form 5695 from the IRS.
Some of the biggest tax credits come from solar energy generation. The first example of a solar energy system comes in the form of a solar water heater. All Energy Star-rated solar water heaters will qualify for this tax credit. Typically, solar water heaters cost somewhere between $2,000 and $5,000.
The other biggest source of solar energy comes in the form of solar panels. Solar panels need to generate electricity directly for the residency and must meet all safety codes. Typically, solar panels cost between $25,000 and $35,000. Even though these sound expensive, the costs are dropping quickly and the tax credit makes the system worth it in the eyes of many homeowners.
Wind Energy
Homeowners can also qualify for green energy tax credits through the use of wind energy. The cost of a wind turbine strong enough to power a home will vary widely. Some may cost $15,000 while others may cost $75,000.
Keep in mind that, in addition to the tax credit, these systems may drastically cut someone’s utility costs. Eventually, these systems should pay for themselves. For this reason, green energy has become an attractive option for many homeowners.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
Feb 12, 2020 | Mortgage
It can be hard to convince a lender that a young person is ready to buy a house. There may not be a long credit history, a lack of assets might make it hard to fund a down payment, and the buyer’s age can cause banks to hesitate. One of the ways for parents to help with this process is to co-sign on the mortgage. Before doing this, there are a few important steps to keep in mind.
Look At Your Own Qualifications
Remember that co-signers are going to go through the same vetting process as the primary borrower. This includes someone’s income, credit history, assets, debts, and credit score are all going to be scrutinized. It might be a while since the co-signer has had to go through this process. Be sure to take a look at one’s own qualifications. Remember that any mortgage, including acting as a co-signer, will act as an outstanding debt. This might make it hard to refinance in the future.
Think About Paying The Loan
While nobody wants to think about their child being unable to pay back the loan, there is always the chance that this may happen. Therefore, think about what would happen if you need to step in and make these payments. If you cannot handle the burden of having that additional co-payment, you may want to think twice about co-signing. Failing to make these payments will not only hurt your child’s credit score but yours as well.
Protect Yourself
As a co-signer, it will be important to protect yourself before signing on the dotted line. First, be sure to do some estate planning with your child. You should encourage your child to take out a life insurance policy. While no parent wants to think about burying their child, if something happens to him or her, the co-signers are going to be on the hook for the rest of the loan. Furthermore, be sure to monitor the loan payments as well. Sign up for email or text alerts to make sure payments are being made on time.
Plan Ahead
Many parents are going to reflexively act as a co-signer for their child; however, it is important to plan ahead. Be sure to think about all possibilities and make sure that both you and your child are ready to handle an added loan payment.
If you are interested in buying a new home or listing your current property, be sure to consult with your trusted real estate professional.
Feb 7, 2020 | Mortgage
According to a report that was recently published by the United States Census Bureau, the average mortgage payment has been dropping. According to the bureau, the average payment is just over $1,500 per month. This is shockingly close to the average cost of renting, which is just under $1,500 per month.
This data shows that the average mortgage payment is declining, down by around three percent in the past 18 months. This trend is expected to continue. Some people might be surprised that the average mortgage rate is dropping, given that the average real estate value continues to rise across the country. There are a few reasons why mortgage payments are dropping.
Why The Average Mortgage Payment Is In Decline
The average mortgage rate is dropping because the average interest rate applied to each home loan is dropping as well. They are hovering around three-year lows.
This means that even though the principal of the loan that someone might take out to purchase a home is staying the same (or going up), the total cost of the mortgage is going down. This is great news for anyone who is looking to buy a home in the near future. Low interest rates may make the cost of buying a home more affordable.
The Importance Of The Average Mortgage Payment
It is important to remember that the average mortgage payment is simply a statistical measure. These statistics are evaluations of the overall trend. In reality, every mortgage is going to be different. Two people who are buying properties that are very similar may end up with mortgages that look very different.
The mortgage payment is based on numerous factors that can vary widely from person to person. In addition to the interest rate applied to the loan, other factors include the size of the down payment, the buyer’s credit score, how much debt someone might have, their average income, and the possible requirement of private mortgage insurance (PMI).
Lowering A Monthly Mortgage Payment
Anyone looking to lower their monthly mortgage payment has a few tools at his or her disposal. Consider making a larger down payment, improving the credit score, or reducing any current debts. This can help someone negotiate for more favorable mortgage terms.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
Jan 28, 2020 | Mortgage
Anyone who has paid attention to the TV recently has likely seen a lot of commercials for something called a reverse mortgage. For those who might not know, a reverse mortgage is exactly that. In this option, people receive monthly payments from a lender in exchange for equity in their homes. In essence, this functions as an annuity.
One of the major benefits of a reverse mortgage is that it can be used to cover the costs associated with long-term care. Over the next few decades, the number of elderly individuals in the United States is projected to double. For this reason, long-term care is projected to become a major expense.
How Can A Reverse Mortgage Pay For Long-Term Care?
Long-term care is one of the biggest unexpected expenses encountered by the elderly. Often, coinsurance associated with a health insurance policy, combined with the lifetime caps on many policies, can shift significant medical costs to the individual. This leaves many elderly individuals looking for an immediate for some cash. Because many elderly individuals and families are on a fixed income, there are not a lot of options.
This is where a reverse mortgage can come in handy. Many elderly individuals have paid off their houses entirely. This can act as an immediate source of equity, providing seniors with a much-needed cash infusion to cover the costs associated with long-term care.
Improving On Reverse Mortgages And Long-Term Care
With long-term care expected to become a bigger issue as a larger percentage of the US population reaches retirement, suggestions have been offered to address these costs. One of these suggestions has been to marry long-term care and reverse mortgages with improved social services.
Many experts have been suggesting ways to tie the equity in someone’s home to Medicare and Social Security. This could be used to create a nice safety net that might support seniors by covering the costs of long-term care. Given the stress that an unexpected medical expense can create, this can offer a much-needed respite for seniors and caregivers alike.
Taking Advantage Of A Reverse Mortgage
In the meantime, it is important for seniors to note that a reverse mortgage can offer an immediate cash infusion. This can be used to cover an unexpected cost, such as a medical bill. It will be interesting to see how reverse mortgages evolve in the future.
If you are interested in purchasing a new home or listing your current property, be sure to set up an appointment with your trusted real estate professional.
Jan 24, 2020 | Mortgage
When someone is looking to purchase a house, they need to think about how long they want their mortgage to last. While a bank can structure a mortgage to last for any number of years, the most common lengths are 15 and 30 years. While a 30-year mortgage is typically more affordable, a 15-year mortgage is cheaper overall.
When someone is trying to decide how long they want their mortgage to last, there are a few important tips to keep in mind.
The Benefits Of A 15-Year Mortgage
There are a few important benefits that everyone should know about a 15-year mortgage. Some of the biggest benefits include:
- With a 15-year mortgage, people are going to pay off their home more quickly. This will free up cash to spend in other places. Those who are looking to retire without a mortgage may want to go with a 15-year mortgage.
- Next, a 15-year mortgage is going to come with a lower interest rate. Because the bank is going to get their money back more quickly, they are going to reward the borrower with a lower interest rate. Overall, the bank is taking on less risk.
- Finally, a 15-year mortgage is also going to be cheaper overall. With a lower interest rate and a loan that is paid off more quickly, the bank is going to take less of someone’s money over the life of the loan.
The Benefits Of A 30-Year Mortgage
A 30-year mortgage has some notable differences when compared to a 15-year mortgage. There are a few important benefits that people need to remember. These include:
- The monthly payments are going to lower. Those who are planning on paying for their children’s college education, or who envision a car payment in the near future, may want to have extra cash on hand to fund them.
- As someone pays off their mortgage the interest paid on the loan is tax-deductible. Since more interest is paid on a 30-year mortgage, there will be greater tax savings as well. This means that people will get some of their money back.
- Finally, a 30-year mortgage is also more flexible. During the loan, people may elect to make extra payments. This allows someone to pay off their home more quickly.
These are a few of the most important points people need to remember when trying to decide between a 15-year and 30-year mortgage.
If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.
