Archive for Mortgage

Paying Rent And Mortgages With A Credit Card

Posted in Mortgage by Michigan Real Estate Expert on March 26th, 2020

Using a credit card for mortgage or rent

When people purchase a house, they usually set up their mortgage payments as a direct draft out of a checking account. The same is typically true of rent payments; however, many people have wondered if there was another way to pay rent or mortgage. After all, there are credit cards out there that have fantastic rewards. It would be great to take advantage of these rewards by placing rent and mortgage payments on a card.

Sadly, there is no way to pay rent or mortgage with a credit card without a fee. There are bank interchange fees that would lead to a surcharge for banks and landlords. This prevents them from readily accepting credit cards without a fee. What if there was a better way?

Possibilities For Credit Card Payments

It is rare to find an apartment complex that accepts a credit card. It is even harder to find a bank that does this. It is helpful to ask about the different ways to pay rents and mortgages when talking to banks and landlords. It can be helpful to do the math on any fees that are charged and compare them to rewards. For example, if a credit card gives five percent cash back on rotating categories, it might be beneficial to take advantage of this five percent back and pay a two percent fee to use the card. This would still net three percent in savings.

Using Third-Party Payment Options

There are also third-party service providers that will allow someone to pay nearly any bill online with a debit or credit card. This includes rent and mortgage payments. These third-party sites still charge fees. Sometimes, it is a flat rate. Other times, it is a percentage of the total.

When To Use Credit And Debit Cards

The most appropriate time to use a credit or debit card to pay this bill is when a minimum spending requirement is needed to trigger a significant bonus. For example, if a card requires someone to spend $5,000 to trigger a bonus, it is easier to reach this number by using the card to pay rent. Otherwise, it is better to calculate the fee versus and points and see which option makes the most sense.

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Should I Pay Off My Mortgage Or Invest the Money?

Posted in Mortgage by Michigan Real Estate Expert on March 25th, 2020

Should I Pay Off My Mortgage Or Invest the MoneyTo understand what to do with a windfall or extra disposable income when it comes to paying down a mortgage or investing the money, we need to discuss and understand the concept of opportunity cost.

What Is Opportunity Cost?

The concept of opportunity cost takes into consideration the total financial impact of the use of funds when applied in different ways, to be able to compare the effectiveness of how it is best to use them. The opportunity cost considers the risks involved, the potential reward, as well as the tax implications of the choices.

Risk Versus Reward Evaluation

All investments have risks. When comparing the potential earnings from an investment against the savings of mortgage interest, only the investment side has any downside risk. If you pay down the mortgage, there is a 100% certainty that the loan will reduce and the interest paid will go down. You can calculate the saving on the interest and know the exact amount.

If you invest those same funds, there is always a risk that the investment money can be lost or the investment returns are lower than expected. Moneywise did a comparison of using money to lower a mortgage versus investing in the S&P 500 stock market index over 43 years from 1971 to 2013. For 26 of those 43 years (60% of the time), paying down the mortgage was a better financial move.

Tax Implications

The tax implications involve the impact of the mortgage interest deduction, and its effect on reducing federal income taxes, and the cost of paying capital gains tax on investment profits.

The Tax Cuts and Jobs Act of 2017 reduced the possibility for many people of benefiting from an itemized mortgage interest deduction because the standard deduction increased. For comparative purposes, most Americans pay capital gains at the current rate of 15%.

Take the tax savings from the mortgage deduction, if you can use it, and compare this to the investment income, less the applicable capital gains taxes. Ask your tax accountant to do the calculation for you if you cannot do this yourself.

Summary

For some, paying down a mortgage is more beneficial than investing. Paying down a mortgage certainly has less risk. Be sure to consider paying down high-interest credit card bills first. That is always a wise idea because the interest rate charged on credit cards is so high.

Every person’s financial circumstances are somewhat different so there is no standard answer when comparing paying down a mortgage to investing the same amount of money. Each person needs to do this calculation of the opportunity costs, to be able to apply their extra funds in ways that are most beneficial for them.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional to discuss current financing options.

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The Long-Term Toll Of College Costs

Posted in Mortgage by Michigan Real Estate Expert on March 20th, 2020

The Long-Term Toll Of College CostsTaking out enormous student loans to get a college degree may be a terrible idea for some. The burden of paying off this debt can make it far more challenging to do other important things like buying a home.

Here are some common problems that come from taking out large student loans:

  • Not Worth It: The college degree may not help you land a high-paying job. Even high-paying jobs like being a dentist have extremely high educational costs as well. Aspiring dentists borrow, on average, over $500,000 to go to dental school and spend multiple decades paying it back.
  • Tuition Hyper-Inflation: Colleges and universities saw the easy money from student loans as a great reason to increase tuition. In many institutions, tuition increases, over the past 42 years, went out of control, especially for trade schools and private universities. College costs rose by 1,400% since 1978. That is five times more than the inflation rate over the same period.
  • OverBorrowing: The easy ability that students have in many cases to over-borrow for living expenses on top of college costs means that they take bigger loans than they need and wastefully spend the money.

In the olden days, they had a phrase for a person who sold themselves into a kind of work-slavery. They called these people “indentured servants.” By taking out student loan debt that may take decades to pay back, this is a form of indentured servitude, especially because it is difficult, if not impossible to get out of paying the student loans back. Even bankruptcy does not discharge student loan debt.

If your student loan goes into default, there is the possibility of a wage garnishment, which means up to 25% of your take-home pay will be deducted from your checks and used to pay off the student loan debt. This is like a modern version of being an indentured servant.

But You Need A College Degree To Succeed, Right?

For many, earning a college degree that teaches skills and knowledge, which help get a high-paying job, is a reasonable idea. However, not all degrees are equal in their influence over getting a job. Many degree certificates are not worth the paper they are printed on. Moreover, some do better than those who have degrees.

Conclusion

What do Bill Gates, Coco Chanel, Ralph Lauren, Rachel Ray, Mark Zuckerberg, Sean “Diddy” Combs, James Cameron, Steve Jobs, Steve Wozniak, Richard Branson, Simon Cowell, Larry Ellison, Ted Turner, and Wolfgang Puck all have in common? They all do NOT have a college degree and still became immensely successful. Many are billionaires, who simply started their businesses and did not have time to finish college, so they dropped out.

Before you saddle yourself with student debt for a huge portion of the rest of your life, think carefully about the ramifications. Then, if you must borrow, borrow as little as possible and make sure you get a degree that helps get a high-paying job.

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.

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Most Renters Are Paying Far More Than Their Landlord’s Mortgage

Posted in Mortgage by Michigan Real Estate Expert on March 13th, 2020

Most Renters Are Paying Far More Than Their Landlord's MortgageIn the overwhelming majority of the 50 largest cities across the U.S., monthly rent is more than the mortgage payment for single-family homes. In several cases, much more. 

Global answering service and chat support company Moneypenny compiled data from Zillow on median rent and mortgage payments from July 2014-July 2019.

In order to calculate the monthly mortgage payments, Moneypenny took the median home sale prices during the same time period and in the same major cities and then used nationally-average mortgage terms: 30-year fixed rate at 4% with approximately 6% down. 

Once the two figures — median monthly rent and median monthly mortgage — were calculated for each city, they were compared side-by-side. The data may surprise you. 

From Less Than Half To More Than Triple

In just seven of the 50 cities analyzed, tenants pay less rent than the owner’s mortgage payment each month. In 28 of the cities — well over half, tenants are paying more than 150% of their home’s mortgage. The city with the highest rent-to-mortgage ratio, Miami, shows that renters pay more than 300% of their landlord’s monthly mortgage payment on average.

Rounding out the top five are New York (276%); Riverside, California (231%); Boston (230%); and San Diego (221%). At the opposite end of the spectrum is New Orleans, where tenants pay just 49% of their home’s mortgage each month, followed by Richmond, Virginia (57%), and Kansas City, Missouri (82%). 

An interesting data point is that the median monthly mortgage payment in Miami is $720, while in New Orleans it’s $2,857. 

Not-Necessarily-For-Profit

While it makes perfect sense that rent prices in hot real estate markets are higher, some may still be surprised by the disparity between rental amounts and monthly mortgage payments. However, it’s important to note that even in the cities with the biggest gap, landlords are not necessarily pocketing the excess and enjoying a nice profit. While it’s certainly possible that they may be, homeowners are more likely putting some of that money back into the house in the form of improvements and maintenance, as well as setting some of it aside for large emergency repairs. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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Considering A Reverse Mortgage? Understand These Important Points First

Posted in Mortgage by Michigan Real Estate Expert on March 11th, 2020

Considering A Reverse Mortgage Understand These Important Points FirstThere are many individuals who end up on a fixed income once they reach a certain age; however, their expenses aren’t always fixed. Sometimes, there is a large medical expense. In other cases, someone might need money for a new car or a home repair. In the event that someone needs cash quickly, one option is called a reverse mortgage.

Those who have equity built up in their home can draw upon this to help with unexpected expenses. This is a quick source of cash that many people overlook. At the same time, it is important to think about the pros and cons of a reverse mortgage.

The Pros Of A Reverse Mortgage

Taking out a reverse mortgage does have several benefits that everyone should know. First, there are no required monthly payments for any reverse mortgage loan. In addition, the money that people get from a reverse mortgage is not taxable. For many, this acts as a tax shield against any income that results from a reverse mortgage.

Next, nobody can ever owe more money than the value of the home when the building is sold. This prevents people from getting buried by potential interest payments. Finally, nobody will ever have to leave their home with a reverse mortgage. The owners retain the rights to the property.

The Cons Of A Reverse Mortgage

On the other hand, there are a few cons that people need to keep in mind as well. First, reverse mortgages are regulated by the federal government, which means that everyone needs to read the rules and regulations carefully. In addition, not everyone who owns a home will qualify for a reverse mortgage. They need to have enough equity built up in the home before the lender will consider it.

In order for someone to take out a reverse mortgage, a lien is going to be placed against the property. In the eyes of some, a lien must be paid off in the event the property is to be sold. Finally, in order to prevent a reverse mortgage from resulting in foreclosure, the building needs to be both maintained and insured.

Thinking about the pros and cons carefully can help someone decide if a reverse mortgage is right for them. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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Ensuring Home Contractors Are Following The Rules Under HICPA

Posted in Mortgage by Michigan Real Estate Expert on March 6th, 2020

Ensuring Home Contractors Are Following The Rules Under HICPAThere are many homeowners who hire contractors to make repairs or upgrades on their homes. It is critical for home improvement contractors to follow all rules and regulations set forth by the law. These regulations have been set forth under the Home Improvement Consumer Protection Act, or HICPA. 

An Overview Of The Home Improvement Consumer Protection Act

The Home Improvement Consumer Protection Act was put forth to ensure that homeowners and contractors come to an appropriate agreement. Some of the rule and regulations that are included in the Home Improvement Consumer Protection Act include:

  • All contractors need to obtain a registration number
  • Home contractors are required to register with the Office of the Attorney General
  • All home contractors need to pay the required registration fees

Finally, the Home Improvement Consumer Protection Act also specifies the various terms that need to be included in each agreement set forth by homeowners and contractors. Any contractors agreed to by contractors and homeowners need to comply with the Home Improvement Consumer Protection Act. The purpose of this act is to protect homeowners against fraudulent contractors. 

What Happens If An Agreement Does Not Follow The Rules?

If an agreement does not abide by the regulations included in the Home Improvement Consumer Protection Act, then there might be liability in a civil court. Furthermore, there could even be criminal charges that result. 

In the event that a homeowner enters into civil litigation against a home contractor, the first item that lawyers will look into include the regulations under the Home Improvement Consumer Protection Act. If the contractor violated any of the regulations, the HICPA may also specify penalties that might be levied against the contractor.

When Does The Home Improvement Consumer Protection Act Apply?

There are only a few exceptions where the HICPA would not apply to a home improvement job. Even though the definitions under the HICPA are very broad, this act does not apply to contractors who earn less than $5,000 of taxable income in a given year. Finally, the HICPA applies only to home improvements. It does not apply to the construction of a new home. The act also does not apply to the sale of any home appliances.

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. 

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3 Tips to Find the Best Neighborhood to Live In

Posted in Mortgage by Michigan Real Estate Expert on March 4th, 2020

3 Tips to Find the Best Neighborhood to Live InThe vast majority of people are going to move at least once in their life. Moves can vary in distance. Sometimes, these moves are across town. Other times, they might be across the country. Regardless of the distance, is important to find a neighborhood that fits both the budget and lifestyle.

There are a few tips to keep in mind.

1. Consider Renting First

Even though there are powerful electronic tools that can help a family narrow down their potential landing spots in a new city, it is impossible to be 100 percent certain that the community is a comfortable fit until actually living there for some time. Therefore, it might be a prudent idea to try renting first.

Renting in that location doesn’t come with the same commitment as buying property. Therefore, if the neighborhood isn’t the right fit, individuals and families can move without having to sell their house. On the other hand, if the community is still a great fit after a few months or a year, it is easier to buy a house at that point in time.

2. Look At The Cost Of Living

Everyone has a budget and most people like to focus on the price of the home. After all, this is likely going to be the biggest expense; however, there are some other factors that are going to play a role as well.

Think about the cost of gas, transportation, the rates on various utilities, healthcare costs, real estate taxes, food prices, and more. All of these factors are going to play a role in how expensive it will be to live in a certain location. Gas prices are going to vary widely depending on state taxes. Some municipalities have local income taxes while others don’t. There might even be HOA fees to consider. Think about all of these factors and their impact on the cost of living.

3. Prioritize Safety

Lastly, even though the financial factors deserve consideration, safety needs to come first. Take a look at the crime rates in the local area. Read some of the local police reports. When visiting, look for signs of vandalism and home damage. This will help everyone estimate the safety of a potential landing spot pretty quickly. Safety should always come first.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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Big Home Repairs That Can Sink A Budget Quickly

Posted in Mortgage by Michigan Real Estate Expert on March 3rd, 2020

Big Home Repairs That Can Sink A Budget QuicklyFor most individuals and families, their home is the most expensive investment they will ever purchase. Therefore, it is important for everyone to take care of their home. Routine maintenance can prevent costly repairs from arising down the road.

It is important for homeowners to make sure they budget for home maintenance and repair costs. Even with a meticulous repair schedule, it is still possible that a major repair might be required. There are a few home repairs that are more expensive than others.

Damage To The Foundation Of The Home

One of the most expensive home repairs that might come up involves damage to the foundation. The foundation is the part of the home that supports the rest of the structure. Therefore, its strength is vital to the integrity of any building.

Depending on the exact nature of the project, repairing the foundation of a home may cost close to $100,00 if the building is large and the damage is severe. At a minimum, homeowners should expect to spend a few thousand dollars on a home foundation repair project.

Some of the most common reasons why a foundation might be damaged involve plumbing issues, clogged gutters, and flooding. Water can corrode the foundation and pool around the base, leading to damage. Therefore, the water system also needs to be addressed with any foundation repair.

A Roof Repair Can Be Costly

The roof is one of the most important barriers in the home. It separates the interior of the home from the dangers of the elements outside. Therefore, it is critical for the roof to remain intact. Roofs need to be inspected regularly.

If there is a problem with the roof, this may cost more than $10,000. Regularly inspecting the roof and making repairs and replacements as they come up can save a home’s budget.

Siding Repairs Are Expensive

Finally, water and wind can damage the siding of a home. Furthermore, insects and other pests can also lead to siding repairs. Repairing a single piece of siding isn’t costly; however, if the entire siding needs to be replaced, this may cost more than $15,000. The exact nature of the cost is going to depend on the materials chosen.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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Investment Property Down Payments: How Much Will You Need?

Posted in Mortgage by Michigan Real Estate Expert on February 14th, 2020

Investment Property Down Payments: How Much Will You NeedInvesting 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.

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Green Energy Tax Credits For Home Improvement & Energy Efficiency

Posted in Mortgage by Michigan Real Estate Expert on February 13th, 2020

Green Energy Tax Credits For Home Improvement & Energy EfficiencyMany 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.

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