Avoid These Six Home Improvement Mistakes

One of the best ways to add value to your house is through a home improvement project. However, there are plenty of pitfalls when it comes to remodeling.

Here are six critical mistakes to avoid:

  1. Not talking to your real estate agent ahead of time. Before you decide on any renovations or remodeling projects, it’s imperative that you sit down and discuss your plans with your real estate agent first. Their knowledge of which home improvements projects are beneficial—as well as their knowledge of current remodeling trends—is very important. Also, they’ll be able to provide you with references for trusted contractors.
  2. Focusing only on cosmetic areas and not on structural issues. Too many homeowners spend their remodeling dollars solely on more superficial areas rather than on structural areas. Having a new master bathroom may be your dream, but you should also concentrate on your home’s wiring, plumbing, walls, roof, and foundation. Ignoring these areas could cause major problems—along with major expenses—down the road.
  3. Making improvements that aren’t equal to your home and neighborhood. Overdoing it with your remodeling project can be a problem as well. For example, an upscale kitchen remodel—complete with state-of-the-art appliances and high-end countertops—may not be right for your home and may be a turn-off to potential buyers when it comes time to sell. Your agent can help you decide if your project is appropriate for your home.
  4. Not vetting your contractor. To avoid getting burned by shady workmanship, make sure you interview several contractors and vet them thoroughly. Along with your real estate agent’s referrals, you should also consider referrals from business associations, your local government and personal or professional contacts. Also, make sure your contractor is licensed and insured and can provide you with a written estimate for all work.
  5. Attempting a DIY project—when it’s not a DIY project. Even if you fancy yourself as being pretty handy around the house, you should know your limitations. Tackling a project that’s too much for you can be expensive if a contractor has to come in and fix what you’ve done incorrectly. Saving money by doing a project yourself is certainly nice, but don’t bite off more than you can chew.
  6. Not getting the proper permits and ignoring regulations. Whether you’re doing the work yourself or having a professional do it, make sure you get the proper permits and stick to all regulations and codes. Bypassing the permit process or completing a project that’s not up to code can cause big headaches when you sell your home, not to mention the fact that it could be very dangerous for you, your family and your contractor. ∆

 

© Left Field Media


Mortgage Options for Retirement

Whether you’re retiring five years from now or 25 years from now, your financial situation will be one of the keys to a happy retirement. Your savings, investments and retirement income (if any) will be your main focus, but you’ll also need to look at one other important area: your mortgage.

Depending upon your financial situation and retirement goals, you’ll have a few options with your mortgage when it comes time for you to retire. Let’s take a closer look at those options: paying off your mortgage, keeping your mortgage (or getting a new one) and refinancing your mortgage.

Pay Off Your Mortgage. For many retirees or soon-to-be retirees, being debt-free during retirement is the most important goal. If you’re one of these people, then paying off your mortgage—either before you retire or within a short time after you retire—may be right for you. By eliminating your monthly mortgage payment, your cash flow will improve and you’ll have one less item of debt to worry about. Paying off your mortgage may take some long-range planning, so talk to your mortgage professional now about your current mortgage and payoff options, if applicable.

Keep Your Mortgage or Get a New Mortgage. Being debt-free may be a nice goal, but if you have to up your current monthly mortgage payment by quite a bit just to pay off your mortgage early, you may be better off keeping your mortgage and investing that “extra” money elsewhere. If you’re looking to relocate for your retirement or downsize into a smaller home, you can also “trade” one mortgage for another. Also, by keeping your mortgage or getting a new one, you’ll have the added benefit of continuing to take the yearly tax deduction on interest.

Refinance Your Mortgage. For many people, this is the best option. With today’s still-low interest rates, refinancing into a fixed-rate mortgage—either with the same term or a shorter term—will keep your payments low and give you much more flexibility in terms of your finances when you retire. If you’re relocating or downsizing for your retirement, however, refinancing may not be the best idea because you may not be able to recoup your costs. Also, if you’re considering refinancing into a short-term loan in order to pay off your mortgage sooner, keep in mind that the higher monthly payments may reduce your ability to build up a nest egg for your retirement.

To get a better understanding of your financial situation when you retire, talk to your financial planner and make sure your mortgage options are part of the conversation. ∆

 

© Left Field Media


Lack of Comparable Sales

“THERE HAVE BEEN VERY FEW HOME SALES IN OUR AREA. HOW CAN WE SET OUR LIST PRICE IF WE DON’T HAVE ANY COMPARABLE SALES TO GO BY? ALSO, TO COMPLICATE THINGS, WE’VE MADE A LOT OF UPGRADES.”

 

This is a situation in which having an experienced real estate agent who knows your area is vital. Not having any recent sales in your neighborhood—and the fact that your home has undergone a lot of upgrades—does provide a few challenges, but a good real estate agent will be able to help you set a fair list price. The problem can be attacked from several different angles. To arrive at an initial list price with very few “comps” to go by, your agent will consider a wide range of factors including your location, current market conditions, your square footage, the year your home was built, distance to services, and your home’s overall condition. In terms of the upgrades you’ve made to your home, although any upgrades will increase its value, you probably won’t get a dollar-for-dollar return on your investment on those particular projects. Your agent will certainly know this and take it into account when determining a good list price. In the end, keep in mind that looking at comparable sales is indeed helpful in setting your list price, but it’s not the end-all be-all. Rather, an agent’s experience and knowledge is much more important and useful. ∆

© Left Field Media

What Can I Afford?

Whether you’re buying a home for the first time or considering a move into a new home, how much you can afford—in terms of a mortgage and general housing expenses—is the biggest calculation you’ll need to make.

To figure out how much you can afford, first you’ll need to calculate how much of your gross monthly income can go towards your mortgage. When doing the math, your goal is to have your monthly mortgage payment not exceed 28 percent of your gross monthly income, although that percentage isn’t necessarily set in stone. However, if your calculations come to quite a bit more than 28 percent, then you may need to scale back on how much you can afford in terms of a monthly mortgage payment.

Next, figure out your total debt and what percentage of your gross monthly income goes to that debt. This calculation will give you a rough estimate of your total household expenses. As a rule, your total debt should be no more than 36 percent of your income. Much like your earlier calculations with your monthly mortgage payment, 36 percent is just a general guideline and you may come in over or under that number by a couple of percentage points.

Once you’re comfortable with those figures, take into consideration general expenses directly relating to your new home. Not only should you look at one-time expenses such as moving and renovations, but—more importantly—also look at general homeowner expenses that you may incur each month such as maintenance, homeowners’ association fees and unexpected home repairs. For this, it’s a good idea to budget in 30-40 percent more than your monthly mortgage payment.

Finally, after you’re done with your own budgeting, you’ll need to get a pre-approval from your lender. With a pre-approval, a lender determines how much they are willing to lend to you by assessing your income, assets, employment and credit history. Once you have a pre-approval, you’ll know what your price range is for buying a home. Keep in mind that the purchase price of your new home doesn’t need to be the same as what your lender is willing to lend—it’s okay to buy a home that’s less than what you’re approved for.

The key to not overextending yourself is to make sure to leave plenty of space in your budget for unforeseen costs and expenses. If you’re going to err, make sure you err on the side of affordability. ∆

 

© Left Field Media


Current & Future Interest Rates Trends October 18′

Now that the traditional spring/summer buying and selling season is over, let’s take a look at how interest rates have been trending—and what may be in store in the coming months.

Generally, the interest rates on a 30-year fixed-rate mortgage and on a 15-year fixed-rate mortgage have been stable throughout the spring and summer real estate season. In the chart below from Freddie Mac’s Primary Mortgage Market Survey, the interest rates have fluctuated only 0.12 percentage points on the 30-year fixed-rate and only 0.14 percentage points on the 15-year fixed-rate from April through August.

This stability in the rates is something we’ve seen the last two years during the same April-August timeframe, with a variance of 0.17 percentage points in the 30-year fixed and 0.14 percentage points in the 15-year fixed in 2017 and 0.17 in the 30-year fixed and 0.12 in the 15-year fixed in 2016.

 

Month 30-Year Fixed 15-Year Fixed
April 4.47% 3.93%
May 4.59% 4.07%
June 4.57% 4.04%
July 4.53% 4.01%
August 4.55% 4.02%

 

The weekly figures for the last six weeks also show fairly steady rates. Since August 16, the 30-year fixed has varied only 0.14 percentage points and the 15-year fixed has varied only 0.14 percentage points.

 

Weekly 30-Year Fixed 15-Year Fixed
August 16 4.53% 4.01%
August 23 4.51% 3.98%
August 30 4.52% 3.97%
September 6 4.54% 3.99%
September 13 4.60% 4.06%
September 20 4.65% 4.11%

 

 

The steady interest rates are a result of a variety of factors that have been applying pressure—both upwards and downwards—on the rates. The balanced economy, strong corporate earnings and worries over rising inflation have applied upward pressure while slowing home sales, concerns about the global economy, and other international “drama”—such as the recent currency problem in Turkey—have applied downward pressure on the rates.

Going forward, two opposing factors that may influence interest rates in the near future are the Federal Reserve’s pronouncement that we’ll see one or two more hikes to the key short-term interest rate this year and the possible economic ramifications of the current tension surrounding tariffs and trade.

As always, to get the best information on interest rate trends, talk to your mortgage professional. ∆

 

© Left Field Media