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Posts Tagged: Home Ownership

Home Equity and Retirement

One of the best things about owning your own home is that, simply by buying it, you are investing in your future. Unlike renting, every time you make a payment on your mortgage, you are building more equity and own more of your home.

This makes homeownership a potentially important element of retirement planning. With Social Security in some hot water and people living longer, the need to save up for your post-retirement life is paramount. If you have done the math and need extra income in your golden years to bridge the gap between your savings and your expenses, then your home can be a viable and valuable asset to maintain a high quality of life.

But how exactly do you access the equity in your home in retirement? A home offers possible value to retirees in several distinct ways:

Sell your home 
Maybe the home you bought was perfect for a growing family, but now that the kids have found their own places, it may be too big. Heating, cooling and powering a larger home can be costly. Not to mention that multistory homes may pose difficulties for older residents with mobility issues. One of the simplest ways to generate extra income is to sell your home and downsize to something that matches your current lifestyle. 

How Home Equity and Retirement Planning Go Hand in Hand

One of the best things about owning your own home is that, simply by buying it, you are investing in your future. Unlike renting, every time you make a payment on your mortgage, you are building more equity and own more of your home. 

This makes homeownership a potentially important element of retirement planning. With Social Security in some hot water and people living longer, the need to save up for your post-retirement life is paramount. This is on top of a troubling new finding by the Employee Benefit Research Institute that claims that the Baby Boomer generation and their children remain "woefully unprepared for retirement."

"Homeownership is an important element of retirement planning."

A leg up in retirement
Going into their golden years, many Americans struggle to build up a sufficient reserve of funds. By being able to turn the equity in your home into cash you can live on if you need it, homeowners have a serious leg up when it comes to retirement savings

"That is really going to improve a retiree's cash flow, especially for people relying on withdrawals from their savings because they don't have a pension," Jamie Hopkins, co-director of the retirement income program at the American College of Financial Services, told Bankrate.

Millennials are Discouraged by the Homeownership Process, but There is No Need to Hide.

On April 18, 2016, Business Insider reported that rental prices in major markets, including San Francisco, had finally begun to drop. But let’s face it—the sub $1,000 one-bedroom apartment in major markets is now merely a story for millennials to tell their grandkids.

For those thinking about becoming a first-time homeowner, the long-term benefits of home ownership make more sense on paper than renting. However, to a renter who already has a full-time job to worry about, the idea of mailing a check once each month can sound far less stressful than worrying about a down payment, private mortgage insurance, and closing costs, among many, many other things.

One constant formula used in the housing industry states that the less daunting home ownership feels, the more likely renters will become homeowners. Even amid increased regulation, private lenders have been working for years to make home ownership comprehensible, simplifying the process with state-by-state training and testing requirements that ensure loan officers are able to handle a wide index of scenarios. With top lenders, it is even common for borrowers to have their loan officer’s cell phone number.

Although borrowers who take advantage of these highly skilled loan officers are never alone in the home buying process, it is critical for first-time homeowners to go into this process with an understanding of some of the unique aspects and costs that go into a mortgage. Here are the most important ones:

The importance of an appraisal in the homebuying process

No matter what side of the homebuying process you are coming from — buyer or seller — the home appraisal is an essential step. Even if a buyer has been pre-approved for the full value of a home that they love, getting it inspected can have an impact on the deal in many serious ways.

A home appraisal is primarily important in establishing the true value of a home. Just because a seller is looking for $300,000 doesn't mean a home isn't actually worth $200,000. An unfavorable appraisal can stop a sale dead in its tracks.

"A home appraisal is primarily important in establishing the true value of a home."

To determine the true value, an independent appraiser will come in and inspect the home thoroughly. This includes investigating the condition, the square footage, location and any additions or renovations. These appraisers are not interested in ensuring the home comes in at a high valuation — they just want the valuation to be accurate.

What is a home improvement loan?

A home is one of the biggest investment you can make in a lifetime. This refers not just to the cost of the property and land itself, but also to maintenance costs. To maintain or build a home's value, homeowners will be required to spend on renovations and upkeep.

But what if you do not have the excess income to spend on a major renovation? That's where home improvement loans can help. 

"To maintain or build a home's value, homeowners will be required to spend on renovations and upkeep.

 

What is a home improvement loan?

 

A home improvement loan is, as the name implies, a loan made for the express purpose of allowing a borrower to upgrade their home. Typically, you are borrowing against the equity currently in your home, thus have a similar process of approvals as a mortgage refinance

They are different from other loans like a home equity line of credit (HELOC), these loans are not open-ended and typically are for a defined period of time shorter than a mortgage — between five and ten years.

The struggle of student loan debt, and what can be done

Touching nearly every American at every level is the crisis that is student loan debt. As college education has become an important requirement for most well-paying jobs, the cost of higher education has grown dramatically over the last several decades. Americans now owe a total of nearly $1.3 trillion on student loans — with roughly seven million borrowers currently in default, and millions more behind on their payments. 

Borrowers with high amounts of student loan debt have been reported to be reluctant to purchase homes, leading to renting longer than may be financially prudent. And the problem isn't simply one for young people fresh out of college: The amount of student loan debt reported by people over age 60 has risen a whopping 850 percent over the last decade, hitting a peak of $43 billion. This has been aided by a tough economy and relatively low earnings for many Americans. 

Tips for preventing frozen water pipes

As temperatures start falling, your home runs the risk of pipes freezing. A frozen water pipe is no small inconvenience: besides reducing healthy water flow to a trickle, as the water cools and expends, pipes run the risk of bursting. A burst pipe can cost you serious money when it comes fixing the pipe and the water damage.

To avoid the expensive disaster caused by frozen pipes, follow these simple tips:

Before winter

Drain all outdoor and underinsulated pipes completely and turn off water flow from the main source. Do not fill the pipes with antifreeze as it is poisonous and could leak into your water supply.

For indoor pipes in unheated areas, wrap pipes with heat cables, heat tape or pipe sleeves to preserve warmth. A heater lamp can also work to keep pipes flowing.

The importance of flood insurance

For homeowners and even aspiring homebuyers, having insurance for a property is essential. But one incredibly useful form of insurance is often ignored until it's too late and the damage is done: flood insurance.

It is important to consider flood insurance because your typical homeowners or home insurance policy rarely includes flood coverage under their standard policy. Many consumers are not aware of this face, as shown by a recent study conducted by the National Association of Insurance Commissioners which revealed that 33 percent of homeowners mistakenly believe that flood damages are covered under a standard homeowners policy. 

Even in areas not known for flooding, the risk is palpable: floods are the number one natural disaster, in terms of frequency, in North America. Making matters worse is the fact that only a tiny fraction of homes are covered in case of flood. 

Simple ways to winterize your home

As the cold weather starts rolling in across the country, it becomes increasingly important to prepare your home for winter. Not only will it save you money on your utility bills, but it can also help avoid preventable weather damage associated with the season.

Here are a few simple and effective tips for winterizing your home:

Turn off water to outdoor spouts

Turn off water to any outdoor areas via the main supply point, then drain any excess water that may be lingering in pipes. This will keep pipes from freezing and potentially bursting as the water expands.