themarycoxteam.wordpress.com - Real Estate Tips

6 Reasons for Rentals

Rental homes have several distinct advantages compared to alternative investments. These advantages coupled with the opportunity for a higher yield make it a clear choice for some investors.

1. Most investments must be paid for in cash. Stocks can be purchased with 50% cash but if the value goes down, more cash has to be used to keep the margin at 50%. Rentals can readily be financed with only 20-25% down payment.
2. Most loans made for business or investment purposes are at a floating interest rate compared to the prevalent fixed-rate mortgage on non-owner occupied real estate.
3. Terms for investment loans if possible are generally six months to a year with a possible renewal but real estate commonly has long term loans up to 30 years.
4. Real estate…

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Your Best Investment

According to a Federal Reserve report on Consumer Finances, homeowners’ net worth is 36 times greater than that of renters. Building on that study, the National Association of REALTORS® believes that by the end of 2015, the factor will grow to 41 times greater.

There can be several factors that contribute to this disparity but an important one is the forced savings that is achieved due to an amortized mortgage. A portion of the payment goes to the reduction of the principal balance of the mortgage which increases equity in the home.

Appreciation is also a major contributor to homeowners’ equity. Homes, in most areas, have consistently increased in value over the long term and during the past four years have experienced solid growth. Many economists…

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Finding the Best Mortgage

As rates are inching up but still very affordable, buyers should remember that there is an alternative to a fixed rate mortgage that can provide the lowest cost of housing for the homeowners who understand the parameters. 

A $300,000 fixed-rate mortgage at 4% has a principal and interest payment of $1,432.25 per month for the entire 30 year term. A 5/1 adjustable mortgage at 3% has a $167.43 lower payment for the first five years and then, can adjust, up or down, based on a predetermined index.

Another interesting fact is that the unpaid balance on the ARM at the end of the first five years is $4,624 lower than the fixed-rate mortgage. The total savings in the first five years on the ARM is $14,669.00.

Adjustable rate mortgages are not the right…

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Cut Mortgage Insurance

Making additional payments toward the principal of your mortgage will do three things for the homeowner: save interest, build equity and shorten the term on fixed rate mortgages. 

These things should be beneficial enough to justify the extra payments but another huge advantage is available to those who have private mortgage insurance on their loan. Mortgage insurance rates vary but can range from seventy-five to two hundred dollars a month on a $200,000 mortgage.

Lenders are required to automatically terminate mortgage insurance when the principal balance reaches 78% of the original value of the property. It is important for homeowners to monitor their balance because sometimes lenders may inadvertently fail to terminate the coverage.

Mortgage…

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Lower the Rate & Deduct the Interest

A home can easily be a person’s largest personal asset and it can be a powerful tool to increase financial stability also.

Since most mortgages are amortizing, the loan becomes a forced savings account that reduces the unpaid balance with each payment. The equity could be used to improve a homeowner’s financial position involving other loans.

While every homeowner recognizes that they can deduct the interest paid on their mortgage, it is surprising how many don’t know that they can write-off the interest on up to $100,000 of home equity debt assuming there is sufficient equity in the home.

The real advantage to a homeowner is that the money borrowed can be used for any purpose and the interest is still deductible. Homeowners could payoff…

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More Home for a Lower Cost of Housing

What if you could live in a larger and possibly newer home for less than you are currently? Would you consider moving? Do you want to hear more?

Interest rates, while they’re expected to go up, actually took a small dip and are still hovering at the 4% or below mark for a 30 year mortgage and almost one percent less for a 15 year term.

Let’s assume that you have a $225,000 mortgage currently at 6% which has a principal and interest payment of $1,348.99. With a 4% rate, you could have a $282,561 mortgage with the same payment. A $57,000 more expensive home could help you get what you need most such as more square footage or a different location or a newer home.

If you’re going to be making that payment for years to come, why not allow lower…

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Get Ready for College

One of the important things as a parent is to plan for their children’s education. Let’s look at two different approaches: a savings account or investing in rental real estate.

Assuming your child is five years old and you start putting $250 a month in a savings account earning 2%, in 13 years you’d have $44,497.41 to pay for their college. Anticipating that isn’t going to be enough, you’d have to save $500 a month to end up with $88,995.

Another way would be to make a lump sum contribution of $20,000 today in a mutual fund earning 5% that would be worth $37,713 in 13 years. You’d have to make a $47,196 initial contribution to end up with the same $88,995.

An alternative to savings would be to invest in a $100,000 home in a good area. Assuming a…

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Wait a Year…It Won’t Matter?

There is a frequently quoted expression “more money has been lost from indecision than was ever lost from making a bad decision.” Regardless of the extent of its accuracy, most people can recall when procrastination has cost them money. 

There are markets so short of inventory that buyers have become frustrated after losing bids for several homes and have decided to wait until more homes come on the market. In the meantime, the shortage of homes is driving the prices up more by the month.

There are buyers who can’t find what they want for the price they want to pay and think that waiting will somehow change things. In some cases, what they want just keeps moving farther and farther away from them.

The other dynamic in play is, of course, the…

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It’s Hard to Imagine

With mortgage rates below 5% since 2009, you’d think any homeowner who should refinance would have already. However, it is estimated, there are approximately 6.5 million borrowers who would benefit with significant monthly savings by refinancing. 

Rodney Anderson of Supreme Lending, on his weekly radio program, described a recent pipeline meeting where they reviewed every pending mortgage application his company was processing. They had seven refinancing applicants whose current mortgage was over 9% and twelve with a rate between 7% and 9%.

“Some 550,000 American homeowners with a mortgage could save $500 or more each month by refinancing at today’s rates. Over three million could save at least $200 per month.” said Ben Graboske, CTO with Black…

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What’s Stopping You?

The majority of tenants say they’d like to own a home but continue to pay rent and missing out on financial and emotional advantages. There seems to still be a lot of misinformation in the marketplace. 

There are a number of programs for low or no down payment options. Veterans can get into a home with no down payment or closing costs. In qualifying areas, USDA has zero down payment programs. FHA requires 3.5% down payment and there are conventional programs for as little as 3% and 5% down.

People with credit issues need expert opinions about their specific situation. Borrowers with bankruptcies or foreclosures may be eligible to purchase again after certain periods of time. There are short-term fixes for some types of credit problems. There is an…

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