mortgages http://www.wisebread.com/taxonomy/term/7866/all en-US Make These 5 Money Moves Before Applying for a Mortgage http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/make-these-5-money-moves-before-applying-for-a-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-506317138 (1).jpg" alt="Making money moves before applying for a mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Each year, millions of people apply for a mortgage and purchase a home. This, however, shouldn't convince you that getting a home loan is a piece of cake. In reality, a mortgage is one of the hardest loans to qualify for. But if you make these money moves before meeting with a lender, you can swing the odds in your favor.</p> <h2>1. Pay off debt</h2> <p>Getting approved for a mortgage doesn't require zero debt, but the more you currently owe, the harder it can be to qualify for a desired amount.</p> <p>To avoid any roadblocks along the way, come up with a clearsighted plan to pay off as much of your debt as possible, especially <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">credit card debt</a>. A high <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; which is your credit card balance compared to your credit limit &mdash; can lower your credit score and make it difficult to qualify for a mortgage or trigger a higher mortgage interest rate.</p> <p>As a personal goal, keep credit card balances below 30 percent of your credit limit. To attain this, stop using cards and pay more than your minimums every month. Also, ask creditors to lower your interest rate. If you can pay less interest, you'll reduce the principal faster.</p> <p>Take it a step further and make higher monthly payments on other types of debts as well, such as a car loan, student loan, etc. This is to your advantage because the less expenses you have, the easier it'll be to adjust to a mortgage payment.</p> <h2>2. Determine what you're comfortable spending</h2> <p>Your mortgage lender decides an affordable amount based on your income and existing debt. Still, it helps to have an idea of what <em>you </em>are comfortable spending on a house before meeting with a bank. Typically, banks allow borrowers to spend between 28 percent and 31 percent of their gross monthly income on a mortgage payment.</p> <p>Do the math and calculate 31 percent of your gross monthly income, and then review your budget to see if you can realistically afford this amount on a monthly basis. After determining a comfortable monthly payment, use a mortgage calculator to estimate the maximum you can borrow based on the desired payment range.</p> <h2>3. Devise a savings plan</h2> <p>Qualifying for a mortgage entails money &mdash; lots of it. Not just money for the monthly payment, but also <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=internal" target="_blank">cash for a down payment</a> (between 3.5 percent and 20 percent of the home's value), plus there's the cost of closing. These fees can run up to 5 percent of the purchase price.</p> <p>Even if you can afford a house payment at a certain price point, you'll only qualify for a particular amount if you have enough in reserves for mortgage-related fees. Let's say you want to purchase a $300,000 house. Your income may show an ability to afford the monthly payment. But if you only have $7,500 in savings for a down payment, instead of the required $10,500 (assuming you get an FHA home loan), you can't purchase the home. You then have two options &mdash; purchase a cheaper home, or postpone buying until you save additional cash.</p> <p>Once you have an idea of how much you'll spend on a property, devise a plan to save for your down payment and closing costs. Based on your amount of disposable income each month and your desired time frame for purchasing a property, decide how much to save. Keep this money in a designated high-yield savings account.</p> <h2>4. Pay your bills on time</h2> <p>There are no hard rules regarding how many late payments a lender allows within 12 or 24 months before applying for a home loan. If there are late payments on your recent credit history, it's up to your lender to calculate the risk level and determine whether you're creditworthy. To do this, some lenders request an explanation to assess whether lateness was due to irresponsibility or circumstances beyond a borrower's control. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>Either way, late payments in your recent history can result in a higher interest rate, which means you'll pay more for your home loan in the long run. Therefore, aim to pay all your bills on time. If you often forget due dates, set up recurring or automatic monthly payments.</p> <h2>5. Shop around for lenders</h2> <p>According to the Consumer Finance Protection Bureau, 47 percent of homebuyers don't compare mortgage lenders when applying for a home loan. What's even more surprising, 77 percent apply to only one lender at all. It might seem convenient to get this step out of the way ASAP, but it just doesn't make smart financial sense.</p> <p>When you're ready to apply for a home loan, you need to do research and shop around. Don't just settle for the first mortgage lender who approves you. You might be eager to get the process underway, but be patient. The first person to give you the green light might not be offering the lowest interest rates (or charging the lowest fees), which could mean the difference between thousands of dollars. Maybe they're just not the right fit for you, or they don't take the time to really earn your business. You won't know unless you compare, and that step can save you a lot of stress (and money) down the line. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows?ref=seealso" target="_blank">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-you-shouldnt-buy-a-house-yet">5 Reasons You Shouldn&#039;t Buy a House (Yet)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home credit history credit score debt repayment down payments home loans mortgages saving money tax deductions Mon, 20 Mar 2017 10:30:21 +0000 Mikey Rox 1908934 at http://www.wisebread.com 5 Common Money Moves That Can Get You Into Legal Trouble http://www.wisebread.com/5-common-money-moves-that-can-get-you-into-legal-trouble <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-common-money-moves-that-can-get-you-into-legal-trouble" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-498121804.jpg" alt="Woman making common money moves that can get her into trouble" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>They seem like minor fibs: We forge our spouse's name on the back of a check. We inflate our monthly income when applying for that rewards credit card. We run a small business from home, and might fib about the size of our office in hopes of getting a tax break from the IRS.</p> <p>These may all seem like harmless white lies. But these seemingly innocent money moves &mdash; and others like them &mdash; can get you into serious legal trouble.</p> <h2>1. Signing Someone Else's Name on a Check</h2> <p>You want to deposit a check into your savings account. The only problem is that check is made out to your spouse, and they're not around. It seems like an easy matter to scribble your spouse's signature on the back of the check and then deposit the money into your joint savings account.</p> <p>But resist the temptation. It is illegal to forge someone's name on a check, even if that person asks you to do it.</p> <p>The same holds true if you want to, say, pay a bill on behalf of an elderly parent. In some cases, if you control this parent's checkbook, it might seem easier to forge your parent's name on the check instead of obtaining your parent's actual signature. This, too, is illegal, even if your motives for forging the signature are good.</p> <p>The odds are high that neither of these forgeries will ever be discovered or reported to the police, of course. But why take the chance?</p> <h2>2. Writing a Bad Check &mdash; On Purpose</h2> <p>It happens sometimes: You drain your bank account while you still have bills to pay. Your bank might have overdraft protection if you unknowingly write a check for more than your balance. But if you write a bad check on purpose, knowing that you don't have enough funds in your account to cover it, that is illegal.</p> <p>If you're caught, you could face a fine and maybe even jail time, depending on the severity of your crime. Even if you're not charged with a criminal act, your bank might charge you a hefty penalty for writing a bad check. And the shops that unknowingly took your bad check may no longer accept your business.</p> <h2>3. Lying on a Credit Card Application</h2> <p>That credit card might come with a tempting <a href="http://www.wisebread.com/5-best-credit-cards-that-offer-bonus-cash-for-sign-up?ref=internal" target="_blank">sign-up bonus</a> or <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">generous rewards program</a>. Dreaming of all the ways you can put those rewards to use, you decide to fib a bit on your application, in hopes of increasing your odds of qualifying for the card.</p> <p>Guess what? That's fraud. And it's illegal.</p> <p>You might be tempted to inflate your monthly income when applying for a particularly appealing credit card. But resist this temptation. Credit card companies only approve consumers who meet certain financial requirements. If you lie about yours, your credit card provider can pursue legal action against you, including fines and possible jail time.</p> <p>Sure, the odds are low that you'll face these penalties for lying on your credit card application. But avoid all of the risk by being honest about your age, income, and employment when applying.</p> <h2>4. Lying About Your Home Office</h2> <p>One of the benefits of running a small business from your home is you can take advantage of the home office deduction, which can reduce the taxes you pay each year.</p> <p>There's a catch, though: You must use your home office &quot;exclusively and regularly&quot; as your principal place of business. And you can only deduct the exact areas that you use for business.</p> <p>This means that if you use your bedroom as your office, you can't claim its entire area as a deduction, just the corner where your desk and computer sit. If you lie about the size of your home office, and the IRS finds out, you'll be hit with penalties and a higher tax bill.</p> <h2>5. Lying About Who'll Be Living in That Home You're Buying</h2> <p>It's not easy to lie on a mortgage application. Lenders will request copies of your bank statements, paycheck stubs, and tax returns to make sure that you're honest about how much money you make.</p> <p>But there is one lie that's not easy for mortgage lenders to discover: A fib about who will actually live in the home.</p> <p>You might be buying a home with the intention of renting it out as an income-producing property. That's fine, but you have to be honest with lenders about this. That's because lenders typically charge higher interest rates to buyers who are renting out homes instead of living in them. They also might require a higher down payment. By claiming that you will live in the home when you don't plan to, you might be able to land a lower interest rate.</p> <p>This is mortgage fraud, and it is highly illegal. If you're found guilty of committing this crime, you can face hefty fines and several years in jail.</p> <p>Don't take the risk. Instead, be honest and pay those higher fees if necessary.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-common-money-moves-that-can-get-you-into-legal-trouble">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-we-are-likely-to-lie-for-money">6 Times We Are Likely to Lie for Money</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-simple-financial-upgrades-you-can-make-during-breakfast">6 Simple Financial Upgrades You Can Make During Breakfast</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-you-will-always-be-thankful-for">7 Money Moves You Will Always Be Thankful For</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-year-end-financial-moves-you-must-make-now">10 Year-End Financial Moves You Must Make Now</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/will-45-mortgage-rates-jumpstart-the-housing-market">Will 4.5% mortgage rates jumpstart the housing market?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance applications fibs fines forgery getting in trouble illegal lying money moves mortgages taxes white lies Thu, 16 Mar 2017 11:00:07 +0000 Dan Rafter 1906389 at http://www.wisebread.com 10 Surprising Ways Real Estate Cuts Your Taxes http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-surprising-ways-real-estate-cuts-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-121277252.jpg" alt="Learning surprising ways real estate cuts taxes" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.</p> <h2>1. Mortgage Interest<strong> </strong></h2> <p>This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).</p> <p>You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.</p> <h2>2. Mortgage Interest Credit</h2> <p>Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!</p> <h2>3. Points</h2> <p>Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.</p> <p>Page 6 of <a href="https://www.irs.gov/pub/irs-pdf/p936.pdf" target="_blank">IRS Publication, 936 Home Mortgage Interest Deduction</a> provides a useful diagram to determine whether or not your points are fully deductible for this year.</p> <h2>4. Real Estate Taxes</h2> <p>You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.</p> <h2>5. Mortgage Insurance Premiums</h2> <p>You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=seealso" target="_blank">What Is Private Mortgage Insurance, Anyway?</a>)</p> <p>In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.</p> <h2>6. Capital Gains Exemption</h2> <p>Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.</p> <p>In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult <a href="https://www.irs.gov/publications/p523/index.html" target="_blank">Publication 523, Selling Your Home</a> for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!</p> <h2>7. Investment Interest</h2> <p>Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.</p> <p>Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.</p> <h2>8. Expenses for Business Use of Homes</h2> <p>Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.</p> <p>If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.</p> <h2>9. Tax Credits for &quot;Green&quot; Improvements</h2> <p>To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:</p> <ul> <li>Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.<br /> &nbsp;</li> <li>Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.</li> </ul> <p>To learn about other tax credit opportunities from energy efficient home improvements, visit&nbsp;<a href="http://www.energystar.gov" target="_blank">EnergyStar.gov</a>.</p> <h2>10. Deductions From Rental Income Activities</h2> <p>Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:</p> <ul> <li>Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;<br /> &nbsp;</li> <li>Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;<br /> &nbsp;</li> <li>Depreciation expenses for the wear and tear of rental property;<br /> &nbsp;</li> <li>Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;<br /> &nbsp;</li> <li>Legal and professional fees directly related to operating expenses; and<br /> &nbsp;</li> <li>Prepaid insurance premiums.</li> </ul> <p>To learn the full list of rental expenses and guidelines for deduction, consult <a href="https://www.irs.gov/publications/p527/ch01.html#en_US_2016_publink1000218979" target="_blank">Publication 527, Residential Rental Property</a>. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-sneaky-home-money-pits-that-sap-your-savings">9 Sneaky Home Money Pits That Sap Your Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes business owners capital gains credits deductions energy efficient homeowners interest landlords mortgages rental properties Fri, 24 Feb 2017 10:00:13 +0000 Damian Davila 1897585 at http://www.wisebread.com Yes, You Need Home Title Insurance — Here's Why http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/yes-you-need-home-title-insurance-heres-why" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-470522924.jpg" alt="Man learning why he needs home title insurance" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The closing costs on a typical mortgage loan can seem overwhelming. According to Zillow, the <a href="http://www.zillow.com/mortgage-learning/closing-costs/" target="_blank">closing costs</a> for a $150,000 home can range from $3,000 to $7,500, with an average falling around $3,700.</p> <p>So when you discover that you'll also have to pay for something called title insurance when closing your loan, you might wonder if this fee is necessary, or if title insurance is something you can skip.</p> <p>Here's the short answer to those questions: Yes, title insurance matters. And no, mortgage lenders won't let you skip it.</p> <h2>What Title Insurance Does</h2> <p>To sum up, title insurance protects you from clerical errors, mistakes in property records, or unpaid taxes involving the home you are purchasing.</p> <p>Maybe the past owner of the home hasn't paid property taxes in years. If you buy the home, the government agencies levying those taxes will come after <em>you</em> to pay them &mdash; unless you have title insurance.</p> <p>Or, maybe a past seller bought the home with a sister. Maybe these two siblings had a falling out, and the brother sold the home without telling his sister. That spurned relative could come after you for the profits she says she is owed from the sale &mdash; again, unless you have title insurance protecting you.</p> <p>Title insurance is like most other forms of insurance: You pay for it in the hopes that you'll never need to use it.</p> <h2>What Title Insurance Doesn't Do</h2> <p>Title insurance covers the window of time before your ownership of the home, protecting you from certain claims and legal fees that were beyond your control. Even though it extends backward through time indefinitely, coverage ceases on the date you take ownership. If you decide not to pay property taxes once you're the official homeowner? That's on you.</p> <h2>A Two-Part Transaction</h2> <p>Title insurance will be included as part of your third-party closing fees, charges levied by companies that work with your mortgage lender to originate your home loan.</p> <p>There are actually two parts to title insurance. First, the title company providing your insurance will search all the property records associated with the home you are buying to make sure there aren't any unpaid taxes, long-lost heirs, or charges of fraud associated with the property. This is known as the title search.</p> <p>Once the search is complete, and the title insurer is confident that the seller has legal ownership and the right to sell the home, it will create two title policies. The lender's title policy protects your lender from anyone claiming rights against your property. It also reimburses your lender if you lose your house to a title claim and are no longer making your mortgage payment. All lenders will require that you pay for a lender's title insurance policy.</p> <p>The second part of title insurance is the part that actually protects you: the owner's policy. This policy protects you from the above mentioned unreleased liens, people who might claim ownership of your home, or public record errors that were missed during the title search. Most lenders will also require that you purchase an owner's policy, too.</p> <h2>How Much Will It Cost?</h2> <p>Title insurance is not cheap. In fact, it ranks as one of the biggest fees buyers will pay when closing a mortgage loan.</p> <p>The cost of this insurance does vary quite a bit, usually depending on where you live. But you can generally expect to pay a one-time premium between $1,000 to $3,000 for title insurance.</p> <p>Most lenders will select a title insurance company for you. But you aren't required to work with that company. You can shop around for lower rates. This is usually a smart move: You can often shave hundreds off the cost of title insurance by shopping around.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-to-finance-a-tiny-house">3 Ways to Finance a Tiny House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules">2 Things You Must Know About the New Mortgage Rules</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance Real Estate and Housing closing costs fees homeownership mortgages property liens property taxes protection public records title insurance Fri, 03 Feb 2017 10:30:32 +0000 Dan Rafter 1885598 at http://www.wisebread.com Why Your Credit Score Matters in Retirement http://www.wisebread.com/why-your-credit-score-matters-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-credit-score-matters-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_car_108348263.jpg" alt="Couple learning why credit score matters in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've left the working world and are ready to enjoy your retirement years. So, you might be forgiven for thinking that your days of fretting over your FICO credit score are over.</p> <p>Guess what? They're not. Your three-digit credit score matters even in your retirement.</p> <p>Lenders of all kinds, not to mention credit card providers, rely on your FICO credit score to determine how well you've managed your credit in the past. Having a low score can hurt you financially, even after you've left the days of commuting to work behind you.</p> <h2>Why Scores Matter</h2> <p>Your FICO credit score &mdash; you have three, one each maintained by the credit bureaus of Experian, Equifax, and TransUnion &mdash; is a key number throughout your adult life. Lenders rely on these scores to determine if you can qualify for loans. And if your score is low, even if you do qualify, you'll pay higher interest rates.</p> <p>Generally, lenders consider a FICO credit score of 740 or higher to be an excellent one. Scores under 640 are generally considered weak by lenders, and will leave you with higher interest rates on the money you borrow.</p> <p>As you make your way through adulthood, lenders will check your scores as you apply for auto loans, mortgages, or credit cards.</p> <p>When you retire, the odds are high that you will no longer be applying for mortgage loans. However, this doesn't mean that credit scores will no longer play a key role in your financial life.</p> <h2>The Best Credit Cards</h2> <p>If you want to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal" target="_blank">qualify for the best credit cards</a>, including ones with the <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">most generous rewards programs</a>, you'll need a high FICO score. Financial institutions only pass out their best credit cards to those customers who've proven that they have a history of paying their bills on time.</p> <p>Having a high credit score is how you'll prove to banks that you are financially responsible. And if you want to qualify for the best credit scores during your retirement, you'll take steps to make sure that your credit score is strong in your 60s, 70s, 80s, and beyond.</p> <h2>A New Car</h2> <p>Maybe you plan to buy that dream car after retirement. If you can't pay for it in cash, you'll need an auto loan. And if you want to qualify for an auto loan with the lowest possible interest rate, you'll need a strong FICO credit score.</p> <p>Auto lenders will check your credit score when you apply for financing. So make sure that your score doesn't take a dip after retirement.</p> <h2>Auto Insurance Rates</h2> <p>If you buy a new car, you'll need auto insurance, too. Guess what? Auto insurers rely on a variation of your credit score to help set their rates. Again, you'll want the highest possible credit score if you expect to qualify for the most affordable auto insurance.</p> <p>Auto insurers use something called a credit-based insurance score to set rates. If this score is strong &mdash; and your driving history is good &mdash; you'll usually qualify for lower insurance rates. Your credit-based insurance score doesn't factor in your job or income. But it will rise if you pay bills such as your credit card payments and mortgage on time every month. It will fall if you miss payments, make payments 30 days or more late, have too much debt, or have accounts that have been sent to collections.</p> <h2>Refinancing to a Lower Monthly Payment</h2> <p>The goal is to enter retirement without having a monthly mortgage payment. That doesn't always happen, though. And if you are still paying off a mortgage loan when you enter your after-work years, you might want to someday refinance that home loan to one with a lower interest rate. Lowering your rate will give you a lower monthly payment. That extra cash each month could be important once you're living on a fixed income.</p> <p>To qualify for a refinance, and for the lowest possible interest rate to make such a move financially worthwhile, you'll again need a high credit score. If your FICO credit score is 740 or higher, the odds are good that you'll qualify for an interest rate low enough to make refinancing a smart financial decision.</p> <p>The lesson here is obvious: You can't put worrying about credit scores behind you just because you've entered retirement. The best move is to continue taking the steps that help guarantee a strong credit score &mdash; paying your bills on time and keeping your credit card debt low &mdash; even after you've left the working world.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-your-credit-score-matters-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-the-new-credit-card-formula-means-for-your-wallet">What the New Credit Card Formula Means for Your Wallet</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement car insurance credit history credit score fico insurance rates mortgages new car refinancing Mon, 30 Jan 2017 10:00:08 +0000 Dan Rafter 1870059 at http://www.wisebread.com FICO or FAKO: Are Free Credit Scores From Credit Cards the Real Thing? http://www.wisebread.com/fico-or-fako-are-free-credit-scores-from-credit-cards-the-real-thing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/fico-or-fako-are-free-credit-scores-from-credit-cards-the-real-thing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_reading_paperwork_471708004.jpg" alt="Woman learning if free credit scores are a real thing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Building up and maintaining a good credit score is a great step toward achieving your financial goals. An <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal" target="_blank">excellent credit score</a> can open doors to better financing for your dream home or a more reliable set of wheels. When used properly, a credit card can help you start off, continue to improve, or even <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=internal" target="_blank">build back your credit history</a>. Your on-time monthly credit card payments count as 35% of your FICO credit score, after all.</p> <p>The traditional way to find out your credit score involves contacting one or all of the credit bureaus and paying for their service to provide your score. Thanks to FICO's Open Access initiative in November 2013, however, credit card users may be able to access their scores free, every month on their statements. More than 50 lenders, including American Express, Bank of America, Chase, and Capital One, <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal" target="_blank">offer their customers free credit scores</a>.</p> <p>It's important to note, though, that the score you get on your statements may not reflect the actual score your mortgage lender or car dealership is looking at when considering you for a loan.</p> <h2>Case Study of a Free Credit Score</h2> <p>I have accumulated a few credit cards over the years, and some of those cards offer me a free credit score. I've looked at the credit scores indicated on my latest statements from each of these cards, and the scores vary by up to 59 points.</p> <p>So, what's going on? Which of these credit scores can I trust?</p> <p>The problem is that these credit cards are all using different factors and ways to calculate the score. Some of these factors include:</p> <ul> <li>The date my credit information was pulled;<br /> &nbsp;</li> <li>The credit reporting agency they use; and<br /> &nbsp;</li> <li>The type of credit score they are reporting.</li> </ul> <p>Given these different factors, you can clearly see that not all free credit scores are alike. It's important to know what credit data you're getting to correctly evaluate your financial health.</p> <h2>3 Criteria to Analyze Your Free Credit Score</h2> <p>Based on these findings, let's review key questions that you should ask yourself about your free credit score from an existing card, or one from a card that you're planning to open.</p> <h3>1. Is It a FICO Score?</h3> <p>Not all credit cards offer the same free credit scores. Capital One offers free TransUnion VantageScore 3.0 scores to all of its cardholders and, since March 2016, to non-customers through its CreditWise credit monitoring service. CreditWise is available as a smartphone app and allows you to sign up for a new account within the app. (See also: <a href="http://www.wisebread.com/7-apps-that-monitor-your-credit-for-you?ref=seealso" target="_blank">7 Apps That Monitor Your Credit for You</a>)</p> <p>Different credit cards use different algorithms to calculate scores. Generally, a FICO credit score provides you a closer look to what your lenders would actually get when pulling your credit score on their own. Credit scores other than a FICO are considered &quot;equivalency scores&quot; or &quot;educational scores,&quot; and are often referred to as &quot;FAKO&quot; scores. While a FAKO score may give you a general idea of where you stand with lenders, it may not be accurate enough to tell you whether or not you'll get approved for a loan.</p> <h3>2. If It's a FICO Score, Which One Is It?</h3> <p>FICO has been in the credit score business for over 25 years and it has developed more than 50 types of credit scores! Most credit card companies offering a free FICO score provide the <a href="http://myfico.7eer.net/c/27771/178841/2185?u=http%3A%2F%2Fwww.myfico.com%2Fcredit-education%2Ffico-score-8-and-multiple-versions-of-fico-scores%2F" target="_blank">FICO Score 8</a>. The key differentiating factors of a FICO Score 8 are that this score:</p> <ul> <li>Gives a bigger weight to cards that have a balance close to the cards' limit;<br /> &nbsp;</li> <li>Is more forgiving than other FICO score versions to one-time late payments of at least 30 days;<br /> &nbsp;</li> <li>Provides a bigger penalty for numerous late payments;<br /> &nbsp;</li> <li>Reduces &quot;tradeline renting&quot; benefit (a credit repair practice in which individuals with poor credit are added as an authorized user to a stronger credit account); and<br /> &nbsp;</li> <li>Ignores collection accounts with an original balance under $100.</li> </ul> <h3>3. What FICO Score Will Your Lender Use?</h3> <p>Depending on their industry and preferred credit reporting bureau, lenders can use different scores. Here are some <a href="http://myfico.7eer.net/c/27771/178841/2185?u=http%3A%2F%2Fwww.myfico.com%2Fcredit-education%2Fcredit-score-versions%2F" target="_blank">examples provided by FICO</a>:</p> <p>&nbsp;<img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/Screen%20Shot%202017-01-07%20at%202.47.52%20AM.png" width="605" height="277" alt="" /></p> <p>According to FICO, the FICO Score 8 provided for free by most credit card companies is most useful when applying for a credit card. For other purposes, your FICO Score 8 may not appropriately predict your likelihood of not paying as agreed in the future of a specific credit obligation.</p> <h2>The Bottom Line: Should You Sign Up for a Free Credit Score From Your Credit Card?</h2> <p>Yes, you should definitely sign up for that free credit score from your financial institution as long as it's a FICO score. The main reason is that the lowest price offering from FICO (9 FICO scores, including FICO Score 8, and Equifax credit report monitoring) is <a href="http://myfico.7eer.net/c/27771/218633/2185" target="_blank">$19.95 per month</a> or $219 per year. If your current card doesn't offer you a credit score or you're looking to take advantage of a balance transfer with a 0% promotional APR, here are Wise Bread's recommendations on <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal" target="_blank">best credit cards that offer credit scores</a>.</p> <p>Having access to your free FICO Score 8 will allow you to save money on credit monitoring fees until you get closer to the acceptable range that your lender is looking for. Once you're closer to your target score, find out from your lender what score they are using and consider signing up for the <a href="http://myfico.7eer.net/c/27771/93942/2185" target="_blank">myFICO score tracking service</a> that gives you access to that specific score (ask for score name and company that issues it). While this option may cost up to $29.95 per month for a couple of months, it will allow you to have a more accurate picture than your FICO Score 8 and prevent a hard pull from your lender. Remember that each hard pull on your credit history slightly brings down your credit score, so it's a good practice to minimize hard pulls.</p> <p>Of course, make sure to read the fine print on the service agreement with myFICO so you don't miss the deadline to prevent a charge for the next month.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/fico-or-fako-are-free-credit-scores-from-credit-cards-the-real-thing">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Is an FHA Home Loan Right for You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores">The 5 Best Credit Cards That Offer Free Credit Scores</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">3 Terrible Things Foreclosure Does to Your Credit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/get-free-credit-score-monitoring-with-credit-karma">Get Your Free Credit Score from Credit Karma</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards auto loans credit monitoring credit scores fico free lenders mortgages myfico Thu, 19 Jan 2017 11:00:10 +0000 Damian Davila 1870052 at http://www.wisebread.com My 2016 Budget Challenge: Can a Paint Job Help an Old House Pass a Re-Fi Appraisal? http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_painting_walls_539825724.jpg" alt="Couple doing paint job on old house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>[<em>Editor's Note: This is the latest episode in Max Wong's journey to find an extra $31,000 in a single year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget-0" target="_blank"><em>here</em></a><em>.</em>]</p> <p>We paid off our home equity line of credit two years early! It was a Festivus miracle.</p> <p>Kind of.</p> <p>Earlier this year, we failed to refinance the mortgage of Dinky Manor not once, but twice. We could not get our ramshackle, 1,000 square foot house to appraise for the whopping $640,000 we needed to get Mr. Spendypants out of his horrifically structured, pre-2007 housing crash home loan.</p> <p>For all of you wondering about that $640,000 for 1,000 square feet&hellip;I guess you don't live in Los Angeles.</p> <p>On Thanksgiving Eve, our friends Mary Ellen and Bob invited us out to dinner with Betsy and Murray (Mary Ellen's sister and brother-in-law). As Mary Ellen and Bob are both Wise Bread readers, they immediately started quizzing us about the 2016 Budget Challenge. They wanted to know all the sordid details &mdash; like how Mr. Spendypants puts up with my ever-increasing level of crazy. We were in the middle of whining about <a href="http://www.wisebread.com/my-2016-budget-challenge-reduce-debt-or-save-for-an-emergency" target="_blank">our underemployment</a> and our ever more <a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house" target="_blank">complicated real estate situation</a> when Murray reached across the table and handed me his business card.</p> <p>Murray is a mortgage banker.</p> <p>We followed up with Murray at his office the following week. He had already looked at a ton of real estate data for our area and couldn't understand why the house hadn't appraised for over $600,000. He started crunching the numbers. He thinks he can figure out how to refinance Dinky Manor's mortgage.</p> <p>However, Murray had two immediate demands. First, Dinky Manor needs an exterior paint job, stat. The fact that our house is the dumpiest on the block isn't helping our cause. Alas, we don't have the $17,000 it would cost to hire professionals to paint the house, so Mr. Spendypants and I will spend a relaxing winter holiday scraping and sanding 80 years of bad paint jobs off the outside of our home. Luckily, one of my best friends is a retired painting contractor. He has agreed to come out of retirement to help us rehab the house for the appraisal before the mortgage rates jump any higher.</p> <p>Could we pay down the home equity line of credit? This was Murray's second ask. Although our debt-to-loan ratio is better than average, if we zap our HELOC down to zero, it would make us look much less risky as borrowers.</p> <p>Conceptually, paying off the debt is a no-brainer. What the bank wants dovetails nicely with my goal of paying off the loan (that is due in 2018) by the end of this year. It's the actual execution of this goal that sucks. After a <a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks" target="_blank">solid start in January</a>, finding extra cash this year has been more difficult than we anticipated. Could we juggle the finances to pay off our loan at this later date without completely cannibalizing our emergency fund? Short answer: sort of. We took a $6,000 chomp out of our emergency fund. Since there is a small but real chance of us both being underemployed come March, and a somewhat larger chance that this mortgage refinance will fall through, this move makes us financially vulnerable.</p> <p>Worst case scenario: We have to take out a new line of credit in March as a precaution. While this would not be the end of the world, that situation would not be ideal. I would like to avoid being that loser personal finance writer who can't kick her debt habit.</p> <p>Best case scenario: The re-Fi goes through and we both find decent employment in March. If this happens we will be able to put the money we were using to pay down the HELOC each month toward replenishing our emergency fund and paying down the new, less expensive mortgage at a faster pace.</p> <p>Fingers crossed.</p> <h2>Progress So Far</h2> <p>Although we did pay off a $15,000 loan with money we had socked away, I am not adding the $6,000 we pulled out of our emergency fund to the plus column of my 2016 budget challenge because we are going to have to pay our emergency fund back, as fast as humanly possible.</p> <p>Panic is a really good motivator. If only we'd had that kind of &quot;inspiration&quot; all year long. We earned a combined $3,258.98 in the first two weeks of December. Here's how we did it.</p> <p>Mr. Spendypants and I DJ'ed a corporate Christmas party. Although we did not win one of the flat screen televisions that were raffled off as door prizes, we did make $1,500 for five hours of work. Also, we ate at least $800 in foie gras cotton candy, spearified olives, and wagyu beef, so that was a great job perk.</p> <p>To take advantage of the holiday shopping fever, I had planned to spend the first two weeks of December selling every single thing that is not nailed down in the house on eBay and Etsy. Alas, this did not happen, so my house is still filled with crap we don't need. Mr. Spendypants and I deemed it more prudent that I use every available second of daylight doing yard work and prepping to paint the house in advance of the looming mortgage appraisal appointment. We will save a lot more money if we can refinance the mortgage than I could ever make selling our stuff online.</p> <p>Even with my new, yucky manual labor schedule, I managed to earn $1,758.98 on the side. In a previous incarnation, I was a jewelry designer. Mary Ellen and Betsy were nice enough to buy $243 in old stock from me for holiday gifts. I made $41 selling books to a second hand bookshop. I have been <a href="http://www.wisebread.com/5-easy-to-make-deluxe-gifts-for-under-15" target="_blank">propagating succulent cuttings</a> from my garden all year long. I made $124 selling little potted plants off my front porch to passers-by. I made $10.73 selling an old dress (that I had gotten for free) to a consignment store. One of my neighbors paid me $25 to run an errand for her, and another neighbor paid me $100 for pet sitting. I made $100 from writing jobs. I sold $707 in jam, honey, and handmade lip balm. Although I barely have any merchandise for sale on Etsy, I received a last minute order that netted me $363.25.</p> <p>Phew.</p> <p>Because I source holiday gifts year round, we actually managed to spend $0 on holiday gifts for friends and family this year. Just about everyone got <a href="http://www.wisebread.com/start-now-you-can-make-these-23-delicious-holiday-gifts" target="_blank">homemade goodies</a> that I had made in advance or gifts paid for through barter. This was a total win. Unfortunately, we did not get to wallow in our thrifty genius for long. We have spent $495 on painting supplies for the house so far&hellip;</p> <p><strong>Goal:</strong> $31,000.00</p> <p><strong>Amount Raised:</strong> $33,126.40</p> <p><strong>Amount Spent:</strong> $14,093.66</p> <p><strong>Amount Left to Go:</strong> $11,967.26</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house">My 2016 Budget Challenge: How to Decide When to Sell Your House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service">Quicken Loans Review: Competitive Rates and Good Customer Service</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-you-shouldnt-refinance-your-mortgage">5 Times You Shouldn&#039;t Refinance Your Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance">ReFi Shy? How to Determine If Now Is the Time to Refinance</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing appraisal budget challenge HELOC home equity line of credit home loans max wongs budget mortgages re-fi refinancing Fri, 13 Jan 2017 10:30:36 +0000 Max Wong 1870057 at http://www.wisebread.com 7 Last-Minute Ways to Cut Your 2016 Tax Bill http://www.wisebread.com/7-last-minute-ways-to-cut-your-2016-tax-bill <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-last-minute-ways-to-cut-your-2016-tax-bill" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/tax_time_clock_170171888.jpg" alt="Finding last-minute ways to cut your tax bill" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Before you know it another tax season will be upon us. Do your wallet a favor and score all the deductions you can with these last-minute ways to reduce your bill in 2016.</p> <h2>1. Investment Account Balancing</h2> <p>Year-end investment account balancing is a no-brainer. If you have a taxable investment account, you should review your transactions for the year to see if you're in a net capital gain situation. If you are &mdash; says Jacob Dayan, co-founder of tax-relief service Community Tax &mdash; find some losing positions that will offset the gains and liquidate them by the last business day of December.</p> <p>&quot;If you wish to remain invested in these assets long-term, you can buy them back after 30 days,&quot; he adds. &quot;Note that this strategy also works in reverse, with one difference. If you sell a net-gain position, you don't have to wait 30 days to buy it back. In either case, if you have positions involving multiple purchases over time, identify the specific assets you want to liquidate by purchase transaction to give you the greatest tax benefit.&quot;</p> <h2>2. Charitable Donations</h2> <p>'Tis the season to give unto others &mdash; if only for the tax breaks. You have until the end of the year to make charitable donations that will count toward your 2016 contributions for tax purposes.</p> <p>&quot;All charitable donations made to qualifying organizations before December 31 will count toward your 2016 deduction, as long as you itemize your deductions,&quot; says Pennsylvania-based certified public accountant William Ray. &quot;Deductions are generally limited to 50% of your adjusted gross income, although additional restrictions may apply for those in higher income brackets. You may also deduct the current fair market value &mdash; not your original cost &mdash; of noncash contributions made to qualifying organizations. Certain noncash contributions may require additional support or an appraisal, so you should review <a href="https://www.irs.gov/pub/irs-pdf/p526.pdf">IRS Publication 526</a> before claiming noncash contributions.&quot;</p> <p>It's also important to track your volunteer time.</p> <p>Ray adds, &quot;Although you cannot make a deduction for your time, you may claim a deduction for any mileage driven using your personal vehicle ($0.14 per mile) and any out of pocket expenses that are not reimbursed. As is the case with any deduction, documentation and support should always be maintained for all contributions.&quot;</p> <p>Financial planner Andy Yadro details another option for end-of-year giving.</p> <p>&quot;Consider contributing to a donor-advised fund,&quot; he suggests. &quot;You get an immediate tax benefit and your money can be invested with potential to grow. This is a great last minute option for someone who wants to make a donation, but hasn't decided which charity it should go to.&quot;</p> <h2>3. Max Out Retirement Contributions</h2> <p>Were you fortunate enough to get a holiday bonus? Use it to top of your tax-deferred retirement accounts such as an IRA. Even better, kick in a few extra dollars from your regular paycheck. You'll boost your savings while reducing your taxable income. However, be aware of the contribution limits for both types of retirement account.</p> <p>&quot;If you or your spouse are not covered by a retirement plan through your employer, you're both eligible to contribute up to $5,500 each to an IRA ($6,500 if you are over age 50),&quot; Ray says. &quot;You may be eligible to make a contribution, even if you are covered by a retirement plan through your employer, depending on your income.&quot;</p> <p>You also have until April 15, 2017, to make this contribution and still have it count toward your 2016 taxes. However, it's highly recommended that you do not file your tax return until you make the contribution. If you claim the deduction but cannot pay, you'll need to file an amended tax return by April 15, 2017, or pay penalties and interest.</p> <h2>4. Pay Your State or Local Income Tax Bill Early</h2> <p>If you itemize deductions, you can claim a deduction for state income taxes paid during the calendar year. This includes any amounts paid for your 2015 tax liability that were paid in calendar year 2016.</p> <p>&quot;If you consistently owe taxes on your state or local tax returns, paying them early can result in immediate federal tax savings,&quot; Ray explains. &quot;States and localities allow you to make estimated tax payments or prepayments at any time during the year. If you make a payment before December 31, 2016, that payment can be deducted on your 2016 federal tax return. But be careful of overpaying. If you overpay and receive a state or local income tax refund, you will need to claim that as income on your 2017 federal tax return.&quot;</p> <h2>5. Make January's Mortgage Payment in December</h2> <p>One of the joys of homeownership is taking advantage of the various tax breaks the government provides. The biggest of these is the mortgage interest deduction. If you can spare the extra cash, consider making your January 2017 mortgage payment before the end of the year. You'll be able to deduct the mortgage interest on your 2016 tax form. Don't get greedy here, though. Tax law generally prohibits taking annual deductions on &quot;prepaid interest,&quot; so you won't be able to pay February's mortgage bill and claim that for 2016, too. For more on the tax advantages of homeownership, see the <a href="http://www.taxpolicycenter.org/briefing-book/what-are-tax-benefits-homeownership">Tax Policy Center's analysis</a>. (See also: <a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip?ref=seealso">4 Tax Deductions New Home Owners Shouldn't Skip</a>)</p> <h2>6. Review Your Health Coverage</h2> <p>If you're covered by a high-deductible health plan, you may qualify for a Health Savings Account (HSA) and contribute $3,350 ($6,750 for a family) to the plan &mdash; all of it tax-deductible.</p> <p>&quot;Many employers now offer high-deductible health plans, meaning employees often have to pay thousands toward a deductible before their health coverage kicks in,&quot; Ray says.</p> <p>To offset this cost, you may qualify for an HSA.</p> <p>&quot;An HSA is basically a 'retirement account for health care' and is becoming more common each year,&quot; Ray continues. &quot;The HSA allows you to contribute to an investment account that can grow tax free over time, while receiving a deduction on your tax return. You even receive a deduction if you don't itemize. The account can then be used to cover qualifying medical costs. Unlike a Flexible Spending Account (FSA), an HSA is 'your money' and can grow over time, rather than being forfeited at the end of the year.&quot;</p> <p>Check with your employer to see if your plan qualifies for an HSA. (See also: <a href="http://www.wisebread.com/11-surprising-things-your-hsa-will-cover?ref=seealso">11 Surprising Things Your HSA Will Cover</a>)</p> <h2>7. Prepay Real Estate Tax</h2> <p>If you foresee a changing income situation, supplement next year's loss with a right-now gain. Yadro suggests prepaying your real estate taxes and taking the deduction now.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/7-last-minute-ways-to-cut-your-2016-tax-bill">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-i-write-it-off-as-charity">Can I Write It Off as Charity?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-should-make-these-11-easy-donations-before-time-runs-out">You Should Make These 11 Easy Donations Before Time Runs Out</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/charitable-giving-get-a-receipt">Charitable giving - get a receipt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/cleaning-out-for-a-cause-make-a-noncash-tax-deductible-donation">Cleaning Out for a Cause: Make a Noncash Tax-Deductible Donation</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes charitable deductions charity HSA income tax investments last minute deductions mortgages real estate retirement contributions tax bill tax deductions Mon, 26 Dec 2016 10:30:23 +0000 Mikey Rox 1860478 at http://www.wisebread.com Home Reverse Mortgaged? Here's How to Sell It http://www.wisebread.com/home-reverse-mortgaged-heres-how-to-sell-it <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/home-reverse-mortgaged-heres-how-to-sell-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_selling_house_185289787.jpg" alt="Couple learning how to sell a reverse-morgaged house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Reverse mortgages are becoming more and more popular as the U.S. population ages. In a reverse mortgage, instead of having to make a monthly payment on a mortgage until it is paid off, a homeowner receives an amount from the equity in their house every month.</p> <p>Reverse mortgages are often a boon to senior citizens living on a fixed income. It essentially removes the need to pay a mortgage every month by converting existing equity in a home into income that covers the mortgage. Reverse mortgages are available only to people 62 years of age or older.</p> <p>The downside, of course, is that reverse mortgages have the opposite effect on equity in the house that conventional mortgages do: They draw from it rather than adding to it. At the end of a reverse mortgage, there may be little or no equity left in the home.</p> <h2>Steps to Sell the Home</h2> <p>Given that, how do you sell a house with a reverse mortgage? After all, at some point the senior citizen may want to move into an assisted living facility or in with children. They may also pass away, and their heir is left with the task of selling the property.</p> <p>It's actually easier than you might think to sell a house with a reverse mortgage. Here are 10 steps you'll need to consider.</p> <h3>1. Know How Much Is Owed</h3> <p>The most important first step is to find out how much is owed in the reverse mortgage. The amount will include moneys paid out by the bank, plus fees and other charges.</p> <h3>2. Check the Paperwork</h3> <p>Read over the paperwork from the bank that made the reverse mortgage. You need to know the interest rate, any fees if the loan is paid off in full, and any other charges.</p> <h3>3. Look for Liens</h3> <p>Double check to ensure there are no other liens on the house. This is important because it can make a huge difference in any equity remaining in the house.</p> <h3>4. Ask for a Payoff Quote From the Lender</h3> <p>A payoff is the amount required to, as the term implies, pay off the reverse mortgage in full. It differs from how much is owed because of fees and other charges. You need to ask for this figure in writing.</p> <h3>5. Estimate What the Home Is Currently Worth</h3> <p>There are two possible scenarios here. One is if the house is worth more than you owe. It may have appreciated in value, or the reverse mortgage was not in effect for a long period of time &mdash; or both. In that case, you can sell the home just as you would sell any other home and realize the net appreciation between what is owed and what it sells for.</p> <p>The other scenario? The house may not be worth what is owed on it, or the market value may be so close to what is owed that you will lose money on any sale. You are underwater on the loan.</p> <p>In the latter case, you have two options. One is to try to rent the house to receive income from it. The other is to see if the reverse mortgage can be converted into a regular mortgage. If it can, you begin making mortgage payments on it and build up equity in the house, just as you would with any house purchased.</p> <h3>6. Make the Sale</h3> <p>If a sale does make financial sense, you proceed just as you would with any home sale. You can arrange for a private sale, or work with an agent. Most agents will charge approximately 6% of the sale price to list and show your home. Remember that what is owed to the bank for the reverse mortgage has to be paid when the house is sold.</p> <h3>7. Make Repairs</h3> <p>Take care of any needed repairs or maintenance on the house to get it ready to show. If you are selling it privately, make a plan for where you will advertise and show it.</p> <h3>8. Hire a Lawyer</h3> <p>Because of the complexity of reverse mortgage sales, hiring a lawyer is likely a prudent move. A lawyer can ensure the terms of the sale are the most advantageous they can be for you. In some locations, a lawyer is required in a real estate transaction that involves any type of loan. Be sure to check any requirements in your area. Finally, the payoff of a reverse mortgage must be handled by an experienced person, and many lawyers are experienced in this area.</p> <h3>9. You &mdash; or the Buyer &mdash; Pay Off the Reverse Mortgage</h3> <p>Be aware that any buyer will need to have either cash to make the purchase or have financing in place if you do not have the money to pay off the reverse mortgage. They will essentially be providing you with the money to execute the payoff.</p> <h3>10. Close the Sale of the House</h3> <p>Issue the bank the payoff amount. You are finished selling the home with the reverse mortgage.</p> <p>As reverse mortgage become used more frequently by senior citizens, the need to sell homes with a reverse mortgage will become more common. These 10 steps will ensure you sell the house in the correct way.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/anum-yoon">Anum Yoon</a> of <a href="http://www.wisebread.com/home-reverse-mortgaged-heres-how-to-sell-it">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage">How to Avoid Getting Scammed With a Reverse Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/reverse-mortgages-the-best-way-to-eat-your-home">Reverse Mortgages: The Best Way to &quot;Eat Your Home&quot;?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you">Home Equity Loan or HELOC: Which Is Right for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-homebuying-questions-youre-embarrassed-to-ask">5 Homebuying Questions You&#039;re Embarrassed to Ask</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-mistake-could-delay-your-retirement-by-10-years">This One Mistake Could Delay Your Retirement by 10 Years</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity fixed incomes mortgages retirement reverse mortgages selling a home senior citizens Fri, 23 Dec 2016 11:00:08 +0000 Anum Yoon 1860474 at http://www.wisebread.com 5 Financial Moves Now That You'll Regret When You Retire http://www.wisebread.com/5-financial-moves-now-that-youll-regret-when-you-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-financial-moves-now-that-youll-regret-when-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_uh_oh_175531215.jpg" alt="Learning financial moves now that you&#039;ll regret when you retire" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all make thousands of decisions every day. Come tomorrow, many of them won't matter much at all. But some decisions do have long-lasting implications. Here are five choices that may leave you longing for a do-over in retirement.</p> <h2>1. Borrowing From Your 401K</h2> <p>It's relatively easy to borrow from most 401K plans. However, the purpose of your 401K isn't to save for a down payment on a house or college bills. It's to build a nest egg for retirement. The more you nibble away at that, the less you'll have for your later years. The best approach? Consider your workplace retirement funds to be off limits &mdash; until retirement.</p> <h2>2. Resetting Your Mortgage Clock Past Your Retirement Age</h2> <p>Interest rates are very low, which has prompted many people to refinance their mortgages. It can be wise to swap out a high interest rate loan for one at a lower rate. However, if this is the home you plan to live in during retirement, make sure your new mortgage will be retired by the time you are. That may mean opting for a shorter term (15 or 20 years instead of 30) or committing to making extra monthly payments. (Use <a href="http://financialmentor.com/calculator/mortgage-payoff-calculator">this calculator</a> to help you figure out how much extra to pay.)</p> <h2>3. Claiming Social Security Too Early</h2> <p>There are some people who may benefit by claiming their Social Security benefits at the earliest possible age &mdash; 62. If longevity doesn't run in your family or if you absolutely have no other options but to take the money sooner than later, go ahead. But good things come to those who wait. When it comes to delaying the start of Social Security, those who can hold off will get quite a boost in benefits.</p> <p>When I looked up my own benefits (<a href="https://secure.ssa.gov/SiView.do">here's where to look up yours</a>), I saw that I'm eligible for $1,780 per month if I claim benefits at age 62. If I wait until my Full Retirement Age of 67, that amount jumps to $2,694 &mdash; a 51% increase. And if I wait until age 70, I would receive $3,441 per month &mdash; nearly twice as much as my age-62 benefit.</p> <p>And here's the other benefit from waiting. Men, I hope I'm not the first to break this to you, but you're probably going to die before your wife, unless she's a lot older than you are. And if your Social Security benefit is larger than hers, the more you can maximize yours, the more it'll benefit your wife once you're gone. That's because upon your death, she'll have the choice of continuing to take her benefit or yours.</p> <p>Social Security claiming strategies are so varied, complex, and important that it would probably benefit you to seek additional guidance via <a href="http://www.socialsecuritysolutions.com/">Social Security Solutions</a> or <a href="http://maximizemysocialsecurity.com/">Maximize My Social Security</a>.</p> <h2>4. Ignoring Inflation</h2> <p>I talked with a newly-retired woman recently who thought she was set for life. She took her savings, divided by her estimated number of years remaining, and was satisfied with her answer. Until I rained on her parade by asking how she planned to account for inflation.</p> <p>She didn't like the idea of investing any of her money in the stock market because she thought that was too risky. And yet, keeping all of her money in a bank savings account virtually guarantees that her buying power will steadily decline. Even a modest annual inflation rate of 2% will cut buying power nearly in half over the course of a 30-year retirement.</p> <p>Most retirees will need to accept the idea of maintaining some level of exposure to the stock market with their investment portfolio in order to make sure their money lasts as long as they do.</p> <h2>5. Counting on Paid Work in Your Later Years</h2> <p>One of today's most significant retirement-related disconnects is the difference between the number of today's workers who are planning to work in retirement (I know, it sounds like an oxymoron) and the number of retirees who actually do still work.</p> <p>An increasing number of people still in the workforce are pushing back their retirement date &mdash; some because they want the mental stimulation that comes from work, some because they realize they'll need the money. And yet, nearly half of people who are now retired left the workforce sooner than intended, many times because of health issues.</p> <p>By the same token, nearly two-thirds of today's workers expect to work for pay to some degree after retiring from their main career, whereas less than one-third of those who are now retired have worked for pay since ending their main career.</p> <p>The best advice? Plan physically, emotionally, and vocationally to work longer than you might prefer while you plan financially to retire earlier than you think you will.</p> <p>Clearly, what you don't do as you prepare for a successful retirement is just as important as what you do. Avoiding the five miscues just discussed will help you prepare well.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/5-financial-moves-now-that-youll-regret-when-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire">12 Money Moves to Make the Moment You Decide to Retire</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k full retirement age inflation Mistakes money moves mortgages regrets social security Thu, 01 Dec 2016 11:00:08 +0000 Matt Bell 1843961 at http://www.wisebread.com Rent Your Home or Buy? Here's How to Decide http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/rent-your-home-or-buy-heres-how-to-decide" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/hands_small_house_71818037.jpg" alt="Deciding if you should rent or buy your home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are plenty of advantages to renting an apartment, and just as many to buying a home, instead. But what about financially? Is renting or buying the smarter money move?</p> <p>Not surprisingly, the answer is complicated, and depends on where you live, what kind of home you want to buy or apartment you want to rent, and how long you plan on staying in one place. Here's a look at the numbers that might help you solve the rent-vs.-buy puzzle.</p> <h2>Prices Are Rising for Buyers and Renters</h2> <p>Renting an apartment is more expensive today than it was even a year ago. But the same is true of buying a home.</p> <p>Consider the cost of buying a home. The National Association of Realtors reported that in September of this year, the median price of existing homes stood at $234,200.</p> <p>You won't necessarily have to pay $234,200 or more, depending on where you buy. But the median sales price continues to increase, meaning that home prices overall are on the rise. The median price in September was up 5.6% from the same month one year earlier, when it was $221,700. And don't expect median prices to fall anytime soon. The association says that September's price increase represents the 55th consecutive month of year-over-year gains.</p> <p>And what about renting? Apartment rents continue to rise, too. ApartmentList reported that in November of this year, the median national rent for one-bedroom apartments was $1,110 a month. For two-bedroom apartments that figure was $1,270. The good news is that median rents actually fell in 55 out of the country's 100 biggest cities from October to November, according to ApartmentList.</p> <p>The bad news? Rents are still higher today than they were one, two, or three years ago. According to ApartmentList, the median national rent was 2% higher in November of this year compared with the same month one year earlier.</p> <p>So no matter if you rent or buy, know that prices are generally rising.</p> <h2>Which Is More Affordable?</h2> <p>That leads to the big question: Given that both buying a home and renting an apartment are getting more expensive, which option is most affordable?</p> <p>The answer to this question includes plenty of variables. For instance, owning a home provides a tax benefit: You can deduct the interest you pay on your mortgage loan each year up to $1 million, resulting in a lower tax bill. But even this isn't a crystal-clear financial plus for all owners. You can only claim your mortgage interest deduction if you itemize your taxes. And if that interest deduction isn't higher than the IRS' standard deduction &mdash; which stood at $12,600 for married couples filing jointly and $6,300 for singles in 2016 &mdash; there is no real reason for you to itemize your taxes and claim the deduction.</p> <p>Then consider the variables of going the apartment route: You might be able to find an apartment with low rent. But that apartment might not be located where you actually want to live, especially if you want to live in the center of a large city. Apartments in urban areas tend to come with higher rents today.</p> <p>And if you do find a cheaper apartment, it will almost certainly not be a newer one. RENTCafe found that in 2015, 75% of all large new apartment properties built across the country were high-end luxury properties, buildings that charge far higher monthly rents. Most of these new apartments are being built in the center of big cities, too, according to RENTCafe.</p> <p>So if you want to rent an apartment in San Francisco? ApartmentList says that a two-bedroom apartment here had a median price of $4,700 a month in November, while a one-bedroom had a median monthly rent of $3,440. In Boston, two-bedrooms rented for a median price of $2,350 a month, while in Seattle it cost a median of $1,720 for a one-bedroom unit and $2,300 for two bedrooms.</p> <p>Given this jumble of numbers, is it cheaper to rent or buy? According to real estate website Trulia, buying a home is cheaper on a national basis. Though, not surprisingly, there are some caveats.</p> <h2>Nationally, Buying Is Cheaper</h2> <p>Trulia reported in October that buying a home was 37.7% cheaper than renting on a national basis. But that 37.7% figure only holds true for those who live in their homes for at least seven years and can afford to come up with a down payment of 20% on their homes.</p> <p>Given that standard, Trulia reports that buying is cheaper than renting in each of the 100 largest metropolitan areas of the country. According to Trulia, for example, it is 50% cheaper to buy in Miami and just under 20% cheaper to buy in San Francisco and Honolulu.</p> <p>Part of the reason that buying is more affordable comes down to mortgage interest rates. Rates are still at historically low levels, with the Freddie Mac Primary Mortgage Market Survey reporting that as of Nov. 10, the average interest rate on a 30-year fixed-rate mortgage loan stood at 3.57%. This makes borrowing money for a mortgage loan more affordable.</p> <p>Want to see what Trulia thinks of the rent-vs.-buy decision in your community? Visit the site&rsquo;s <a href="https://www.trulia.com/rent_vs_buy/">rent-vs.-buy calculator</a>, punch in your metropolitan area and wait for the results.</p> <h2>What Should You Do?</h2> <p>These numbers, and Trulia&rsquo;s rent-vs.-buy calculator, should serve as a general guide. But they alone can't tell you whether you should rent or buy. That's because everyone's situation is unique.</p> <p>Say you only plan to live in an area for three or four years before moving. Renting is almost always the better financial move. Say you hate the thought of mowing a lawn for 15 years. Again, renting might be the better choice, even if it is more expensive than owning a home. If you dream of gardening in your own backyard? Then buying might make you happier.</p> <p>Your best bet is to carefully analyze what you want out of a home, whether it's the stability of owning and building equity or the freedom that comes with renting. Then make your decision based on what type of home will best meet your needs.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-best-cities-with-rent-control">The 3 Best Cities With Rent Control</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-simple-way-to-decide-how-much-rent-you-can-really-afford">The Simple Way to Decide How Much Rent You Can Really Afford</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-11-best-websites-for-renting-your-extra-space">The 11 Best Websites for Renting Your Extra Space</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-signing-a-lease">10 Questions to Ask Before Signing a Lease</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing apartments cost of living homeownership mortgages rent vs buy renting Tue, 22 Nov 2016 11:00:15 +0000 Dan Rafter 1835351 at http://www.wisebread.com Watch Out for These 5 Last Minute Home Buying Costs http://www.wisebread.com/watch-out-for-these-5-last-minute-home-buying-costs <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/watch-out-for-these-5-last-minute-home-buying-costs" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_cash_grass_13020597_0.jpg" alt="Finding ways to watch out for last minute home buying costs" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In 2015, 5,250,000 existing homes and 510,000 newly constructed properties were <a href="http://www.realtor.org/field-guides/field-guide-to-quick-real-estate-statistics">sold in the U.S</a>. And as Wise Bread predicted back in December 2015, homes have been one of the <a href="http://www.wisebread.com/8-necessities-that-will-be-cheaper-in-2016">necessities that are cheaper in 2016</a>, boosting the percentage of first-time homebuyers entering the market.</p> <p>But unexpected costs toward the end of the buying process can leave prospective buyers scrambling at the last minute or, even worse, unable to land the home of their dreams. Let's take a look at five pesky home buying costs that could appear at the eleventh hour.</p> <h2>1. Lower Property Appraisal</h2> <p>The seller told you that the home is worth $350,000 and you earnestly believed that valuation. So, you went to the bank and applied for a mortgage based on the market value of $350,000. To meet compliance requirements and to do its due diligence, the bank includes an appraisal contingency in your mortgage application. This clause requires that a third-party appraiser verifies that the home is actually worth $350,000.</p> <p>If the appraisal requested by your bank were to come under the $350,000, then somebody would have to come up with the difference for the bank to approve the loan. Depending on several factors, including the number of days the house has been on the market and the skill level of your real estate agent, the seller, her agent, or your own agent may help you with the difference. In the worst case scenario, you'll have to come up with the difference or have to say goodbye to that home.</p> <p>In the event that you believe the third-party appraiser may have provided an inaccurate estimate, you could hire another appraiser, submit that new estimate to the bank, and let the bank re-evaluate the mortgage. However, you would be most likely responsible for the cost of that second appraisal.</p> <h2>2. Mortgage Insurance</h2> <p>Let's imagine that you are in the process of saving for a decent down payment for your first home. Two years before you reach your savings goal, a home is finally available in your dream neighborhood. Your broker is confident that a similar home won't be available for another five years, so he suggests that you buy. The catch: You can't come up with at least 20% of the home value for a down payment.</p> <p>When you pony up less than a 20% down payment to buy a home, you'll have to pay private mortgage insurance (PMI). The <a href="https://www.federalreserve.gov/boarddocs/supmanual/cch/hpa.pdf">Homeowner's Protection Act</a> requires homebuyers who finance more than 80% of a new home's value to purchase PMI. Keep in mind that this is protection for the lender (not you!) in case you default on your mortgage.</p> <p>The average PMI payment ranges from 0.5% to 1% of the total value of the home loan. Still, this cost isn't small potatoes. In 2015, the average value of a mortgage in the U.S. was $172,341. Assuming a 1% PMI, the average PMI payment in 2015 was about $1,723. That would be one cost that you would have to pay year after year until your loan value reaches 78% of the original market value of the secured property.</p> <p>Still, your lender may have a strong case to continue requiring the PMI in the event of a dramatic price drop in the market value of your home, an existing home equity line of credit (HELOC) on your property, or a long string of late monthly payments within the last two years.</p> <h2>3. Dramatic Change in Financial Situation</h2> <p>When you're in the process of buying a home, you should keep a consistent financial picture, especially with your credit score. So, delay buying all those expensive new kitchen appliances, pieces of furniture for your living room, and blue period art pieces on credit until you have the keys in hand. A dramatic change to your credit score is a major red flag for the lender and the financial institution may decide to offer the mortgage at a higher interest rate than originally expected &mdash; or turn down the loan entirely.</p> <p>Here are other financial do's and don'ts until settlement day:</p> <ul> <li>Do keep a good paper trail of the source of your down payment;<br /> &nbsp;</li> <li>Don't make large transfers between your accounts;<br /> &nbsp;</li> <li>Do delay any other large purchases on credit, such as a car;<br /> &nbsp;</li> <li>Don't miss any monthly payments on existing debt (they account for 35% of your credit score!);<br /> &nbsp;</li> <li>Do provide all documentation requested by your lender and agent within the stipulated time frame;<br /> &nbsp;</li> <li>Don't open new credit or store cards.</li> </ul> <h2>4. Repairs</h2> <p>When you receive the report from a licensed home inspector, you may find that your dream home is not so dreamy after all. Take the comments from the inspector seriously and determine whether it's worthwhile to ask the seller to incur some of those costs, or to provide a financial remedy. After all, you'll be the one covering all of them once the home is yours.</p> <p>However, choose your fights wisely. No home is 100% perfect. Having to replace all door handles because you find them out of style isn't nearly as bad as having to battle black mold in the basement of your soon-to-be home.</p> <h2>5. Special Case: Hike in Homeowner's Association Fees</h2> <p>Last but not least, make sure to review the minutes of the meetings of the homeowner's association (HOA) for your property for at least the last six months.</p> <p>Pay special attention to two items.</p> <p>First, look for a schedule of upcoming monthly dues. In some cases, you may be welcomed with a higher-than-expected bill right off the bat.</p> <p>Second, watch out for any large projects that are under current review by the board of the HOA. For example, installing a complex system of solar panels on the roof or replacing all the windows of the apartment building because existing windows no longer meet city codes could both mean an ever-growing monthly HOA due. In certain circumstances, the HOA board could be planning to present you the option to pay your entire pro rata amount for the project or to finance the cost through the HOA's loan. Either option would put a dent on your monthly budget.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/watch-out-for-these-5-last-minute-home-buying-costs">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-why-2015-is-the-year-to-buy-a-house">5 Reasons Why 2015 is the Year to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-to-finance-a-tiny-house">3 Ways to Finance a Tiny House</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing appraisals hidden costs hoa fees home buying homeownership insurance last minute costs mortgages pmi repairs Fri, 18 Nov 2016 11:30:10 +0000 Damian Davila 1835252 at http://www.wisebread.com Should You Pay Your Mortgage Off Early? http://www.wisebread.com/should-you-pay-your-mortgage-off-early <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-your-mortgage-off-early" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/married_couple_home_18525549.jpg" alt="Married couple paying off their mortgage early" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Hate sending that big payment to your mortgage lender each month? You're certainly not alone. But what if you had the ability to pay off that mortgage loan early, either by paying extra dollars toward your loan's principal balance or by paying off the rest of your mortgage in one giant payment?</p> <p>Should you do it? Or are there times when <em>not </em>paying off your mortgage early actually makes sense?</p> <p>Not surprisingly, it depends on a host of factors. Here is what you should look at when determining whether paying off your mortgage early is the best choice.</p> <h2>Tax Benefits</h2> <p>When arguing against paying off your mortgage early, most people point to the mortgage interest deduction. This allows most homeowners to deduct annual mortgage payments.</p> <p>There is a catch here, though: You can only claim the mortgage interest deduction if you itemize your taxes. And you should only itemize if your deductions are higher than the IRS' standard deduction, which as of 2016 stood at $12,600 for married couples filing jointly and $6,300 for singles and married people who file separately.</p> <p>This means that those homeowners most likely to benefit from the deduction are those who have purchased higher-priced homes, have a high interest rate on their mortgage, or are in the very early stages of paying off that mortgage. For other homeowners, the deduction will either be less than or barely more than their standard deduction.</p> <p>This means that you'll need to determine &mdash; perhaps with the help of your accountant or financial adviser &mdash; whether the mortgage interest deduction is really helping you at your current stage of paying off your mortgage. If it is, then factor this benefit in when determining whether you should pay off your mortgage early. But if it's not? Then don't let the promise of a yearly tax deduction influence your choice.</p> <h2>Other Debt</h2> <p>According to Freddie Mac's Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage stood at 3.54% as of Nov. 3. The average rate for a 15-year fixed-rate mortgage was an even lower 2.84%. Those are both extremely low interest rates.</p> <p>At the same time, financial website Bankrate reported that the average variable interest rate for credit cards stood at 16.28% as of Nov. 2.</p> <p>The message here is clear: If you are burdened with high-interest credit card debt, and you have enough money to spend extra on your mortgage loan or pay it off entirely, it makes more sense to put those extra dollars toward your credit cards.</p> <p>It makes financial sense to pay off debt that comes with higher interest rates first. It might feel good to make that big monthly mortgage payment disappear, but it's smarter to whack away at your <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?ref=internal">credit card debt</a>, which, thanks to high interest rates, can grow quickly each month.</p> <p>Before deciding to pay extra on your mortgage or pay it off entirely, look at your other debt first: Use your extra money to eliminate the debt that is costing you the most each month.</p> <h2>Are You Staying Put or Moving?</h2> <p>How long do you plan on staying in your home? Do you plan on living out the rest of your days there? Or are you already planning a move in five to seven years?</p> <p>It makes more sense to pay extra on your mortgage loan if you plan on staying in your home for a longer period of time. By paying extra each month, you can shave thousands of dollars off the amount you'll pay in interest during the life of your mortgage.</p> <p>But if you plan on moving in five years, paying extra doesn't make as much sense. You'll sell your home long before you come close to paying it off. So if you're not going to be a long-term resident of your current home, put that extra money to better use.</p> <h2>Are You an Investor?</h2> <p>Those who argue against spending extra on your mortgage say that most homeowners would be better off taking those extra dollars and investing them. This goes back to the low interest rates attached to mortgages today. If you are only paying an interest rate of 3.5% on your home loan, why wouldn't you keep that debt and instead invest in the stock market, where you could make a return of 7% or more on that money?</p> <p>This assumes, though, that you'll actually invest the money that you won't spend on your mortgage loan. If you're more likely to spend it instead, you're better off paying down your mortgage or even paying it off early.</p> <h2>Retirement</h2> <p>Are you close to retirement? You might want to pay off that mortgage early. It's best to enter retirement with as few monthly payments as possible. If you plan to stay in your home after retiring, paying off that mortgage early makes sense. You are then free to use that money that you would have sent to your lender each month however you choose.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why">Yes, You Need Home Title Insurance — Here&#039;s Why</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/watch-out-for-these-5-last-minute-home-buying-costs">Watch Out for These 5 Last Minute Home Buying Costs</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Rent Your Home or Buy? Here&#039;s How to Decide</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing debt homeownership interest rates mortgages paying off early retirement tax benefits Wed, 16 Nov 2016 10:30:27 +0000 Dan Rafter 1833769 at http://www.wisebread.com Everybody's Wrong About How Much House You Can Afford http://www.wisebread.com/everybodys-wrong-about-how-much-house-you-can-afford <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everybodys-wrong-about-how-much-house-you-can-afford" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_moving_house_93431053.jpg" alt="Learning how much house you can really afford" title="" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>A home is one of the most expensive &mdash; and most emotional &mdash; purchases you'll ever make. That high cost and high emotion combination can be dangerous, tempting you to spend so much on a house that it ends up owning <em>you</em>.</p> <p>Instead, buy a house you can actually afford. What is a reasonable cost, you might ask? For starters, ditch the conventional homeownership wisdom, and consider this plan to help you buy a home you can truly afford.</p> <h2>A Reasonable Percentage</h2> <p>I've spent a lot of time crunching numbers to come up with <a href="http://www.mattaboutmoney.com/resources/">recommended cash flow guidelines</a>, showing how much various sized households with various levels of income can afford to spend on everything from clothing to vacations. All that spreadsheet time gave me more than a headache; it gave me a deep appreciation for the importance of keeping housing costs under control.</p> <p>Here's what I found: If you're going to be able to save for emergencies and near-term purchases, invest for longer-term needs such as retirement or your kids' college costs, live generously, and enjoy some financial breathing space, you have to keep your total housing costs (mortgage, property taxes, homeowner's insurance, and association fees, if applicable) to no more than 25% of monthly gross income. Preferably, no more than 20%.</p> <p>Even more radically, I recommend that two-income couples run the numbers on what they can afford based on just <em>one</em> of their incomes.</p> <p>I know this all probably sounds ludicrous, but hear me out.</p> <h2>But I Qualify for More!</h2> <p>Mortgage lenders will typically allow you to devote 28% of your gross income to housing costs. They assume you'll have other debts as well and will be fine with that as long as it takes no more than 36% to 40% of your gross income to cover your housing costs and these other debts.</p> <p>But mortgage lenders aren't the ones who'll be making the payments. You will.</p> <p>Keeping your monthly housing costs within the parameters I suggested, and holding no other debt, will do wonders for your solvency and stress level.</p> <h2>Why Not Use Two Incomes?</h2> <p>If you're a double-income household, think twice before basing your housing decision on both incomes.</p> <p>If you don't have kids but would like to someday, and if one of you would like to step out of the paid workforce for a period of time in order to be home with your kids, it'll be a lot easier to transition to that life if your home doesn't require two incomes.</p> <p>That was the single best financial advice my wife and I received before we got married. Following that advice meant renting for the first 10 months of our marriage and then buying a condo in what our realtor optimistically described as &quot;an up and coming neighborhood&quot; in Chicago.</p> <p>After our first child was born and my wife left her job to be home full-time, the financial transition wasn't very difficult at all.</p> <p>The key to getting acclimated to living on one income is not getting acclimated to living on two incomes in the first place.</p> <p>If you don't plan to have kids, or if you do but you both plan to continue working full-time, it can still be dangerous to buy a house that requires two incomes. What if one of you loses your job?</p> <p><em>Choosing</em> to transition from two incomes to one because one parent wants to stay home for a period of time is one thing. Being <em>forced</em> to make that transition because one spouse goes through an extended time of unemployment is far more painful.</p> <h2>What If You Already Have a Two-Income House?</h2> <p>Very often, when people say they can't afford to save, invest, or support charitable causes they care about, it's because they're spending too much on housing.</p> <p>If you're in that situation, consider something radical. Consider moving to a home you can more easily afford.</p> <p>There's nothing easy about moving. I realize that. But I know two couples that have sold homes they realized they really couldn't afford. In both cases, moving was difficult, time-consuming, and even embarrassing. But both couples are so happy to have made the move. It's been better for their finances and their marriages.</p> <p>Keeping your housing costs reasonable is an essential part of wise money management. That means keeping your housing costs to no more than 20% to 25% of monthly gross income &mdash; and preferably basing that on one income. It's a radical idea, but it may just enable you to enjoy your home without financial worries. And that's worth more than extra square footage any day.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/everybodys-wrong-about-how-much-house-you-can-afford">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-buy-a-house-without-a-mortgage">4 Ways to Buy a House Without a Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/23-hidden-costs-of-buying-an-old-house">23 Hidden Costs of Buying an Old House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-house-hunt-without-leaving-your-couch">How to House Hunt Without Leaving Your Couch</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-millennials-can-do-to-buy-a-house-within-the-next-decade">5 Things Millennials Can Do to Buy a House Within the Next Decade</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-location-isnt-king-how-to-choose-income-rental-property">When Location Isn&#039;t King: How to Choose Income Rental Property</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing affordability buying a house cash flow expenses incomes mortgages new house single income Wed, 09 Nov 2016 09:30:07 +0000 Matt Bell 1827232 at http://www.wisebread.com 3 Sources of Fast Cash Besides Your 401K http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-sources-of-fast-cash-besides-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/handling_cash_780905671.jpg" alt="Finding sources of fast cash outside of 401K" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're in the middle of a remodeling project, and due to unforeseen circumstances, your money runs out early. You can't live with a half-completed kitchen, but you can't pay for it to be finished right now. And while you have plenty of equity in your home and a healthy retirement account, there's nothing in the bank.</p> <p>Once you've decided to take out a loan, what is the best source of funds? Are 401K loans or borrowing against home equity ever a good idea?</p> <p>&quot;The best option is of course is your parents,&quot; says financial planner Bob Goldman. But if you can't tap the bank of mom and dad for an interest-free loan, your other best options are probably a cash-out refinance, a secondary mortgage, a home equity line of credit, or a 401K loan. Deciding which one to use requires some number crunching and a hard look at your personal situation, including your job security, your repayment timeline, and your will power.</p> <h2>Cash-Out Refinance</h2> <p>Mortgage interest rates are at historic lows, making now a good time to think about refinancing. When you refinance your home, you are replacing your current loan with a brand-new one, preferably at a better interest rate. Depending on how much equity you have in your home, you may have the option of borrowing cash at the time of the refinance &mdash; so that once all the paperwork is done, you'll have a lump sum in your bank account, which you will pay back as part of your regular mortgage payments.</p> <h2>Cash-Out Refinance Pros</h2> <p>A cash-out refinance has a lot going for it.</p> <h3>1. Low Rate</h3> <p>A mortgage often offers the lowest interest rate you can get, outside of promotional offers. And because rates are near historic lows, a lot of people feel that locking in a low rate now for a long loan term is a good call.</p> <h3>2. Low Payments</h3> <p>Because the payback period will be long &mdash; generally 30 years &mdash; a cash-out refi can ease the month-to-month strain of repayment, especially if you are able to lower the interest rate. If you are paying, say, 5% interest on your mortgage and you are able to refinance to 3.77%, you could add $50,000 to your loan principal while only adding about $100 a month to your payment.</p> <h3>3. No Surprises</h3> <p>As long as you take out a fixed-rate mortgage, you know what your payment will be for the life of the loan.</p> <h3>4. Tax Benefit</h3> <p>The interest you pay on your refinanced mortgage will be tax deductible. According to this <a href="http://www.calcxml.com/do/hom09">mortgage tax savings calculator</a>, if you add $50,000 to a $200,000 mortgage, you could save about $10,000 in taxes over the life of the loan, more or less depending on your tax bracket and the interest rate.</p> <h2>Cash-Out Refinance Cons</h2> <p>As great as a cash-out refinance is, it's not free money.</p> <h3>1. Risk</h3> <p>Your home is on the line. For most people, your house is your biggest asset, and putting it even at slight risk isn't a decision to take lightly. Far too many homeowners ended up losing their homes during the financial crisis when they overborrowed against their homes' value.</p> <h3>2. Fees</h3> <p>You have to pay closing costs, which average about $1,800 on a $200,000 loan.</p> <h3>3. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h3>4. Starting Over</h3> <p>One thing people often overlook when refinancing, Goldman says, is that taking out a new 30-year loan pushes out the date when you'll be done paying off your mortgage. &quot;You reset the clock on your mortgage,&quot; Goldman says. &quot;You're back to Day One, where you're paying mostly interest.&quot;</p> <h2>What's the Total Cost of a Cash-Out Refinance?</h2> <p>Getting $50,000 this way would cost a typical borrower about $30,000 in interest and fees over the course of 30 years at current interest rates. I calculated this using a mortgage calculator to compare the lifetime cost of borrowing $200,000 versus $250,000, keeping in mind that getting cash out usually increases your interest rate by about ⅛ percent. I added $2,000 in closing costs and subtracted $10,000 in tax savings.</p> <h2>Home Equity Loan</h2> <p>A home-equity loan is so much like a mortgage that it's also known as a &quot;second mortgage.&quot; The only difference between this and a cash-out refinance is that instead of replacing your original mortgage with a new one, you're adding a second loan also using your home as collateral. But everything else &mdash; the fact that you're taking a fixed amount of money, usually at a set rate, and paying it back over time &mdash; remains the same.</p> <h2>Home Equity Loan Pros</h2> <p>A second mortgage is a lot like a cash out refi, but with some wrinkles.</p> <h3>1. Simplicity</h3> <p>If you have a great mortgage rate on your home and don't want to change it, this is a way to borrow money while leaving your original mortgage untouched.</p> <h3>2. Shorter Time</h3> <p>If you have a 30-year mortgage but only want to borrow money for five to 15 years, you can do that with a home-equity loan.</p> <h3>3. Tax Benefit</h3> <p>Like a regular mortgage, your interest is usually tax deductible.</p> <h2>Home Equity Loan Cons</h2> <p>You'll need to be sure you understand the downsides of this kind of loan.</p> <h3>1. Interest Rate</h3> <p>Data from Bankrate shows home equity loans averaging at least a percentage point higher than mortgage rates.</p> <h3>2. Qualifying</h3> <p>You need good credit, especially for the best rates.</p> <h2>What's the Total Cost of a home-equity loan?</h2> <p>About $11,000 in interest and fees to borrow $50,000 for 10 years.</p> <p>If you borrow $50,000 for 10 years through a second mortgage, you would pay about $13,000 interest over the life of the loan. Closing costs would be similar to a mortgage refinance, about $2,000. During that time, the mortgage interest deduction could save you about $4,000 in taxes.</p> <h2>Home Equity Line of Credit</h2> <p>Like a home-equity loan, a Home Equity Line of Credit (HELOC) is a secondary loan that piggybacks on your original loan. As with both types of loans discussed above, your home is still the collateral. The big difference is that while you can get cash out of a first or second mortgage only once, a HELOC is a revolving credit line, meaning that you don't need to know upfront exactly how much you'll need over the life of the loan. You can borrow $10,000 this month for a new furnace, and then $5,000 another month for landscaping.</p> <h2>HELOC Pros</h2> <p>The key advantage of a HELOC is its flexibility, but there are others to consider, too.</p> <h3>1. Borrowing Flexibility</h3> <p>Experts recommend these loans for ongoing expenses such as college tuition, rather than a home repair that you might pay for in a lump sum. If you do a refinance and then realize you'll need to borrow more money, you would need to pay closing costs all over again and might not be able to lock in the same rate.</p> <h3>2. Tax Benefit</h3> <p>Like the above loans, the interest paid on a HELOC is usually tax deductible.</p> <h3>3. Payment Flexibility</h3> <p>Your loan may allow you to pay interest-only for a certain amount of time.</p> <h2>HELOC Cons</h2> <p>As with the other home loans discussed, a HELOC carries some costs.</p> <h3>1. Risk</h3> <p>Like both the above loans, your home is on the line.</p> <h3>2. Rate Uncertainty</h3> <p>Since HELOCs often have <a href="https://www.consumer.ftc.gov/articles/0227-home-equity-loans-and-credit-lines#lines">variable interest rates</a>, and rates are currently at historic lows, they will probably rise in the future. By law, how much the rates go up is capped &mdash; the lender must tell you the maximum potential rate when you take out the loan. The average HELOC rate at the moment is similar to home equity rates, or around a point above 30-year-mortgage rates.</p> <h3>3. Balloon Payments</h3> <p>Many HELOCs start out requiring only interest payments, then expect the borrower to pay the whole principal at the end. If you can't, Goldman said, you'll probably end up refinancing the debt into a much longer, more expensive loan.</p> <h3>4. Temptation</h3> <p>As with credit cards, having a line of credit to draw on can encourage overspending. &quot;It's one thing to be on a diet when the refrigerator is empty. It's another thing to be on a diet when the freezer is full of ice cream,&quot; Goldman said. &quot;You'll have this money available to you, so it will require a great deal of discipline to manage it.&quot;</p> <h3>5. Qualifying</h3> <p>You need good credit to qualify, especially for the best rates.</p> <h3>6. Fees</h3> <p>You may or may not have to pay closing costs, and may be charged ongoing fees such as annual maintenance fees and transaction fees.</p> <h2>What's the Total Cost of a HELOC?</h2> <p>Rough estimate: $9,500. It's more difficult to predict the lifetime cost of a HELOC if the rate is adjustable and the amount you owe on it varies, but this <a href="http://www.calcxml.com/calculators/adjustable-rate-mortgage-calculator">adjustable mortgage calculator</a> figures that with steady, modest interest increases, a 10-year, $50,000 HELOC could cost $14,000 in interest. Fees vary, but if your bank charges a $50 annual fee, that adds $500 to the cost. Subtract an estimated $5,000 in tax savings.</p> <h2>Borrowing From Your 401K</h2> <p>If you have a 401K retirement account through your employer, you might have the option of &quot;borrowing&quot; from its balance. This is not a true loan, since the money in your 401K already belongs to you. In reality, what you're doing is getting an exemption from early withdrawal penalties and taxation, as long as you promise to put the money back and pay yourself an interest rate &mdash; generally one to two percentage points above the prime rate.</p> <p>Despite all those articles out there warning you to avoid borrowing from your 401K, Goldman says this can be a good option if conditions are right.</p> <p>&quot;If I had my choice, I would definitely borrow from a 401K,&quot; he said. Although neither borrowing against your home or borrowing against your retirement are without risk, at least if you fail to pay back your 401K loan, you're not out on the street.</p> <h2>401K Loan Pros</h2> <p>This type of loan may be the easiest of all to get &mdash; it's your money, after all!</p> <h3>1. Qualifying</h3> <p>You don't need good credit to qualify for a good rate, making this an attractive option for folks who wouldn't qualify for a regular loan.</p> <h3>2. Risk</h3> <p>If you fail to pay it back, it won't affect your credit score or send collection agents after you. You also don't risk having your home repossessed.</p> <h3>3. No Bank</h3> <p>You pay the interest to yourself, which is sort of like not paying interest at all.</p> <h2>401K Loan Cons</h2> <p>There are not too many downsides to borrowing from your 401K &mdash; but there's a big one you should think very carefully about.</p> <h3>1. Risk to Your Retirement Savings</h3> <p>Failure to pay back this loan could cause great harm to your retirement account. For instance, if your employment ends for any reason, the loan becomes due immediately. If you can't pay it, it's converted to a distribution, which means that you pay taxes and (if you are under age 59 &frac12;, a 10% penalty). So you're basically stuck at your job while you have a 401K loan out; you might end up turning down a new job offer if you don't have the cash to pay the loan. Worse, if you get fired and can't pay it, you could be out of a lot of money in addition to having no job.</p> <h3>2. Double Taxation</h3> <p>The disadvantage that people often don't consider with 401K loans is that while you filled your account with pretax dollars, you repay the loan with post-tax dollars &mdash; but you'll have to pay tax again on the money when you eventually withdraw it in retirement. How much you can get: While home loans let you borrow a percentage of your home equity, 401K loans are capped at $50,000 or half your balance, whichever is less.</p> <h2>What's the Total Cost of Borrowing From Your 401K?</h2> <p>It would vary greatly depending on how close you are to retirement and how well the market does during your loan. Using <a href="http://www.calcxml.com/calculators/impact-of-borrowing-from-my-retirement-plan">this calculator</a>, I came up with an estimated cost of $25,000 in lost investment and tax benefits to borrow $50,000 for five years. That assumes your retirement account would have $10,246 less in it at the time of retirement, and that you lost out on $15,000 worth of tax benefits.</p> <h2>Bottom Line</h2> <p>By these calculations, home equity loans tend to be less costly than mortgage refis or 401K loans. You should run the numbers using your own circumstances before making that determination for yourself.</p> <p>Cost is not the only thing to consider when deciding how to borrow. There's also the degree of risk involved, and the amount of time you have to pay the money back. Again, personal circumstances will dictate your choice: If you only need the money for a short time, for instance, until your stock options vest next year, a 401K loan might be the best choice. If you can't afford to pay the loan off in the near-term, the refinance gives you the most time.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/3-sources-of-fast-cash-besides-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt">5 Ways to Pay Off High Interest Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">The Fed Raised Rates — Then Something Weird Happened</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-lenders-that-love-millennials">4 Lenders That Love Millennials</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal">My 2016 Budget Challenge: Can a Paint Job Help an Old House Pass a Re-Fi Appraisal?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k borrowing HELOC home equity line of credit interest loans mortgages refinance second mortgage Wed, 02 Nov 2016 10:00:10 +0000 Carrie Kirby 1825229 at http://www.wisebread.com