No drastic changes this year. But next year is very different.

Image: Retrorocket/Getty

The sweeping tax bill signed into law just before the 2017 holidays brings changes for virtually all homeowners — but, for the most part, not until you file your 2018 tax return in 2019.

Homeowner tax deductions don’t really change for taxes due this year. So file as you normally would on April 17 (or Oct. 15, if you get an extension).

After this tax season, here’s how the new law can affect your home ownership tax benefits.

The Standard Deduction Is Going Up

Because the standard deduction has increased across the board — to $12,000 from $6,500 for single individuals and to $24,000 from $13,000 for joint returns — fewer people will have a reason to itemize. And you guessed it, to get home ownership tax benefits, you have to itemize.

If you do have enough deductions to itemize, some things have changed:

The Mortgage Interest Deduction Remains, But With a New Cap

The maximum mortgage debt on which you can deduct interest for new loans is now $750,000, not $1 million as before. Second-home mortgage interest follows the same rule.

If your mortgage existed on Dec. 14, 2017, you’re grandfathered in on the $1 million maximum. Also, you can refinance that existing mortgage and keep deducting the interest on up to $1 million of debt, so long as you don’t increase the amount you owe with the refi.

 

Home Equity Loan Interest Is Only Deductible for Home Improvements

If you’re planning to redo a bathroom or a kitchen or fix up a fixer-upper, the interest on new home equity loans, home equity lines of credit, and second mortgages will still be deductible, but only up to the maximum amount (for all mortgages) of $750,000. (The new rules refer to “substantial” home improvements, though the rule makers didn’t define that word. Talk to your tax pro.)

The rules no longer allow you to use home equity loans to get tax-deductible financing for such things as consumer debt and tuition.

However, if you have an existing home equity loan (approved before Dec. 15, 2017) and the proceeds were used to substantially improve your home, the interest will remain deductible, so long as you don’t exceed the total cap.

State and Local Tax Deductions Are Capped

Through 2017, these deductions were unlimited. Starting with tax year 2018, state and local taxes, including property and income or sales taxes, are capped at a total of $10,000 combined.

BTW, talk with your tax preparer if you prepaid your 2018 property taxes in 2017 in hopes of maxing out your deductions before the tax law change. Whether it’s actually deductible depends.

• If you had a 2017 property tax bill in hand, that means the tax was assessed and you should be able to deduct it with your 2017 taxes if you itemize.
• If your local taxing authority said it would accept prepayments, but the tax hadn’t yet been assessed — just estimated — the payment likely isn’t deductible on your 2017 tax returns.

Casualty Losses Have Been Pared Back

Casualty losses for such things as a home burglary or a fire are no longer deductible. To claim a casualty loss, the loss has to fall under a presidentially declared disaster, like a hurricane or earthquake.

Moving Expense Deductions Are Limited to the Military

Unless you’re in the military, moving expenses you pay out of pocket for a job relocation (at least 50 miles farther from your house than your current job) are no longer deductible. And you can no longer exclude employer reimbursements for moving expenses from your income.

What’s Not Changing

The capital gains exclusion on a gain on the sale of your home stays the same. When you sell your primary residence, you can make up to $250,000 in profit if you’re single, or $500,000 if you’re married, and not owe any taxes on those gains. Most people are eligible for this exclusion, but you must have lived in your home for at least two of the five years before you sell.

The student loan deduction — up to $2,500 if you’re repaying — stays put, and you don’t have to itemize to take it.

The home office deduction remains for independent contractors. But for employees who work from home, it’s been repealed.

The prepaid interest (or points) you paid when you took out your mortgage is still 100% deductible in the year you paid it, if you itemize. If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.

But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years.

If you’re a landlord, there’s good news: Your mortgage interest and property tax deductions on your rental real estate remain unlimited.

What’s Been Gone for a While

The private mortgage insurance(PMI)deduction expired with tax year 2016. Ditto the residential energy tax credits for installing things like energy-efficient windows and doors, water heaters, furnaces, and insulation.

Congress didn’t address either of these benefits in the new tax legislation. However, it’s still possible that lawmakers may retroactively reinstate these tax benefits in 2018.

 

Article written by CHRISTINA HOFFMANN

 

 

 

Looking to buy or sell a home?

Chris Lee and Rusty’s Team at RealtySouth 205-233-5183

 

If you’re in the market for a new home or investment property, one of the first questions you’ll probably ask is, “What can we afford?” Many buyers become so caught up in how much they can afford that they don’t realize their total buying power—that is, the total amount of purchasing potential they actually have.

 

Buying Power Defined

Your buying power is comprised of the total amount of money you have available each month for a mortgage payment. This means the money you have each month after fixed bills and expenses. Any money you’ve saved for a down payment, the proceeds from the sale of your current home, if applicable, and the amount of money you’re qualified to borrow all impact your buying power as well. When you take all of this into account, you may find you are able to purchase a larger home or a home in a more desirable neighborhood, or you might realize you should be looking for homes in a lower price range.

 

What About Housing Affordability?

Housing affordability is a metric used by real estate experts to assess whether or not the average family earning an average wage could qualify for a mortgage on the average home.¹ Although this figure is essential to creating a comprehensive overview of the real estate market, it’s not a factor you should consider in your home search. What may be considered affordable to you based on your income and other factors may be different than what’s affordable to the average buyer.

 

Why Buying Power Matters

A common misunderstanding is that a home’s list price determines whether or not you can purchase it. Although it’s important to look at the price tag, it’s essential to consider what your monthly payment will be if you own the home. After all, the purchase price doesn’t include the housing-related expenses, such as annual property taxes, homeowner insurance, associated monthly fees and any maintenance or repairs. Figuring out the payment will prevent you from overestimating or underestimating your buying power. After all, you’ll live with your monthly payment, not the sales price.

 

Once you have clarity on your buying power, you’ll be able to buy the home you want, instead of settling for a home because you feel it’s the only one you can afford. It will also prevent you from becoming “house poor,” a common term for someone who’s put all their money toward the down payment, leaving them nothing left over for fees outside of their monthly house payment. Both scenarios can negatively impact the lifestyle you want to live. Understanding your buying power can help you get the home you want without sacrificing the lifestyle you desire.

 

If you haven’t sold your current home yet, a Comparative Market Assessment (CMA) will give you a general idea of how much you may get for your home based on what other homes have sold for in your area. Contact our team for a FREE CMA!

 

Calculating Your Buying Power

You might be wondering, “How do I know what my buying power is?” Buying power is calculated by adding the money you’ve saved for a down payment and/or the money you made from selling your home (minus fees and mortgage payoff) to all of your sources of income and investments that could be used to make your monthly payment. Make sure to include your monthly pay, commissions or tips, dividends from investments, payments from rental properties or other monthly income you receive as well as the loan amount you’re willing to finance and qualify for.

 

Most lenders advised buyers to spend no more than 35 to 45 percent of their pretax income on housing, meaning all your income and sources of revenue prior to paying taxes. Make sure you factor in not only your mortgage payment, but also property tax and home insurance to the cost of housing.² However, other financial experts advise spending no more than a very conservative 25 percent of your after-tax income on your housing expenses.²  Whether you plan to spend the average, play it conservative or split the difference is up to you.

 

Traditionally, mortgage lenders have targeted the ideal housing expense amount to be a ratio of 28 percent or less.³

 

However, these figures bring up an important point: you don’t have to spend all of your savings and available monthly income on a mortgage payment. It’s important to set money aside for regular home maintenance, unexpected repairs and monthly fees, such as a condominium or homeowners association fee. While the above ratios are commonly accepted, a lender will look at your total financial picture when they decide how much they’re willing to lend. It may be tempting to take out a large loan in order to purchase the home of your dreams, but keep in mind the less money you have to borrow, the stronger your buying power may be.

 

4 Things That Impact Buying Power

1. Credit score. A great score can help you lock into a lower interest rate.

 

2. Debt-to-income ratio. The lower the ratio, the better risk you may be to lenders as long as you have an established credit history.

 

3. Assets, including the documentation of where the money for the purchase is coming from and the mix of your investments.

 

4. Down payment. The more you’re able to put down, the less you will have to borrow. With a down payment of 20 percent or more, you won’t have to purchase private mortgage insurance (PMI) and you may also be able to negotiate a lower interest rate.

 

How to Save for a Down Payment

If you’re thinking of buying a home one day, one of the first steps to take is to start saving for a down payment. Here are some tips to make saving easier.

 

First-time buyers:

1. Set a savings goal. One way to figure out how much to save is to use the average sales price for homes that are similar to what you want and figure out your target down payment percentage. For example, if homes are selling for $200,000 in your area and you want to put 20 percent down, you’ll have to save $40,000. Set a goal to save that amount within a specific time frame; just keep in mind the longer you save, the more the average selling price will change. Although the majority of buyers saved for six months or less, 29 percent of all buyers (and 31 percent of first-time buyers) saved for more than two years for a down payment.⁴

 

2. Cut back on expenses. Review your monthly expenses and look for ways to save. Twenty-nine percent of buyers cut spending on non-essential items and 22 percent cut spending on entertainment while they were saving for a home.⁴ Think about items you can live without or cut back on temporarily while you’re saving.

 

3. Look for ways to boost your income. Get a side job or sell items online or at a garage sale to increase your income in a short amount of time. Be sure to save any windfalls you get, including your annual income tax refund or work bonuses.

 

4. Check out home-buying programs. Your state, county or local government may offer special programs, such as grants, for first-time buyers to use.

 

5. Ask your family. Thirteen percent of all buyers, and 24 percent of first-time buyers were given money from family or friends to use toward the down payment of their home.⁴

 

Repeat buyers:

More than 52 percent of repeat buyers used the proceeds from the sale of their primary residence toward the down payment on their next home.⁴ Similarly, 76 percent tapped into their savings accounts.⁴ If you’re thinking of buying another home, here are more ways to save more money, in addition to the tips listed above:

 

1. Rent a room. If you have an income flat (or mother-in-law unit) attached to your home, rent it out and channel the income into a high-interest savings account.

 

2. Make your money work for you. If you don’t plan to buy for at least five years, invest it and let the compound interest work for you. Discuss this option with your financial planner or broker to see if this is ideal for you and your goals.

 

3. Tap into your 401(k). If you have a 401(k) plan, you may be allowed to borrow a portion of it, the lesser of up to $50,000 or half of its value, for your down payment. Remember, it’s a loan so you’ll have to pay it back. If you leave or lose your job before you’ve repaid the loan, you’ll have between 60 to 90 days to repay the balance or face stiff taxes and penalties.

 

If you want to buy an investment property

Whether you’re buying a second home or a rental property, here are a couple tips to save for a down payment.

 

1. Tap into your equity. If you’ve paid off or paid down your mortgage on your primary home, you may be able to tap into your equity to purchase another property. Contact your lender to learn more about a HELOC or home equity loan.

 

2. Get a partner. Find a friend or relative who’s willing to purchase property with you. Typically, you’ll split the costs and profits equally. Just make sure to work with an attorney to create a partnership agreement to fit your situation.

 

 

Work Out Your Buying Potential

What’s your buying potential? Fill out this worksheet to get an estimate.

 

Housing Expense Ratio:
1. Monthly income before taxes	$
2. Multiply line 1 by 0.28	X 0.28
3. Monthly mortgage payment (PITI) should not exceed this amount	= $
4. Monthly income before taxes	$
5. Multiply line 4 by 0.36	X 0.36
6. Total monthly payments on all debts (including mortgage) should not exceed this amount	= $
7.  Subtract the total monthly payments on all outstanding debts (e.g., car loans, credit cards, student loans, etc.)	– $
8. The monthly mortgage payment should not exceed this amount	$
9. Look at line 3 and line 8. The lower figure is an estimate of the maximum mortgage payment in consideration of your income and debts.	$
10. Multiply line 9 by 0.80	X 0.80
11. This equals portion of your mortgage payment that is the principal and interest only	$
12. Use the table below to see the size of the loan you may be able to obtain with this monthly mortgage payment.

Source: Iowa State University Extension, What is your house-buying power?

 

Monthly Payment on 30-Year Fixed Rate Mortgage

Loan amount	3%	3.5%	4%	4.5%	5%	5.5%	6%
$50,000	211	225	239	253	268	284	300
$75,000	316	337	358	380	402	426	450
$100,000	421	449	477	506	536	568	600
$150,000	632	674	716	759	804	852	900
$200,000	842	898	954	1012	1072	1136	1200
$250,000	1052	1123	1193	1265	1340	1420	1500
$300,000	1263	1347	1431	1518	1608	1704	1800

 

Didn’t see your desired loan amount? Use the table below to estimate your monthly payment (principal and interest) per $1,000 of your loan. To figure out an estimated loan payment, multiply the factor by the number of thousands in the amount of your mortgage.

 

For example, if you intend to borrow $400,000, with a loan term of 30 years at 4% interest, multiply 4.77x 400 = $1908 per month.

 

Interest Rate	15-Year Term	30-Year Term
	Monthly Payment	Monthly Payment
3%	6.90	4.21
3.5%	7.14	4.49
4%	7.39	4.77
4.5%	7.64	5.06
5%	7.90	5.36
5.5%	8.18	5.68
6%	8.44	6.00

Source: HSH.com http://www.hsh.com/mopaytable-print.html)

 

Don’t forget to factor in property taxes and insurance. These are often added to your principal and interest of your mortgage payment—the money used to pay down the balance of your loan and the charge for borrowing the money. Since these numbers vary, contact your county assessor’s office for the current property tax rate and your insurer for a home insurance quote. Once you have these figures, divide each by 12 to estimate how much they’ll add to the above payment amounts.

 

Do you want a clearer picture of your buying power? Would you like to see what kind of homes you can get with your buying power? Give us a call!

Chris Lee and Rusty’s Team  at RealtySouth                                  205-233-5183

                                     

Sources: 1. National Association of REALTORS https://www.nar.realtor/topics/housing-affordability-index/methodology

2. Moneyunder30.com https://www.moneyunder30.com/percentage-income-mortgage-payments
3. Credit.com https://www.credit.com/loans/mortgage-questions/how-to-determine-your-monthly-housing-budget/
4. National Association of REALTORS, 2016 Profile of Home Buyers and Sellers
5. Iowa State University Extension, What is your house-buying power? https://store.extension.iastate.edu/product/pm1460-pdf
6. HSH.com http://www.hsh.com/mopaytable-print.html

 

 

 

 

 

Our world is full of risk at every turn—from perilous jobs to dangerous driving conditions. That’s why we all love to get back to our homes and not worry about everyday safety hazards. It’s great to feel comfortable and safe at home, but is it as safe as it can be?

 

Your home should be your haven: the place where you will be protected from harm. It should be a top priority, and yet every year 1200 people or more visit the emergency room during the holiday months due to accidents and unintended injuries sustained from hidden dangers around the home.

 

With a sharp eye and preventive action you can reduce the chances of lurking safety dangers for everyone who visits your home.

 

The Top 12 Home Safety Tips

 

1. GOOD LIGHTING— Adequate lighting reduces the risk of tripping and falling both inside and outside your home. This is especially important in winters when days are shorter. Critical areas that need to be illuminated are the stairs, outdoors, and foyers. Make sure your street number is well lit and visible from the street to aid first responders find your home. The fix: Make sure adequate wattage is utilized and long-life bulbs and motion detectors are in place.

 

2. ELECTRICAL PROBLEMS?— Electrical issues, like a flickering light or a dead outlet, can be mild annoyances that actually signal serious dangers. If not addressed promptly, a faulty electrical system can result in house fires and shocks. The fix: If you’re experiencing any problems with your electricity, contact a professional right away. In your daily life, make sure electrical cords are not frayed or pierced and extension cords are securely connected. Do not run too many cords to a single outlet. Unplug small appliances, space heaters, and power tools when not in use.

 

3. DO ROUTINE CLEANING— Not maintaining your appliances leads to a greater chance of accidental home fires. The fix: Do simple tasks regularly like cleaning grease off your stovetop, emptying the lint trap on your dryer, and keeping your chimney clean and clear.

 

4. SMOKE AND GAS DETECTORS— Every home needs functional warning devices that detect smoke and gases. The fix: When purchasing smoke alarms, make sure they also detect carbon monoxide, a deadly gas that is especially dangerous because it is colorless and odorless. Replace the batteries every six months—or whenever you change your clocks. Create an emergency evacuation plan, build a preparedness kit, and practice regular safety drills with your family to ensure awareness of procedures.

 

5. SECURE YOUR HOME— Many homes now have the latest technological advancements but still rely on locks and hardware from decades ago to keep you safe from intruders. The fix: Do an audit of all entry points to your home—doors and windows and screens. If any do not have secure screens, locks, and deadbolts, have them installed. For those entry points that do already have door knobs, handles, and locks, make sure that they are in good working condition.

 

6. WHEN YOU ARE AWAY— We all enjoy long weekends and out-of-town vacations, but unfortunately that leaves your home vulnerable to intruders. The fix: Create the illusion that someone may still be there. Leave a TV or stereo on in the room where a burglar would most likely break in. Have neighbor pick up mail and the daily paper. Turn down phone ringers, keep blinds drawn, and don’t leave unsecured valuables in the home even if you think they are well-hidden. Never hide keys around the home or garden, and don’t leave notes on the door that suggest you are out of town.

 

7. HOUSEHOLD REPAIRS— Even if you are an expert and know your way around electrical, plumbing, car or other household repairs, proceed with caution. A poor repair could be a recipe for disaster. The fix: Call a professional or ask me for a referral from our trusted sources.

 

8. VEHICLE CAUTION— Remember that there is danger even before you drive on the street. If you are backing your car up, watch out for children and pets on the sidewalk and road. The fix: Be cautious and proceed slowly when driving vehicles in or out of your driveway. If your driveway does not have good visibility in both directions, walk down and look in both directions before you get in your car.

 

9. MAKE IT SAFE FOR VISITORS— If you are hosting friends and family, consider what additional safety challenges they may face. The fix: Put yourself in the shoes of a small child and look for low, hard edges, sharp objects, easy-to-open cabinets with chemicals and cleaning agents. Look for falling and tripping hazards that may fell seniors.

 

10. BRACE YOURSELF— Heavy objects are rarely braced in the home. Appliances, artwork, televisions, and aquariums present real hazards if they are knocked down by a person or a natural disaster. The fix: Strap and brace heavy objects and use security hardware for large artwork.

 

11. UNCOVER HIDDEN DANGERS— If your home was built before the late seventies, there’s likely lead in the paint under the top coats on your walls and windows, and there might be traces in the varnish used on many hardwood floors. In addition, asbestos often can be found in insulation and “popcorn” ceiling textures. The fix: Hire a licensed contractor to test for possible contaminants and remove them safely, especially prior to a remodel.

 

12. MOTHER NATURE— Your homeowners insurance will cover you in many instances, but did you know that you may not be insured against natural disasters like earthquakes, floods, tornadoes, and hurricanes? They typically require an additional policy. The fix: Contact your insurance agent to make sure you have adequate replacement coverage as home values escalate and coverage amounts can stay static. Discuss costs for adding disaster policies for the natural disaster most likely to hit your area. Finally, having a disaster and communication plan can minimize the risks.

 

Safety Dangers to Kids You May Not Think About

 

Do you have small children who live with you? Even if you don’t, with the holiday season rapidly approaching, your home may welcome friends with young children and older family members. This makes now the ideal time to survey home your home for potential safety problems.

 

OPEN WATER

Did you know that as little as an inch of water can be a major hazard? A pail of water in the yard, large puddles from a storm, even a washing machine can induce a small child to trip or fall into and become at risk. The fix: Watch for open ice chests and other standing water, and don’t leave toilet seats open.

 

SMALL BATTERIES

Button-sized lithium batteries power small electronic devices, including remote controls, watches, musical greeting cards, and ornaments. When accidently swallowed, they can get stuck in the esophagus and generate an electrical current that can cause severe chemical burns and tissue damage. The fix: Only let small children play with mechnical devices and toys under supervision, and make sure to put these items away when not in use.

 

WINDOWS AND STAIRS

Every year, more than 5,000 kids end up in the emergency room after tumbling out of a window. Combat that by installing window guards or window stops so kids can’t fall out. Stairs are another potential hazard for youngsters with less-than-perfect balance. The fix: Baby gates can prevent young kids from venturing up or down. Steps should always have firm footing and be clear of objects as even older people can slip and fall or trip on items left on the stairs.

 

FAMILY PETS

Cats can scratch a child not used to playing with finicky felines. The family dog may be big and loving but can outweigh a child by five times. Children can be easily knocked down, nipped, or even bitten by a dog not used to the activity of small children. The fix: Monitor play activity and make sure your pet is not getting anxious or annoyed.

 

CORDS

Babies can be strangled by cords on blinds and shades. The fix: Excessive cords of all types should be removed or secured down. Always keep cribs away from windows with loose cords.

 

Now’s the Time

With the upcoming holidays at hand, now is the perfect time to survey your home and address potential safety hazards to yourselves, your family, and your friends. It doesn’t take long, most fixes are very inexpensive and simple to do, and your efforts will pay dividends in peace of mind for years to come.

 

If you would like our advice on how to make your home safer and need a list of trusted sources for home repairs, please contact us today. It’s our business to ensure that your home is safe and secure for your family.

Chris Lee and RustysTeam | 205-233-5183| clee@realtysouth.com | http://www.chriswlee.com

What is Home Equity?

Home equity seems to be a very simple calculation — the total amount of mortgages owed subtracted from the current market value of a home. Here is a simple example:

 

Current Home Market Value         $325,000

Existing Mortgage                          $225,000

Homeowner Equity                         $100,000

 

One side of the equation is well defined, and it is found on the monthly mortgage statement, the loan balance. The other side is less obvious — the current market value of the property.

 

As a homeowner, your down payment purchases your initial equity, and your monthly (or additional) principal payments increase your equity. In strong real estate markets and in-demand locations, equity can increase quite rapidly as the property value increases, but the inverse can also happen — too much available inventory and market down-cycles can lead to falling home values and a reduction in homeowner equity.

 

It can be difficult to put an accurate value on something that you have emotional and monetary vesting in. It is safe to say that most people think their home is worth more than then it is.

 

Homeowners can make savvy assessments about their home’s current market value by following the sales of similar properties in the neighborhood, but should stay away from websites such as Zillow and Trulia, which provide inaccurate and outdated estimates. The most accurate measurement requires a comparative market analysis from a real estate professional or having the home professionally appraised. But, the bottom line — your home is worth as much as someone is willing to pay for it.

 

Creating Value is in Your Hands

Maintaining the condition of a home is vitally important to retaining and increasing value. Homes are judged against their peers: how they compare to similar homes in the neighborhood. Another way to retain value is to not over upgrade, since it is rare to ever recoup the money spent if you exceed neighborhood value. Keep up the landscaping and do the little things to add curb appeal.

 

Putting Home Equity to Work

Home equity represents the largest single asset of millions of people, and because it represents so much of an individual’s net worth, it must be treated with respect. Home equity is not a liquid asset until a property is sold, or it is borrowed against.

 

There are two types of loans that tap into homeowner equity as collateral.

 

Home Equity Loans

 

Many home equity plans set a fixed period during which the person can borrow money, such as 10 years. At the end of this “draw period,” the person may be allowed to renew the credit line. If the plan does not allow renewals, the homeowner will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period, for example, of 10 years.

 

A home equity loan, sometimes called a second mortgage, usually has a fixed rate and a set time to pay it back, generally with equal monthly payments.

 

Home Equity Line of Credit

 

A home equity line of credit is similar to a credit card. The lender sets a maximum amount you can borrow, and you can draw money as you need it, though many home equity lines of credit require an initial draw. The interest rate varies daily, and is usually prime plus a set number, but the required payment is usually interest only. Once the loan has been paid down, the payment is reduced, and it can be paid off and initiated as many times as a homeowner requires.

 

How Much Equity can be Accessed?

Since the financial institution is lending money and using a home as collateral, they will not lend 100% of the home’s equity. The bank does not want to take the risk that if the house price drops, they would be carrying a loan for more than its market value. Therefore, most banks will allow a qualified homeowner to borrow approximately 80% of their equity.

 

It’s Important to Use Your Home Equity Wisely

Because it is likely the biggest asset most people have, losing your home equity is hard to overcome. It must be used in prudent ways, and the payments against the loan must be affordable. Using equity money to make the loan payment is only acceptable for a short-term solution.

 

There are number of good reasons to use money from a home equity loan… and some really bad ones. First, let’s cover smart uses.

 

1. Invest in Your Home

The best way to use the money is create more equity in the home. Among the very best returns on your investment (ROI) include kitchen and bathroom remodels, adding square footage or an extra bath, enhancing curb appeal and repairing/keeping the existing structure sound. Making prudent investments in your home is a wonderful win-win: you enjoy the upgrades and the repairs can add value to the home.

 

2. Invest in your Children’s Education

Using your home equity to finance a child’s higher education may be the greatest payoff of all. Not only is the rate much lower than a student loan, it is an investment in the child’s future.

 

3. Supplement Retirement Needs

Older homeowners spent their working lives paying down their mortgage. At retirement, when monthly income is reduced, a home equity loan could pay for a dream vacation or an unexpected major expense.

 

4. Augment the Impending Sale of a Home

If you’re planning to sell soon, a home equity line of credit may be the best way to finance improvements, and you can pay it off entirely when you sell. Investing wisely on upgrades and repairs may even reap a profit on your investment.

 

Here are some examples of some not very wise choices.

 

Adding luxury amenities like a swimming pool, a hot spa, lavish landscaping, expensive appliances and exotic countertops and flooring rarely pay off.

 

Purchasing a car or boat or most any personal luxury items is a poor use of the funds, since these items quickly depreciate in value.

 

Also stay away from using money on risk-heavy investments. Financing stock purchases, start-up businesses and paying routine bills is not financially smart. If you cannot afford to purchase those items with available funds, using equity from your home means they should not be in your budget.

 

You should treat a home equity loan as an investment and not as extra cash when making financial decisions. If your intended use of the money doesn’t pay you back in some way, it’s not the best use of your valuable equity.

 

We Are Happy to Assist You

If you would like an assessment of the market value of your home and the current equity you can access, give us a call for a comparative market analysis (205-233-5183). or simply visit www.tuscaloosahomevalue.com

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Okay, you made one of the most important decisions in your life: you’re buying a home! You found your ideal home. It’s in your desired neighborhood, close to everything you love, you dig its design and feel, and you’re ready to finalize the deal.

But, whoa … wait a minute! Buying a home isn’t like buying a toaster. If you discover something’s wrong with your new home, you can’t return it for a refund or an even exchange. You’re stuck with your buying decision. Purchasing a home is an important investment and should be treated as such. Therefore, before finalizing anything, your “ideal” home needs an inspection to protect you from throwing your hard-earned money into a money pit.

A home inspection is a professional visual examination of the home’s roof, plumbing, heating and cooling system, electrical systems, and foundation.

There are really two types of home of inspections. There is a general home inspection and a specialized inspection. Most general inspections cost between $267 and $370. The cost of the specialized inspection varies from type to type. If the inspector recommends a specialized inspection, take that advice because buying a home is the single most important investment you’ll make and you want extra assurance that you’re making a wise investment.

By having your prospective new home inspected, you can:

• Negotiate with the home seller and get the home sale-ready at no cost to you
• Prevent your insurance rates from rising
• Opt-out of the purchase before you make a costly mistake
• Save money in the short and long run

How Much Money Can a Home Inspection Save You?

A home inspection helps to find potential expenses beyond the sales price, which puts homebuyers in a powerful position for negotiation. If there are any issues discovered during the home inspection, buyers can stipulate that the sellers either repair them before closing or help cover the costs in some other way. If the sellers do not want to front the money to complete the repairs, buyers could negotiate a drop in the overall sales price of the home!

Perhaps even more importantly, a home inspection buys you peace of mind. Your first days and months in a new home will set the tone for your life there, and you don’t want to taint that time with worries about hidden problems and potential money pits.

To help you understand how much money a home inspection can save you, here are some numbers from HomeAdvisor to drive the point home … so to speak.

Roof – Roofing problems are one of the most common issues found by home inspections. Roof repair can range between $316 and $1046, but to replace a roof entirely can cost between $4,660 and $8,950.

Plumbing – Don’t underestimate the plumbing. Small leaks can cause damage that costs between $1,041 and $3,488 to repair. Your home inspector will look for visible problems with the plumbing such as leaky faucets, water stains around sinks and the shower, and noisy pipes. Stains on walls, ceilings, and warped floors show plumbing problems.

Heating and Cooling – Ensuring the home’s heating and cooling system is working properly is very important. Your home inspector will make you aware of any problems with the existing system and let know you whether the system is past its prime and needs replacing. You don’t want to throw down $3,919 to replace an aged furnace. Nor do you want to spend $5,238 replacing an ill-working air conditioner. Replacing and repairing a water heater gets pricey too. Wouldn’t you rather use your savings for a vacation?

Electrical Systems – When thinking of the electrical system, no problem is better than even a small problem. Electrical problems might seem small, but they can blossom into thousand-dollar catastrophes. Make sure your home inspector examines the electric meter, wires, circuit breaker, switches, and the GCFI outlets and electrical outlets.

Foundation – If your home inspector sees that the house is sinking, that means water is seeping into the foundation; cracks in walls, sticking windows, and sagging floor also indicate foundational problems. The foundation is so important that if the general inspection report shows foundation problems, lenders will not lend money on the home until those issues are solved. Foundation repairs can reach as high as $5,880 to repair.

As you can see, a small investment of a few hundred dollars for a general home inspection can save you tons of money and future headaches. To save even more money, you might consider investing in a specialized home inspection as well. A specialized inspection gets down to the nitty-gritty of all the trouble spots the general home inspection might have located.

How Much Money Can a Specialized Inspection Save You?

A general home inspection can trigger a need for a specialized inspection because the general home inspector spotted something off about the roof, sewer system, the heating and cooling system, and the foundation. If humidity is high where you’re buying your home, a pest inspection is recommended. Usually, a pest inspection will check for mold as well as pests. Most homebuyers have a Radon test done to ensure air quality.

Roof – Roof specialists examine the chimney and the flashing surrounding it. They also look at the level of wear and tear of the roof. They can tell you how long the roof will last before a new one is needed. They’ll inspect the downspouts and gutters. The average cost of a roof inspection is about $223. Most roof inspections will cost between $121 and $324.

Sewer System – Making sure your sewer system has no problems should happen before the closing because what might look like a small problem can turn into a large problem in the future. If any issues pop up, you can negotiate with the seller about needed repairs or replacements before closing. Cost of inspection will vary; on the low side, it might cost you around $95, and on the high side, it might cost you $790. Compare these numbers to repairing a septic tank, which can cost, on average, $1,435 (though it could reach as high as $4,459), and you can see that the cost of an inspection is worth it when you catch the problem before you buy.

Heating and Cooling System – A HVAC specialist will check the ducts for blockage and for consistent maintenance of the unit. The repairs needed might be small or they might be big, but this small investment will save you headaches and lots of money down the road.

Foundation – A foundation specialist will pinpoint the exact problem with the foundation. The specialist will look at the grade or slope of the home. The ground should slope away from the home in all directions a half inch per foot. Most homeowners have spent between $1,763 and $5,880 to repair their foundation. And the average cost to re-slope a lawn is at $1,705. Most homeowners paid between $933 and $2,558 to re-slope their lawn.

Pest Inspection – Termites eat a home’s wood structure from inside out and can cause thousands of dollars worth of damage to your home. Other pests can turn your dream home into a nightmare. Depending on the humidity of where you live, you should a pest/termite inspection every two years or so. You can start with your potential new home. Most inspections are extensive and cost between $109 and $281. The good news is that most pest management company will guarantee the past inspection if bugs show up.

Radon Test – Radon is a naturally occurring invisible odorless gas that is the second leading cause of cancer. A radon test is a good test to have done as a good habit. The cost of radon test is low and its cost varies from state to state. Here’s more information about Radon.

Steps You Can Take to Save Money Using a Home Inspection

To help yourself save with a home inspection, you will need to:

Attend the inspection – Attending the inspection is important because it’s an opportunity for you to ask questions.

Check utilities – Checking utilities let’s know the energy efficiency of your potential home.

Hire a Qualified Home Inspector – We can recommend bona-fide home inspectors to you. You can compare our recommendation with all inspectors who belong to the American Society of Home Inspectors. While the decision of who you work with is always yours, we can educate you so that you make a wise homebuying decision.

 

 

Who hasn’t tried to predict the future? Whether it be predicting the economy, gas prices, or even how your favorite team will perform this season, we have all done it. So when it comes to the interior design of your home, why not take a look at what is making a comeback, and what the “paint color of the year” is predicted to be?

For years granite has been the go to for all of your countertop upgrades. You may be surprised to learn that granite is no longer the favored material when consumers go to upgrade their kitchen. Quartz has become the new favorite of consumers in this market. Citing many factors including, durability, resistance to scratches, color variety, and resemblance of marble, quartz is now the “in” trend.

Have you ever heard the saying “history repeats itself”? Well that is also true when it comes to subway tile. Remember that faded green subway tile in your grandparents bathroom when you were a child? Well guess what? According to Realtor Magazine, subway tile is a classic, and is coming back strong in kitchens and bathroom remodels. The preferred color scheme consumers are using are lighter colors especially off whites.

Lastly, if you are considering repainting a room in your home to improve market value for the next year poised taupe is the way to go. If you are like me you are wondering what that looks like exactly. Poised taupe is best described as a brownish-gray hue color. So there you have it, your predicted color of the year for 2017.

Who doesn’t love a gourmet kitchen or steam shower? These fancy amenities and setups are highly desired in any home, in any market. When choosing to spend money upgrading a home what makes more sense, replacing that old shingle roof with a metal one, or changing out the old shower with a new steam shower. One thing that potential buyers take for granted when buying a home is already expecting that the roof does not leak and that the electrical systems are in good working order. No matter how fancy your kitchen, how big your bathroom, or how spacious your living room, if the exterior of the house is not well taken care of the buyers will not be able to see past it.

Now to the good part. If your roof, siding, electrical systems, and other basic facets of your home are in good order where should you spend the money and start first? I’m glad you asked. Take a look at the article linked below from HGTV.com about which upgrades can bring the greatest resale value to a home.

Which Home Improvements Pay Off?