Whether you own a home or are looking to buy or sell one,
here are some useful tips, ideas and advice.
When you are ready to make a move our team members are here for you.
Home Ownership Hedges Against Inflation
Great financial reasons to own real estate, advises Biggerpockets.com are building equity, tax advantages that don’t exist for other asset classes, not having to pay rent, passive income from rental properties, among many others. One of the greatest advantages is that buying a home is a terrific hedge against inflation.
Since 1913, the annual inflation rate in the U.S. has averaged 3.10%. As the cost of goods and services rises, so do the costs of buying a home. Currently, mortgage interest rates, or the borrowing costs to buy a home, are at record lows. If you were to purchase a home today, you’d be able to lock in fixed-rate long-term debt (your mortgage) to buy a financial asset that promises to rise in value while you enjoy using it.
That means that while others pay rising rents and home prices year after year, your monthly payments are cheaper and cheaper, by comparison, allowing you the freedom to reinvest in your home, invest in other asset classes, or put money toward other worth goals such as higher education and retirement. Another way of looking at it is that the first year you on your home will also seem the most expensive, and it will get easier year after year.
A home as an inflation hedge is important because after the pandemic the economy will improve to the point that the government needs to control inflation by raising borrowing rates to banks, mortgages. Homebuying will only become more expensive.
Packing for Your Move
Deciding what to pack when you’re moving isn’t easy. However, if you follow these simple suggestions, packing to move and unpacking to move into your new home will be much easier.
Declutter: Decluttering serves two purposes. It makes it less expensive for you to move because you’re not paying freight to move things you no longer need or want. Second, less clutter makes your home show better to homebuyers. A good rule of thumb is to group items into no more than three categories – Keep, Donate, and Throw Away. Add a “Sell” category if you have time to pack and ship the items.
Organize: Use good packing materials, including sturdy boxes, bubble wrap, and paper, especially if you’re doing the packing and not moving company. Clearly label the boxes according to the rooms where they’ll be moved. Provide your movers with copies of a simplified floor plan, so they don’t have to stop and ask you where this or that box goes.
Think ahead: Remember that the movers, though they are professionals, get tired and that’s when accidents happen. Keep boxes under 50 pounds whenever possible. Put heavier items in larger boxes with proper labeling like “topload.”
Insure you move: Contact your homeowner’s insurance carrier about coverage for moving and riders for valuables. Your mover can provide either released value insurance (about $0.60 per pound of goods lost or damaged, according to Moving.com) or the full replacement value.
Student Loans and Homebuying
According to StudentLoanHero.com, you can get a mortgage loan, even with high student loan debt. It’s all in how you manage the three most important factors in getting loan approval:
Down Payment: Twenty percent of the purchase price of the home is the benchmark down payment, but it’s possible to get a loan with a down payment as little as 3% such as the FannieMae HomeReady morgtage. Down payments can be gifts from parents, from your savings, or from state and local down payment assistance programs. No-down-payment loans for veterans are available from VA.gov and rural community loans from USDA.gov.
Credit Scores: Quickenloans.com says the minimum credit scores you need (between 580 and 620) depend on the type of loan you want. VA loans don’t require credit scores, but the private lenders who make the loans do have minimum credit score requirements, usually 580.
Debt-to-Income ratio: Debt-to-income (DTI) ratio means how much debt you have as a percentage of your income. Most lenders believe you should have no more than 28-31% of your gross monthly income put toward housing costs. Your total debt service should be no more than 10-13% of your gross monthly income. To lower your debt, start making higher payments to reduce the amount of credit card debt you have. You can also refinance your student loans to lower the payments, but be cautious about refinancing federal loans as you’ll lose certain protections like loan forbearance, loan forgiveness and income-based payments.
Selling a Second Home
It’s tax time and you may have questions if you own a second home and sold it or plan to sell it. Do you have to pay capital gains when you sell a second home? All that depends.
A second home, says HRBlock.com, can include houses, mobile homes, condos, co-ops, trailers, and houseboats. When you sell a second home, Merrilledge.com says you’ll owe capital gains on any profits, with certain exclusions.
If you purchased your home as your primary residence, and it was your primary residence for at least two of the five years immediately preceding the sale, you can exclude up to $500,000 of gains on the sale if you’re married and filing jointly, or exclude $250,000 for singles. You can also deduct real estate taxes and points paid to buy your second home.
If you own your second home for more than a year, it’s a long-term capital gain on the profit; a short-term capital gain is on a profit of a second home you owned one year or less.
If you got a mortgage to buy or improve a second home, you can deduct the mortgage interest if you itemize deductions. Your deduction could be limited if your mortgage is more than the fair market value of your home or if the combined mortgages on your primary home and second home are more than $500,000 for single filers or $1million for married join filers.
Confirm all information with your tax attorney, CPA or tax professional.
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