Is now the time to make them real?BY BROOKE REYNOLDS
If your home is no longer where your heart is, it may be time for a change. But between selling and buying, or renovating your current space, it’s hard to know what the next best step to take is. Jeff Day, a senior loan officer at Ruoff Mortgage, gives a practical breakdown of pros and cons for each housing option so you know how to move forward with your next home adventure. Plus, the professionals at Bedel Financial offer up considerations before you fall in love with a new home.
BUYING VS. RENTING
You may have decided you’re ready for the responsibilities and blessings of home ownership. But there’s more to consider than carpet choice. Do you plan to stay in the home for longer than three years? If you’re not sure, weigh the expense of the Realtor fee alone, which typically takes a few years of appreciation before you can break even on selling a house.
Second, if you have the ability to wait for a low interest rate, that’s great, but if not, don’t sweat their ever-fluctuating tendencies. If you’re looking for an indicator for when they are at the lowest, Day suggests to watch for the 10-year Treasury Bond to yield way low since mortgage interest rates closely mimic this indicator.
SELLING IS ADVANTAGEOUS
The national housing market is at its best when we are close to full employment rates in the United States. Right now, we’re in a seller’s market, which means there’s not enough inventory for the number of buyers in the market. This is great news for the seller but can get costly for the buyer, as it usually means multiple competitive offers on the same property.
It’s important the buyer get pre-approved with a lender before looking, since it is a seller’s market, and the seller is going to choose the best offer. And just remember, as you’re trying to edge out other interested buyers, that your monthly house payment should be equal to or lower than 30 percent of your gross monthly income. Don’t let desire overshadow your budget!
REFINANCE WHEN THE RATE IS RIGHT
If you can get into a lower-rate mortgage, refinancing is worth looking into. Day says a good time to refinance your home is when the current interest rates are lower than your mortgage rate, and you can recoup the cost of the refinance in a year to 18 months. (Because no, refinancing is not free, no matter how the ads spin it.)
If you’ve decided to refinance your home, this is a good time to pull cash out for renovation, too, or even to get rid of other revolving debt. It’s a good deal for you because the interest rate on your mortgage is almost always lower than other types of debt.
TRICK OUT YOUR CURRENT SPACE
If you know you’re going to be in your home for a while, bite the bullet and do the in-home renovations you know you’ll enjoy. If you plan on selling in a year or two, focus on what the market wants to see so you can maximize your asking price and maintain a short time on the market.
Many banks offer Home Equity Lines of Credit (HELOC) that are great for renovating a property. Watch the market forecast on these, though. Rates could go up another 2.25 percent over the next two or three years. However, even as these rates increase, they are still less than most credit card rates.
AVOIDING THE EXTREME: BANKRUPTCY
“I usually see bankruptcies due to one of the Big Ds: divorce, downsizing, displacement or death,” Day says. All these triggers have the potential to cause people not to be able to make good on their house payments. You can prepare to avoid all of these situations to some extent, such as having six months’ worth of house payments in savings. You might also consider insurance policies that could help buy you some time before having to claim bankruptcy, like disability or life insurance.
DON’T CLOSE YET!
MUST-READ TIPS FROM BEDEL FINANCIAL
Consider these five often-ignored factors before buying your next home
- Does the neighborhood have a homeowners’ association? If so, it is important to review the HOA contract before buying. There may be restrictions on items such as putting up a playset or a storage barn, which you would want to be aware of before moving in. It is also very important to ensure the HOA dues fit into your budget. Keep in mind that these fees can increase if improvement projects need to be done.
- Whether you are downsizing or upsizing, it is important to get an estimate of expenses from the utility company. Just because you are downsizing doesn’t necessarily mean the utility bills will decrease.
- Consider your future needs when moving. Is there a bedroom and bathroom on the main level if you or a loved one have mobility challenges? Will you be able to keep up with landscaping and maintenance?
- Talk to your homeowner’s insurance agent to find out if they would recommend any additional policies. These could include flood, sewer backup or earthquake insurance.
- Research the area! Visit the neighborhood at different times of the day to get a sense of traffic activity. Don’t be afraid to talk with neighbors. Go online to review crime reports. Buying a home is a large financial transaction, and you don’t want to find out later that the quiet street you visited on a Sunday afternoon is actually incredibly busy during the week.