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Showing posts from July, 2019

Get Leverage Working for You

Leverage is an investment term that describes the use of borrowed funds to control an asset; sometimes referred to as using other people's money.  Borrowed funds can affect the investment in your home positively.For instance, if you had a $100,000 rental property, collected the rents and paid the expenses and had $10,000 left, you would earn a 10% return (divide the $10,000 by the $100,000.)  With no loan on the property, there is no leverage.If you decided to get an 80% mortgage at 8%, you would owe an additional $6,400 in expenses leaving you only $3,600 net.  However, your return would grow to 18% because your investment is now $20,000 in cash (divide the $3,600 by $20,000.) Leverage, the use of borrowed funds, causes the return to increase in this example.  While, most people associate leverage with rental properties, it also applies to a home.  The larger the mortgage, the more leverage you have.  A FHA mortgage with a 3.5% down payment has more leverage than an 80% loan.Assu…

Delay Will Usually Cost More

Two things can happen when the mortgage rates go up before you've found a home or locked-in your mortgage.You'll either pay the current mortgage rate which means a higher payment, or you'll have to increase your down payment to keep the monthly payment at the same level.If the rate were to go up by ½%, the payment on a $275,000 mortgage would increase by $82.87 per month for the entire 30-year term.That would increase the cost of the home by $29,835.Some people are purchasing the maximum home that they can qualify for.In that case, they cannot qualify for a higher payment and the only way to buy the same price home is to put more money down which may not be a possibility.The other alternative is to buy a lower price home which may not be in the same area or size which will involve some compromises.The rate is not the only dynamic that affects buyers waiting to purchase.The home they want could sell to someone else.Prices could increase as new homes come on the market.The q…

Measuring Square Footage

Square footage is commonly used to determine if a home will fit a buyer's needs.The price per square foot can be used to compare the costs of different homes and even, determine the value of a property.The challenge is what is the source of the square footage measurement and how was it done.County records use square footage to determine assessed value for property tax purposes.They are assumed to be reliable but there can be inaccuracies in their tax rolls.Another source of square footage could be from the house plans but the problem there is that the builder may have made modifications, or a subsequent owner could have made additions.Appraisers are required to measure the home to determine square footage and they generally, adhere to a standard method which leads to uniformity in the industry.The ANSI, American National Standards Institute, guidelines are considered the standard but there are no laws governing the process.Because basements are below grade level, regardless of whe…

Checking for Water Leaks

Aside from standing water in your yard or water running out from under a sink, the first indication that you might have a water leak comes from a larger than normal water bill.Before calling a leak specialist or a plumber, there is a simple diagnostic you can perform.Go through your home and make certain that all the faucets are turned off and that the toilets have indeed stopped filling the reserve.Then, go to the water meter and make a mark on the lens where the dial is currently.If there is water in the meter box, the meter itself could be leaking.If the meter is still turning, the leak is between the meter and the house. By inspecting the area between the meter and the house, you can look for soft, muddy areas or grass that is greener than the rest of the yard.One of the hardest places to isolate a leak is in a swimming pool.If you have an automatic filler, like in a toilet, you'll need to turn it off.Mark the water line on the wall and wait to see if the water level goes down…

Checking for Water Leaks

Aside from standing water in your yard or water running out from under a sink, the first indication that you might have a water leak comes from a larger than normal water bill.Before calling a leak specialist or a plumber, there is a simple diagnostic you can perform.Go through your home and make certain that all the faucets are turned off and that the toilets have indeed stopped filling the reserve.Then, go to the water meter and make a mark on the lens where the dial is currently.If there is water in the meter box, the meter itself could be leaking.If the meter is still turning, the leak is between the meter and the house. By inspecting the area between the meter and the house, you can look for soft, muddy areas or grass that is greener than the rest of the yard.One of the hardest places to isolate a leak is in a swimming pool.If you have an automatic filler, like in a toilet, you'll need to turn it off.Mark the water line on the wall and wait to see if the water level goes down…

Building Equity

Owning a home is the first step to building equity.Tenants build equity but not for themselves; they build it for the owners.Equity is the difference in the value of the home and what is owed on the home.There are two dynamics that cause this to grow: appreciation and principal reduction.As the home increases in value, it is said to appreciate.Various authorities will annualize an appreciation rate based on average sales prices from one year to the next.Since appreciation is based on supply and demand as well as economic conditions, it will not be the same year after year.If you looked at a ten to twelve-year period, some would be higher than others and there may even be some individual years that it is flat or even declined.For the most part, values tend to appreciate over time.Most mortgages are amortized which means that a portion of the payment each month is applied to the principal in order to pay off the loan by the end of the term.A $300,000 mortgage at 4.5% for 30 years has $3…