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Should retirees pay off their mortgages with investments?

Liz has just retired and wonders if she should use her investments to pay off her mortgage, despite her advisor’s advice to the contrary. Q: I retired this year and my mortgage is coming due soon. My advisor said to keep the mortgage as rates are low and keep the money invested to keep making me money. If the investments in question are in a Registered Retirement Savings Plan (RRSP) or a similar tax-deferred account, you need to consider the tax implications of using these investments to pay off your mortgage. If the investments in question are in a non-registered, taxable account, I may be that much more inclined to consider paying off your debt, Liz. The investments in this case would generate taxable investment income, and your required rate of return would need to be higher to account for taxes payable and justify staying invested over paying off your mortgage. I would also consider in this case, if you decided you didn’t want to pay off your mortgage, to at least pay off the mortgage initially with your investments, and then borrow the money back to invest. But if you’re going to do it, at least consider making the interest tax-deductible. Unfortunately, the Canadian financial advice industry is such that you need to take your advisor’s advice with a grain of salt, however disconcerting it is for me to say that. You staying invested ensures the bank gets paid twice – from your investment fees and from your mortgage interest.

Detroit’s mortgages return to pre-recession levels, still face obstacles

(Photo: Max Ortiz, The Detroit News) Detroit — Nearly 1,300 home buyers took out mortgages in the city in 2018, a number not seen here since before the Great Recession. More than six years later, most home sales still are all-cash, and many Detroiters cannot obtain a loan. “Undoubtedly, Chemical’s presence will help residents access these tools.” (Photo: Max Ortiz, The Detroit News) Bertha Alexander relied on one of those tools after she lost her home insurance on the Morningside bungalow she purchased through a land contract in 2013. Since then, the bank has joined other efforts to increase financial literacy and lending. Maurice Cox, city of Detroit planning and development director, said Chemical Bank's move to Detroit is an endorsement that the city's recovery can be sustained. In 2018, residential properties gained more than $400 million in value and 90 percent of Detroit’s 194 neighborhoods saw increases in residential home values. While it is down from 97 percent in 2014, according to the Urban Institute, the national average is 36 percent. It offers low-interest mortgages and second loans up to $75,000 above the property’s appraisal for repairs. “We want people to know you can get a mortgage in the city of Detroit,” Pate said. Quicken Loans, Detroit's largest home lender in 2018 with 439 mortgages, provided $5 million to partner with Home Depot to renovate 70 homes in the city since 2015.

Here are two new ways to boost retirement income

But are these newfangled alternatives to reverse mortgage loans safe—and sensible? In a shared equity agreement, the company gives you cash in exchange for a portion of the upside in the home’s value. Under the agreement, the company gives you cash in exchange for a portion of the upside in the home’s value at some point in the future. In essence, they become co-owners of your home (though you will still continue to pay the mortgage and property taxes). Shared equity agreements have a fixed term, often as little as 10 years but sometimes as long as 30. At the end of the term, you have to pay back the equity you received, plus the company’s share of appreciation, which most people do by selling the home. Converting to a rental Another option is called a sale-leaseback, offered by New York City-based start-ups Irene and EasyKnock. Then they rent your property back to you for as long as you want. Sale-leaseback companies also charge fees, of course. To repurchase your home, you’ll pay the funding amount you initially received, plus a premium of 5% in the first year or 2.5% in subsequent years.

Good news and bad news about the real-estate market in 2019

The problem is that the pent-up demand is still expected to continue to exceed supply, even with more homes for sale. NAR predicts that existing home prices will rise 2.5% in 2019, to a median of $265,200, compared with a 4.7% rise in 2018, to $258,700. Mortgage rates will continue rising From the beginning of 2018 to mid-December, 30-year fixed mortgage rates went up a little less than three-quarters of a percentage point, to around 4.75%. Fannie Mae’s forecast is for an increase of just 0.1 percentage point. For example, in NerdWallet’s daily mortgage rate survey, the 30-year fixed-rate mortgage started the year averaging 4.09%. Affordability still a concern As home prices and mortgage rates rise in tandem, home buyers find it harder to afford homes. New homes get smaller From a home buyer’s perspective, most markets need more houses for sale, and they need to be on the affordable end of the price scale. Lending standards ease a little Mortgage lenders learned an enduring lesson in the housing crisis a decade ago: Make sure borrowers can repay their loans. Borrowers choose ARMs because the initial rates on adjustables are lower than the rates on fixed-rate mortgages. In October, 8.2% of mortgages were ARMs, according to Ellie Mae; 12 months earlier, ARMs had a 5.5% share of mortgages.

Why getting a mortgage may be easier now — and riskier

Too much debt results in a high DTI – and it’s one of the most common reasons for mortgage denial. While some research shows that borrowers with high DTIs are more likely to struggle with their mortgage payments, others argue that DTI limits have been too strict since the 2008 financial crisis. With higher debt limits, the Urban Institute, a nonprofit research organization, found that 95,000 more mortgages could be approved each year. Now, certain borrowers with a DTI as high as 50 percent can get approved for a mortgage, up from the previous maximum of 45 percent. That’s not to say your debt will be ignored. “Today you can, but you may need to have a slightly higher FICO score than someone with a lower DTI.” He says these compensating factors – a higher credit score, for example – help keep the default risk under control and make it safer for lenders to approve higher-DTI applicants. The Urban Institute’s Housing Credit Availability Index, which measures the percentage of home purchase loans that are likely to default, shows risk at historic lows for the past 10 years, Pardo says. The new limits may also empower black and Latino borrowers, who are more likely to have DTI ratios above 45 percent, according to the Urban Institute. Borrowers with high DTIs still have to find a lender willing to work with them. NerdWallet is a USA TODAY content partner providing general news, commentary and coverage from around the web.

Rents rising at breakneck pace – but rising mortgage rates are keeping renters from...

The Many Ways to Be Relieved of Your Timeshare Obligations While it is true that a timeshare contract is a binding legal document, it is often mistakenly thought that such a contract cannot only be cancelled. In fact, most timeshare companies maintain that their contracts are non – cancellable. This misconception is perpetuated by timeshare companies and user groups that are funded, maintained and controlled by the timeshare industry. Straight Up with Jocelyn Predovich: The Truth about FHA 203k Loans The FHA 203k loan program provides home buyers the opportunity to buy and fix up a property, without exhausting their personal savings. Rents are rising at the fastest pace in nearly two years – but rising mortgage rates are keeping renters stuck between a rock and a hard place. “The median rent in the United States rose 2.8 percent over the past year to $1,445, the fastest pace of appreciation since May 2016, according to Zillow,” Olick wrote for CNBC. But now rent is on the rise again due to a record-low supply of homes for sale. And rising mortgage rates just make the problem worse, decreasing affordability for potential buyers. “Construction of new apartments has been slowing, and new single-family home construction is nowhere near where it needs to be, given red-hot demand,” she wrote. Related stories:

Cost of living: The purchasing power of a dollar in every state

To shed light on these differences that reflect the relative purchasing power of Americans in every state, 24/7 Wall St. calculated the value of a dollar in each using data from the Bureau of Economic Analysis. For example, with Hawaii’s relatively high housing prices, a dollar spent on rent there is worth only 61 cents. States with large shares of residents living in expensive housing within urban areas account for the vast majority of the states where a dollar is worth the least. A dollar is generally worth much more in states, particularly in the South, where a smaller share of residents live in cities. North Carolina More:Economic climate: The best (and worst) states for business 34. South Dakota More:Financial security: Best (and worst) states to grow old in 42. For example, with Hawaii’s relatively high housing prices, a dollar spent on rent there is worth only 61 cents. In states where a dollar is worth less (those with the highest cost of living), many residents have higher incomes. While residents of New Jersey state see only $0.88 in value for each dollar they spend, the annual per capita income there is also almost $20,000 higher, more than enough to offset their lower purchasing power. For this reason, in most states with high resident incomes and steep consumer prices, the people living there can generally afford to fork out more for goods and services than can their counterparts in states with cheaper prices and lower salaries.

Real estate strategy: How to win at real life Monopoly

Here’s how to win at Monopoly in real life by adopting some of its real estate strategy. Considerations for investors with multiple mortgaged properties Mistakes to avoid The leverage you gain with smart mortgaging allows you to control more rentals and acquire wealth. Check mortgage rates for rental property here (Dec 18th, 2018) Monopoly and mortgages The objective of this classic game is to control property and extract rents from your competitors until they run out of money. Some properties are more valuable and desirable than others, and owning a matching group allows you to build homes and hotels and charge much higher rents. Real estate strategy: leverage Monopoly is not just a game. According to Alex Hemani at Forbes.com, leverage in real estate investing works best when property values and rents are increasing. And while most investor property mortgages require at least 20 percent down, getting that 20 percent from your other properties allows you to leverage a lot more. Investment cash-out mortgages in real life There are many ways to extract equity from investment properties. Financing more properties Mortgage lenders require significant cash reserves when financing rental property, and the more properties you have mortgaged, the higher this number may be. Most property investors make their money over time, paying off their mortgages and investing their rental income Many, many wealthy people in the US got there with real estate investing.

Juggling real estate, second job not uncommon for agents

“Starting a new career as a real estate agent can be intimidating, to say the least. She spells out a few tips for part-time agents seeking to get into real estate full time and for workers jumping into the field while holding down another job. One key starting point is to find a broker who’s used to part-time or newer agents. “Obviously it’s not easy to be available for your clients at a time that is good for them if you work limited hours. “But if you work elsewhere during this time period getting things done might become quite difficult.” Another potential problem are situations when it’s not possible to meet certain timing requirements. “You already know that evenings and weekends are prime time for agents, and finding the time for a day off or vacation is going to be difficult if you want to succeed.” She says many prospective agents “decide to ‘test the waters’ before devoting themselves full time as a new agent.” Many associates begin as part-timers and some stay that way, Ford says, noting that it fits “single parents, persons looking to supplement an existing income, or retired persons who want to stay active and involved.” For potential real estate investors, there are income streams “to sustain you” while pursuing the career full time, says Jaren Barnes, writing for BiggerPockets.com. It takes “a little bit of a hassle” to get things set up, he says. “But once they are, you’re looking at making $200-$400 per appraisal.” Barnes acknowledged that becoming an appraiser “definitely takes a time investment.” The outcome, however, can be “working less than 10 hours and making a decent income.” Assistant Property Manager. Broker price opinion professional. Barnes says that becoming a stager “is something you can do right out the gate, without any professional experience.” Moreover, it can be fun, lucrative and fairly easy to develop a schedule so the work is part time.

Does affordability matter: Why delinquent mortgages more common in ‘most affordable’ states

Why do the states with housing’s highest “affordability” measurements — much-discussed but perhaps dubious economic yardsticks — have more borrowers who can’t make their mortgage payments? The state’s home listings are priced at 55 percent of normal “affordability,” according to one housing-cost index from the National Association of Realtors. That ranks next to last nationally. I loaded my trusty spreadsheet with various economic and housing markers — plus the recent ranking of state rankings I compiled — to ponder how housing “affordability” translated to other measurements of life. Now to be fair to those “affordable” states, homeownership (tracked by the US Census Bureau) paralleled affordability: averaging 69 percent for states with the highest Realtor grades vs. 63 percent for the least affordable. The same hiring spree that put them in a home-buying mood also makes housing costlier to buy. A broad-based cost-of-living scorecard from the state of Missouri gave most “most affordable” states an average No. 37 for least affordable. 37 for least affordable. And it’s not a small gap: thin 0.2 percent population growth for “most affordable” states in 2018 vs. swifter 1 percent for the pricier locales.

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Buying for the First Time? Look Southeast

Buyers fresh to the market are necessary—often, as a catalyst for other transactions. Currently, first-timers are in limbo, unable to afford or compete against the demand for scarce supply. At the entry level, there were 17.1 percent fewer options for sale at the beginning of this year than at the start of 2017, and first-timers generally have no proceeds from a prior sale to spend. “Southeastern markets will be easiest for new buyers, where homes are more affordable and there’s less competition.” According to the analysis, the best markets are: Tampa, Fla. Indianapolis, Ind. Houston, Texas Orlando, Fla. San Antonio, Texas Saint Louis, Mo. Philadelphia, Pa. Atlanta, Ga. Las Vegas, Nev. Dallas, Texas Analysts based the list on markets with appreciation that is expected to be robust; a “Breakeven Horizon” that is relatively short (the Breakeven Horizon is the length of time before owning a home becomes better financially than renting one); favorable inventory-to-household ratios (an indicator of inventory); concentration of price reductions; and lower median values. For more information, please visit www.zillow.com. Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.