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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.

How a Stock Market Shakeup Affects Mortgages

Will the stock market shakeup affect mortgage rates and home sales? The Stock Market Shakeup and Home Sales Since then the market has continued to be turbulent. Then, President Trump's tariffs announcement made it drop 420 points on March 1. So how does the recent shakeup affect you if you’re thinking about buying or selling a home? When the yield on these notes increases, mortgage rates increase. On a $250,000 mortgage that’s $70 per month ($840 per year). But as interest rates rise, you could find yourself facing a monthly payment similar to what you would have with higher home prices and lower interest rates. It might be a good time to buy a home before rates increase any further, but only if you’re otherwise ready and only if you find a home you will be happy living in for years. Mortgage rates are still relatively low, making it a good time to take out a home loan. Short-term stock market shakeups should not be a factor in home buying or selling decisions.

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.

2018: A Tough Year for First-Time Buyers

How the new Republican tax plan approved late last year will affect housing isn’t completely clear yet, but buying a home in 2018 will likely become more expensive, especially for buyers who live in high-tax states. Taxpayers used to be able to deduct all of their state and local taxes, including property taxes, state income taxes and city income taxes, from their federal taxes. So in 2018, it may make more sense for taxpayers to take the standard deduction instead of itemizing and taking the state and local tax deduction. And tax changes affecting mortgages are also likely to hurt first-time home buyers — or any of us who can’t afford to buy a home with cash. Most parts of the new tax law, including the state and local tax deduction cap and the new mortgage interest deduction limit, are set to expire in seven years. Sellers are going to just not sell if they don’t get their price,” Mr. Miller said. “When the spread’s very narrow, because you can’t go much lower than things are right now, you’re risk averse as a lender,” he said. With interest rates currently at 4.54 percent for a 30-year-fixed rate mortgage per Bankrate — which is still a relatively low rate, despite having increased in the last year — lenders don’t have much incentive to lend. But higher interest rates could change that and eventually make it easier for first-time buyers to get a mortgage. “You’re taking a huge financial investment in exactly the same location that determines your labor income.” Any asset that isn’t risk-free, he added, “has a recession risk in it, so if there’s any bad shocks to hit the U.S. economy and we walk into a recession, or the inflation rate rises, housing prices can change.” Dr. Davis and brokers will likely tell you that what your decision should come down to is not so much whether you will make money off your home, or how much of a tax break you will or won’t get, but where you want to be — and for how long.

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.

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.

Don’t Get a Mortgage Loan Without Doing This

“The Consumer Financial Protection Bureau found that nearly half of home buyers do not look for mortgages with more favorable interest rates. Why?” Well, for one: It’s the Wild West out there. If you’ve gotten even a third of the way through the home-buying process, you know there’s enough paperwork to fill what was supposed to be the guest bedroom in your new place. The process is overwhelming—so much so that simply getting a preapproval from one lender feels like a win. But you shouldn’t stop there! While the market dictates where interest rates hover, different banks and lenders have different offers, so call around and get at least a handful of different quotes before settling. It’s often the case, too, that bigger lenders will match or beat better offers you get—but that’s not something they usually advertise. You have to get in there and play the game. In Worth It, Steinberg uses a $100,000 mortgage example: If you pay this off over 30 years, you’ll end up paying over $71,000 on top of the mortgage amount. Whatever you do: Shop around, and know that almost everything involved in buying a house is negotiable—the mortgage included.

Home buyers beware: Most expensive housing markets in some states average $750,000-plus

The U.S. economic recovery and continued growth have had many positive effects on the nation and the population. For at least one group, however, the improving economy has had a negative impact — for potential homebuyers. Along with incomes and low unemployment, the housing market continues to grow. Of course, housing markets are different from one another. To determine the county with the most expensive housing market in every state, 24/7 Wall Street reviewed median home values of 3,119 counties and county equivalents as of the second quarter of 2017 from the National Association of Realtors. In California, the most expensive market has a median value in excess of $1 million. In other states, the most expensive market barely tops $200,000. homes valued $1,000,000+: 6.4% More: American cities with the most property crime in every state Most expensive housing market: Carver County Median home price: $329,383 Median mortgage payment: $1,331 Median household income: $88,638 (State: $65,599) Pct. homes valued $1,000,000+: 3.9% More: Cities where crime is soaring in every state Most expensive housing market: New York County Median home price: $932,366 Median mortgage payment: $3,768 Median household income: $75,513 (State: $62,909) Pct. 24/7 Wall Street is a USA TODAY content partner offering financial news and commentary.

When is my first mortgage payment due?

So, you ask, when is my first mortgage payment due? The amount of time you have before your first payment depends on the day of the month you close your mortgage Add one month to your closing date, then your first payment is due on the first of the following month The earlier in the month you close, the more time before your first payment However, when you close, you pre-pay the interest for the rest of the month. “You have a 15-day grace period in which to pay that month’s mortgage payment,” says Hensel. It would be considered late if it arrived from you on August 16.” Do you expect your payment to be more than 15 days late? Say you have a $900 monthly mortgage payment. Brousseau says your lender should provide you with information shortly after closing. A second option is to mail a check to your lender. A third option is to make an online payment to the lender. Then, you make two payments that month. “Also, not all lenders will permit this method of payment.” Show Me Today's Rates (May 26th, 2018) The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker.

Most Expensive Housing Market in Every State

Of course, housing markets are different from one another. In the most expensive markets in states like New York, Massachusetts, California, and Virginia, the typical home is valued at well over $750,000. California > Most expensive housing market: San Francisco County > Median home price: $1,087,599 > Median mortgage payment: $4,395 > Median household income: $87,701 (State: $67,739) > Pct. New York > Most expensive housing market: New York County > Median home price: $932,366 > Median mortgage payment: $3,768 > Median household income: $75,513 (State: $62,909) > Pct. Oklahoma > Most expensive housing market: McClain County > Median home price: $174,667 > Median mortgage payment: $706 > Median household income: $58,673 (State: $49,176) > Pct. Virginia > Most expensive housing market: Falls Church city > Median home price: $850,801 > Median mortgage payment: $3,438 > Median household income: $115,244 (State: $68,114) > Pct. homes valued $1,000,000+: 15.4% Source: Michael Feist / Wikimedia Commons 47. Washington > Most expensive housing market: San Juan County > Median home price: $565,568 > Median mortgage payment: $2,286 > Median household income: $58,029 (State: $67,106) > Pct. West Virginia > Most expensive housing market: Jefferson County > Median home price: $245,334 > Median mortgage payment: $992 > Median household income: $69,753 (State: $43,385) > Pct. Even in low-income states, the most expensive housing market has a median home value of at least $250,000, but there are exceptions.

TRENDING

Homebuilder confidence stabilizes, hinting at solid spring home buying season

Despite affordability and labor concerns, homebuilder confidence held steady at 62 points in March, according to the National Association of Home Builders/Wells Fargo Housing Market Index. “Builders report the market is stabilizing following the slowdown at the end of 2018 and they anticipate a solid spring home buying season," NAHB Chairman Greg Ugalde said. In March, the index measuring current sales conditions rose from 66 to 68 points, while buyer traffic declined from 48 to 44. Lastly, expectations over the next six months rose from 68 to 71 points. The three-month moving averages for regional HMI scores show the Northeast rose five points from 43 to 48 points, the South also moved forward from 63 to 66, the West inched forward from 67 to 69 points and the Midwest slid one point backwards from 52 to 51 points. "In a healthy sign for the housing market, more builders are saying that lower price points are selling well, and this was reflected in the government's new home sales report released last week," NAHB Chief Economist Robert Dietz said. "Increased inventory of affordably priced homes – in markets where government policies support such construction – will enable more entry-level buyers to enter the market." “The skilled worker shortage, lack of buildable lots and stiff zoning restrictions in many major metro markets are among the challenges builders face as they strive to construct homes that can sell at affordable price points,” the report states. NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.