When purchasing a home most people have no intention of walking away from it. But unforeseen circumstances like unexpected medical bills or losing a job can overwhelm even the best intentioned and leave the homeowner facing their worst nightmare: foreclosure.
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Homeowner's insurance trap. Merely inquiring about making an insurance claim can drive up your premiums-even if you never make the claim. Any damage done to a home is evidence of "risk" that an insurer can consider when setting premium rates, even if no claim is made to cover the damage. If you merely discuss making a claim for such damage with an insurer or its agent, the damage and potential claim will be included in your claim record.
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Bad news for property owners. The Supreme Court has ruled that municipalities can decide what constitutes a "public purpose" for seizure under eminent domain, allowing them to turn private property over to developers. If threatened: Fight abusive eminent domain projects at the state and local levels where you might find statutory protection.
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Prepaying a mortgage has a financial effect much like buying a bond - with your return being the after-tax interest cost you avoid paying on the mortgage, instead of the after-tax interest you receive from a bond.
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How it works: You can "pledge" mutual funds, shares of stock, CDs, etc. as collateral for a loan. You obtain a large enough loan to give your child down payment money. You repay the loan, deducting the interest (if you itemize). A pledged-asset mortgage makes sense if you are in a high tax bracket and the asset you are pledging has a higher rate of return than the mortgage rate...or when your alternative is to sell the assets you're pledging, causing a significant tax liability.
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With the tremendous rise in property values, homes are the biggest source of wealth for many households, so it is important to make the most of real estate assets.
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Home scams are on the rise. Cut-rate chimney cleaning/repair companies offer low prices, then claim to find structural damage.
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Lending to a family member so that he/she can buy a home can be beneficial for you both. You're likely to receive higher interest than from an income-producing investment, and the loan is secured by real estate. Your relative won't have to go through a mortgage qualification process and will get a lower interest rate than from a bank. He also can save up to 30% on closing costs. As with a bank loan, he can take a tax deduction for mortgage interest.
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Consider an interest-only mortgage only if you expect to sell your home or expect a large salary increase within a few years. You initially pay interest on the amount borrowed, not principal. When principal repayment eventually begins, however, monthly payments increase significantly.
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Few people understand the inner workings of the Federal Reserve. By controlling the level of short-term interest rates, the Fed has a sweeping effect on the entire economy -mortgage and credit card rates...interest paid on bank accounts and CDs...and performance of financial markets. At its February meeting, Alan Greenspan's Fed raised the federal funds rate by 0.25% to 2.5%, the sixth increase since June 2004.
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Home-equity rates vary significantly, so shop around. Interest rates for similar loans or lines of credit can vary by as much as two percentage points. Don't automatically gravitate to lenders that advertise aggressively. Their marketing campaigns are costly, and the tab is passed on to borrowers.
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American home owners spent more than $130 billion on remodeling projects last year, but many weren't satisfied with the results. The offices of state attorneys general are bombarded with complaints about home-improvement contractors. Only auto mechanics and phone companies are complained about more often.
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Better house hunting: Get pre-approved - not just pre-qualified - for a mortgage so that you won't need a financing contingency clause in your contract. Drive through neighborhoods you like to find For Sale signs. Ask neighbors to let you know of houses that come on the market.
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The likelihood of a home being targeted by burglars increases when the home is:
• A detached single-family home on a corner lot. This type of home is more visible and easier to "case" by a burglar. This increases risk of burglary by about 9%.
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Top ways to spruce up a house:
• Replace the front door - light-switch plates and electrical-outlet covers - interior doors - doorknobs, unless your doorknobs are vintage and charming - shower curtains.
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Beware: So-called "interest-only" mortgages (IOMs) aren't for everyone. They are being marketed as a way to increase buying power in this environment of high home prices and rising mortgage rates. You pay only interest in the first few years, adding principal payments later on.
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