Trading Up or Downsizing

Whether you’re selling your current home so that you can move into a larger property or downsizing into a smaller one, there are some things you should keep in mind to be well prepared for moving day:

Trading Up
Most of the challenges come with trade-ups. In this case, you’ll likely have a larger mortgage payment, higher utility bills, higher annual maintenance costs, larger tax payments, and higher homeowner’s insurance costs.

Determine how much more home you can afford by scrutinizing your expenses as closely as you did when you were a first-time homebuyer. If affordability hinges on the amount of equity you pull from the sale of your current home, keep in mind that you probably won’t know the total amount until after you’ve completed settlement.

Check with your homeowner’s insurance agent to learn about how much more it may cost to insure your larger home.

Calculating an increase in utility expenses isn’t cut-and-dried. If your new home is 40 percent larger than your current home, you can estimate that your new utility bills will be commensurate with the increase in square footage. However, if your new home is substantially more energy efficient, there may be little or no increase in the utility bills.

Property taxes are assessed based on the property’s value and after you purchase your trade-up abode. The tax assessor likely will re-evaluate taxes upward based on updated property value data. Check with your county tax assessor’s office before you close to learn more about your potential tax expenses.

Maintenance costs will likely increase. Here you can apply a standard rule of thumb to budget your annual maintenance costs: multiply the purchase price of the home by 1 percent, if the home is newer or in excellent condition, and by 1.25 percent if the home is older. The result is the annual cost you can expect to pay for maintenance.

Downsizing
Dealing with years of accumulated belongings and figuring out whether you should rent or buy are the biggest issues associated with downsizing. If you’re going into retirement and plan on traveling a lot or don’t want to be rooted to a particular place, renting is obviously your best choice. However, if you’ve decided to buy, you’ll have to carefully evaluate which type of property best suits your needs. Are you looking for another but smaller single-family home? Or is a residential community best for you?

Downsizers looking to minimize home maintenance chores and costs may fare well in some sort of residential community living where association fees cover the bulk of the property’s exterior maintenance. In this case, you’ll have to decide whether you’re looking for a town home, condominium, loft, or some other type of community dwelling. It may be helpful to make a list of your most important features. Are you looking for a city residence that is close to shopping and transportation? Or are you more interested in the amenities – like pools and tennis courts – offered by the residential communities?

Pets are another consideration. Some residential community living arrangements place strict limits on the number of pets you may keep and or the pet’s size or type. For example, in some communities tenants may own no more than two dogs, each weighing no more than 15 pounds.

If you’re looking for another single-family home, it would be helpful to create an itemized a list of what you consider to be the most important features. Will you need space for guests or are you looking for a cozy cottage? Consider taking a detailed inventory of your current living space and how frequently you use certain rooms and other amenities. Do you really need that third bedroom or formal dining room?

Whether you’re moving into a smaller single-family home or some type of residential community, figuring out which belongings and furnishings to keep can be a difficult and emotional task. If the job appears insurmountable, consider hiring an expert who can help you get organized and make the best use of your new space.

For all your real estate needs go to www.RenoIsHome.com.

Home Equity: Using Your Home’s Riches Can Be a Sensible Move

Many homeowners have accumulated a wealth of equity in their home. Record year-over-year-over-year home price increases have dramatically increased the value of our homes, some by double, quadruple or more. To figure out how much equity you have, subtract your mortgage balance from the home’s current market value. The difference is the amount of your home equity.

If you don’t know the current market value of your home, give your real estate agent a call and he or she will be able to provide this information. And don’t forget that your real estate agent also is a good source for information about local home equity loan specialists.

There are two ways to tap into your home equity, through a home equity loan or a home equity line of credit. Homeowners are attracted to these types of loans because they offer lower, sometimes significantly lower, interest rates, and in most cases, the interest is tax deductible up to $100,000.

The Home Equity Loan is a lot like your first mortgage. It allows you to borrow a sum of money under terms and conditions similar to those outlined in a typical fixed-rate 30-year mortgage. The interest rate is fixed and so is your monthly payment, which pays down both the interest and principal. The cash you receive is in one lump sum and the average loan term is 15 years.

This type of loan is best for large, one-time purchase. For example, to pay for an expensive home repair or upgrade, to buy a car or to consolidate a large amount of high-interest credit card debt.

Using a home equity loan to pay off credit car debt can be a sensible move, but it also can be risky. If you decide to take a home equity loan to consolidate high interest credit card debt, it may be a good idea to also attend a money management seminar that focuses on resisting maxing out those cards again.

The Home Equity Line Of Credit, also known as a HELOC, is a flexible program that borrowers use much like a pre-paid credit card account. A HELOC includes a draw and a repayment period, each set when the loan closes; a typical schedule could be a five-year draw period and a 10-year repay period.

Draw periods allow the borrower to withdrawal money as needed. These borrowers must make a minimum monthly payment that covers the variable interest rate. The borrower controls the rate at which the principal is paid. If the borrower chooses to make a payment on the principal balance, the revolving credit account increases the borrower’s limit by the amount of the principal paid down. During the repay period, the borrower’s spree is up and he now must replay the balance of the loan over the loan’s remaining term.

This type of loan is best for a homeowner who will intermittently need relatively large sums of cash, for example to cover quarterly college tuition bills or some other expenditure that requires large but infrequent payment installments. While your access to the money works much like using a credit card or savings account, take care to avoid depleting your credit line for impulsive purchases and be cautious when spending home equity funds.

For all your real estate needs go to www.RenoIsHome.com.