Using Your Home’s Equity for Retirement

When it comes to retirement, we plan and plan and still have questions.  One of the top questions for homeowners when it comes to retirement is what should we do about the equity in our home?  Therefore, I thought it important to cover that in my current blog since there’s not a lot of information about it.

The equity that you have in your home represents a large part of your wealth.  For married couples, your non-financial assets represent about 70% of your combined assets. 

There are many financial planning programs available.  However, many of them lack the ability to figure out what role housing wealth should play in your retirement.  When it comes to middle class Americans, housing wealth should play an extremely important part in financing their retirement.  But, it doesn’t seem to be a primary consideration when they begin planning.  Thus, there is a void of housing wealth in financial planning programs.

When it comes to homeowners who have 70% of their wealth tied up in their equity, there are a number of options for them to use that money for their retirement needs. 

Here is a list of some of the options you have to unlock the equity in your home:

* Sell and downsize to a smaller home.  This frees up funds for to invest or for an annuity purchase.

* Pay off the mortgage, if possible, to reduce overall expenses.

* Secure a home equity loan or secondary mortgage on the home.

* Sell your home.  Invest the proceeds and then rent.

* Rent out extra rooms.

* Get a reverse mortgage.

* Keep the house mortgage free and let its value serve as an emergency fund if needed.

* Rent out your primary residence and live elsewhere at a lower cost.

Not every one of these options will be viable for one’s retirement plan, but they are presented to help retirees use the equity in their home when it’s time for retirement.  In the meantime, researchers are working on new financial planning models that will include a way for homeowners to incorporate housing wealth in their retirement plan.

Just Call Realtor® Liz Miller for all Your Lake Havasu City Real Estate Needs

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Buying a Home for the First Time: What You Need to Know

There are still many people across the country who are considering buying a home for the first time.  And, with the $8,000 federal tax credit getting ready to expire on November 30^th, many of them are on a time crunch. At the same time, every consumer still wants to successfully buy their first home.  Therefore, if you are considering taking the plunge to buy your first home, I have some advice on what you need to know to help it be a successful purchase.

Although home prices have declined, purchasing a new home can still be more challenging than it was a year or two ago.  Because of one of the biggest housing market crashes in history, lenders are now tighter than ever with their lending standards, which makes it more difficult for buyers to get the financing they need.

For those who are still ready to make that big step, here are some helpful tips on what you can do to be a successful homeowner:

Do a careful inspection of your credit report to learn what your credit score currently is and to find out if there are any bad marks you need to know about.  Lenders will check your credit report to see if you have the means to pay the mortgage on the home you want to purchase.  The higher your credit score, the more favorable an interest rate and terms you will receive on your mortgage loan.  You can check your credit report and score through many online companies for free.

Become familiar with mortgage conditions and terms.  A mortgage is a legal and binding agreement between the buyer and lender of a property.  Being familiar with all the conditions and terms before you sign any legal documents, even a mortgage, will help you know that you are not being pressured into signing something you don’t completely understand.  If you need assistance understanding the legalities of mortgage terms and conditions, you can seek assistance from an attorney or a real estate professional.

Hire a real estate professional to help you through the entire process.  Buying a home will most likely be the biggest financial transaction you will ever make in your lifetime.  Finding a trusted real estate professional to help you through the process will help you feel less overwhelmed.  A realtor will help you understand everything from beginning to end and help you feel more confident in your purchase.  They will also be most useful in dealing with the complexities of purchasing a home.

Following these tips can help your home buying process go more smoothly.  Just be sure to seek any advice needed when having difficulty understanding anything about the home buying process.

 

Just Call Realtor® Liz Miller for All Your Lake Havasu Real Estate Needs

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Baby Boomers’ Preferences in Real Estate

Baby Boomers’ preferences in real estate are different than their predecessors.  We won’t talk about age here.  BUT if any of this applies to you, well, we won’t tell anyone.

The Baby Boomers, who are currently age 45 to 63, have had an impact on society, starting with their childhood to their transition into retirement.  Recognizing the importance of this influential generation on the housing industry, the MetLife Mature Market Institute (MMI) and the National Association of Home Builders (NAHB) embarked on a research project that closely examined the 55+ population (the “Boomers” as well as older cohorts) preferences in homes and communities as well as the housing industry’s response to consumer demand.  The end result is “Housing for the 55+ Market: Trends and Insights on Boomers and Beyond”, one of the most comprehensive reports dedicated to this segment.

One of the most interesting items in the report was that they want smaller homes that are easier to take care of.  The preferred size of those surveyed is 1,903 square feet.

Other key findings:

• The majority of 55+ households do not live in age-restricted (also called age-qualified) or other 55+ communities.  Yet, that number is on the rise.  Residents in this type of community registered the highest satisfaction rates.  However, most 55+ respondents indicated they were happy with their current homes.

• The main reasons for moving to a 55+ owner-occupied community were family or personal reasons, financial or employment reasons and the desire to have a higher quality home.  In multi-family communities, family was the number one reason.  But, reducing costs and increasing quality were also top priorities.

• Within the community, design and looks were most important to 55+ single-family home buyers.

• The share of all 55+ buyers of newly built homes using a mortgage has increased significantly in the past six years.  However, for other 55+ communities, there was a decline from 54% in 2001 to 40% in 2007.

• Even though we would expect home value and home size to be related, this does not appear to be the case in 2001-2005.  The overall rapid price appreciation across homes of all sizes during this period appears to be driving these results.

Liz Miller, Just Call Liz for your Lake Havasu real estate needs

Have Banks Gone Too Far?

Have banks gone too far in tightening their hold on lending practices?  There was a real-head-scratcher in the LA Times last week written by David Lazarus, one of their most able real estate observers.

Here’s some of it:

“One reason we got into our current economic mess is because banks handed out home loans to pretty much anyone with a pulse, regardless of their ability to, you know, actually make mortgage payments.”

Banks have subsequently tightened their lending practices, which is a good thing.  But have they gone too far?

Glendora residents Angie Trujillo and Carl Heinzen think so.  They’re still trying to figure out why they got turned down for a refinancing of their mortgage.  Before we get any deeper into their story, you should know that Trujillo, 61, is no stranger to the world of banking.  She worked for Bank of America for nearly 40 years, rising from switchboard operator to assistant vice president.  Trujillo was shown the door in March, not long after BofA announced that it would be sacking as many as 35,000 employees over three years to cope with the recession.

Trujillo and Heinzen, who are married, applied for a refi several weeks before she lost her job at the bank.  Considering Trujillo’s long history with BofA and the fact that their loan was already with BofA, they figured the refi would still go through without any difficulty.  But in August, they learned it had been rejected.  The reason, according to the letter they received from the bank: “Income insufficient to support expenses.”

Apparently BofA decided not to take into consideration the $58,000 severance package Trujillo received from BofA along with her pink slip.  Or her $377,000 BofA pension.  Or her $156,000 in savings at BofA. Or the $10,000 she and her husband deposit at BofA monthly for rental properties they own and manage.  Not to mention the $450,000 value of their house, as appraised by BofA for their current BofA loan of $280,000.

Oh, and let’s not overlook that Heinzen’s FICO credit score was 809 at the time of their refi application and Trujillo’s was 764, placing them among the least-risky loan seekers in the country.

Kind of makes you wonder: If people like Heinzen and Trujillo can’t get a home loan, even for just a refi, who can?

Liz Miller, Just Call Liz for your Lake Havasu real estate needs

Will Extending the $8,000 Federal Tax Credit Influence You?

According to a Zillow survey, many prospective first-time home buyers say that extending the $8,000 federal tax credit will heavily influence their decision to buy a home before the end of 2010.  This would make up an additional 334,000 buyers between December 2009 and next year; 2010, if it is extended.

In the survey Zillow did, they queried adults who would qualify as first-time home buyers.  They asked them if their plans to buy a home before the end of 2010 would be influenced if the federal tax credit was extended.  18% said yes, it would be their primary influence, 25% said it would be a significant influence,  27% said it would have some influence on their home buying decision and 31 % said it wouldn’t have any influence on their decision at all.

In Zillow’s analysis of the current real estate market trends, it shows that, if the credit were extended and everyone took advantage of the full $8,000, there could be up to $14.86 billion dished out.  The suggested 334,000 additional homebuyers that could be seen if the credit is extended could mean the difference between a healthy annual increase in home sales for next year and a negative home sales year.

Not many will disagree that extending the tax credit will boost demand at the margin.  It can even help to make it easier to work down the high inventory levels the real estate market currently has of existing homes.  The $8,000 first-time buyer federal tax credit is going to expire on November 30, 2009, which is very close.  Those who qualify are buyers who do not currently own any property or have not owned any property for the past three years as a primary residence.  So, don’t miss out just in-case the credit is not extended.

Just Call Realtor® Liz Miller For All Your Lake Havasu City Real Estate Needs.

Those Who Have Chosen to Walk Away from Home Mortgages

A new study looks are those who have chosen to walk away from home mortgages, and it has a few surprises.

For example: Who is more likely to walk away from a house and a mortgage — a person with super-prime credit scores or someone with lower scores?

Research reported in the LA Times, drawn from 24 million individual credit files, has found that homeowners with high scores when they apply for a loan are 50% more likely to “strategically default” — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring borrowers.

National credit bureau Experian teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected warning signs, such as nonpayments on other debts.

With foreclosures, delinquencies and loan losses at record levels, strategic defaults and walkaways are among the hottest subjects in residential real estate finance. Unlike in earlier academic studies, Experian and Wyman could tap into credit files over extended periods to identify patterns associated with strategic defaults.

Among researchers’ findings are these eye-openers:

* The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year’s fourth quarter.

* Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they’ve fallen behind on other accounts.

* Strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and have cratered since 2006. In California last year, the number of strategic defaults was 68 times higher than it was in 2005. In Florida it was 46 times higher. In most other parts of the country, defaults were about nine times higher in 2008 than in 2005.

* Two-thirds of strategic defaulters have only one mortgage — the one they’re walking away from on their primary homes. Individuals who have mortgages on multiple houses also have a higher likelihood of strategic default, but researchers believe that many of these walkaways are from investment properties or second homes.

* People who default strategically and lose their houses appear to understand the consequences of what they’re doing. Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters “are clearly sophisticated,” based on the patterns of selective payments observable in their credit files. For example, they tend not to default on home equity lines of credit until after they bail out on their main mortgages, sometimes to draw down more cash on the equity line.

Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said, but they appear to look at it as a business decision: “Well, I’m $200,000 in the hole on my house, and yes, I’ll damage my credit,” he said of defaulters. But they see it as the most practical solution under the circumstances.

The Experian-Wyman study does not try to explore the ethical or legal aspects of mortgage walkaways. But it does suggest that lenders and loan servicers take steps to screen and identify strategic defaulters in advance and possibly avoid offering them loan modifications, since they’ll probably just re-default on them anyway.

Realtor Liz Miller – Lake Havasu City, Arizona Real Estate

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How the $8,000 Federal Tax Credit Works

It still surprises me how many homebuyers still don’t truly understand how the $8,000 federal tax credit works.  So, I can either give my blog readers 8,000 reasons to buy a home or answer frequently asked questions about how the federal tax credit works.  I think I will choose the shorter route and answer frequently asked questions, since the deadline for the tax credit is approaching fast.

Here are answers to some of the most asked questions:

* The deadline for the federal tax credit is November 30, 2009.

* Only first-time buyers qualify.  This means you must not have owned a home within the past three years.

* The federal tax credit may only be applied to the primary residence.

* You never have to pay the money back as long as you occupy the home for three years or more.

* The minimum tax credit you can receive is 10% of the purchase price of the home and the maximum you can receive is $8,000.

* To qualify for the tax credit, single buyers must not have an income of over $75,000 and couples must not have a combined income of over $150,000.

* It’s never been a better time to buy than right now with the federal tax credit, low interest rates and affordable housing.

For anyone that still has questions about the federal tax credit, contact me today.  The deadline is only five weeks away.  So, don’t delay any longer or you could soon miss out on this great opportunity.

Realtor® Liz Miller  ~  Lake Havasu City, Arizona Real Estate

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Lake Havasu City’s High Energy Bills Will Soon Be a Thing of the Past

From the news I recently read, it looks like Lake Havasu City’s high energy bills will soon be a thing of the past.  The Lake Havasu City Council recently took steps to pass a new ordinance for the use of solar energy that just might make high energy bills a thing of the past.

The Lake Havasu City Council unanimously voted for allowing height exceptions and allowing solar panels to exceed the current 15-foot residential height limits by 3 feet.  With the new ordinance, solar panels can really maximize their potential.

Two options were presented for voting.  Option one was to allow solar collectors to extend 18 feet with an application of 25% of the roof and required a setback of 10 feet from the edge of the roof.  Option two was a similar option one, but the solar collectors would have to extend no more than two feet above the maximum allowable height.

Arizona utility companies are now mandated to provide 15% renewable energy to their energy supply by the year 2025.  The main purpose of adding solar panels on houses is to get them to what is called a “net zero,” meaning the house will produce the same amount of energy it uses over the course of one year.  Many of the homes that have solar panels installed no longer have electric bills.

Lake Havasu City is trying to be on the cutting edge by embracing renewable and sustainable energy and by being environmentally friendly.  And it sounds like this is a great way to start.

Realtor® Liz Miller  ~  Lake Havasu City, Arizona Real Estate

Protecting Your Mortgage and Your Home

Every homeowner has options and responsibilities, which is an important part of protecting your mortgage and your home.  Therefore, I’d like to give some tips and advice about what those options and responsibilities are so your real estate investment will be safe at all times.

Every mortgage lender requires each homeowner to carry homeowners insurance.  Therefore, it is the homeowner’s responsibility to maintain adequate homeowner’s insurance coverage at all times.

Your homeowner’s insurance policy should meet the following requirements:

* Your mortgage company must be listed as the mortgagee on all policies.

* You have to provide at least a minimum protection for fire and extended coverage property insurance for the amount it would cost to rebuild or replace your home at today’s cost.

* The insurance company you chose must have a rating of B or higher by the A.M. Best Rating Guide.

* The deductible for your insurance must be at least 5% of the home mortgage, unless a higher maximum deductible is required by state law.  Flood insurance requires a maximum deductible of $5,000.

Policies available to homeowners include: 

* Homeowner’s Insurance

* Flood Insurance

* Earthquake Insurance

Each time you make a change to your insurance policy, you must update your mortgage company as soon as possible.  You can even call your mortgage company to discuss possible changes before you make them.

Quick tips to save you money on your homeowner’s insurance:

* Combine home and auto insurance policies with the same insurer.

* Maintain a home security system.

* Insure your home, not your land.

* Ensure a smoke-free home.

Following these simple tips and advice will help you save money and feel sure that your real estate investment is in good hands.

Realtor® Liz Miller ~ Lake Havasu City, Arizona Real Estate

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