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HomeZones - A Real Estate Newsletter

Reverse Mortgages for Seniors
Reverse mortgages are becoming popular in the United States.  Reverse mortgages are a
special type of home loan that lets a homeowner convert the equity in his/her home into
cash.  They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements and more.  If you are interested in a reverse mortgage, beware of scam artists that charge thousands of dollars for information that is free from HUD.  For more information on Reverse Mortgages go to www.hud.gov.
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Make Debt Payments Tax Deductible
One way to save money on your debt payments is to have a home equity line of credit.  If you're able to borrow against your home, many times the interest rate is lower and your interest payments are tax deductible.

Home equity loans are now at low interest rates, and interest on loans up to $100,000 is tax deductible.  Interest paid on credit card debt is not.

But home equity loans should be used prudently.  "You are putting your home up as collateral."  That is why lenders can afford to give you a lower interest rate.  If something goes wrong, your home may be in jeopardy.
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Questions & Answers
1. What is the first step when buying a home?
Find out what price home you can afford to buy. The easiest way to do this is to talk to a mortgage broker or loan agent and ask them to pre-qualify you for a home loan. Pre-qualification is an informal procedure. It requires a brief meeting with a loan representative who will ask you about your financial capabilities: your income, savings and debts. The representative will then tell you what price home you can afford to buy. This also can be completed over the telephone or on line.
2. What is one of the financial advantages to owning a home?
Very few buyers pay all cash for a house. Most take out a home loan. The amount of cash you put into the purchase as a down payment is called your "equity" in the property. Each month when you make a house payment on you loan, part of the payment goes to pay the interest you owe and part of the payment goes to pay back the amount you borrowed (called the "principal"). Over time, your equity in the property grows. This amounts to forced savings.
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Home Equity Loans
Most lenders will allow you to borrow up to 80 percent of the equity you have in your home. When you borrow against the equity in your home that is, the market value minus the outstanding balance the interest you pay on the loan is tax deductible. That’s a benefit you do not receive with personal loans. (Smart investors always avoid using high interest credit cards).

With a short term, low interest loan, the cost of remodeling can actually be offset by the increasing market value of your home. This is because the value of your home in the marketplace may grow fast enough when combined with rising real estate prices and your investments in improvements to actually offset the amount you are paying in interest. Do your homework before borrowing to pay for projects. Do not confuse home equity loans with home equity lines of credit.

With a line of credit, you are pre-approved to borrow what you need, when you need it (with certain limitations). Because lines of credit are tied to fluctuating interest rates (like adjustable rate loans), a credit line that’s easy to handle this year could blow your budget next year should interest rates skyrocket. Save your line of credit for an emergency. Estimate and spend wisely.

According to David Janoff of NARI, you should commit only 80% of your remodeling resources to a project; set aside 20% as a reserve fund. That’s roughly how much you’ll need for cost overruns and unexpected expenses.
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Did You Know?
Mortgage Acceleration

Mortgage acceleration is a method of paying down your mortgage more quickly than you have agreed to, just by putting a few dollars extra into each month’s payment. You can think of acceleration as a type of savings account. The return on your investment is a compounded rate equal to what you are paying on your mortgage because the interest on every dollar extra that you put in is a return on your investment. You will save a lot over the 30 year term.

However, acceleration is not for everyone. Once you put the money into a mortgage payment, you can not get it back without refinancing the property. In the typical 30 years mortgage, one half of the original amount borrowed is still due after 25 years. You will cut one full year off the repayment term with one extra month’s payment in the first year. You will cut your loan period in half by doubling each month’s principal payment.

The principal is pretty small at first, so it is not a difficult program to get started. A 30 year loan will be paid off in about 18 years by increasing your monthly payment by $100.00. This program makes sense. It is the best way to reduce the true cost of buying a house. When you make your next payment on your home loan, increase it by a few dollars. Write in the extra amount in the box provided by most mortgage lenders. labeled "principal" and watch that amount owed go down more quickly.

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Good Reasons for using a Realtor®
Realtors are not just sales agents. They are expert negotiators, seasoned financial advisors and superb navigators around the local neighborhood. A professional Realtor is a member of the National Association of Realtors, California Association of Realtors and the local board of Realtors and must abide by a Code of Ethics and Standards of Practice enforced by these associations. A Realtor knows the value of real estate in your area and can intelligently determine the fair market price of your home. A Realtor is an expert at developing ways to make your home more saleable.

A Realtor can assist the buyer in obtaining a mortgage and can help guide the buyer through the details and stress of escrow, closing, property taxes and the down payment. When buying a home a Realtor is experienced at presenting your offer to the home owner and can help you through the process of negotiating the best deal. A Realtor brings objectivity to the buying transaction and can point out advantages and disadvantages of a particular property. A Realtor knows the best lenders in the area and can help you get pre-qualified for a mortgage and discuss down payments, closing costs and monthly payment options.
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Handy Hints
If you are thinking about painting the inside of your home, you will be confronted with the need to choose between different grades of paint.  Many consumers opt for less expensive paint for the obvious reason, but you may not be getting your money's worth.  Higher grades of paint can contain titanium that provides better surface coverage than less expensive paints.  These lower grades of paint are often clay-based and contain little or no titanium, and may require more coats of paint for equivalent coverage.  Titanium based paints also frequently contain an anti-splattering agent that produces less of a mess and are easier to clean up.
QUOTE:
"Life is always walking up to us and saying, 'Come on in, the living's fine,' and what do we do?  Back off and take its picture"'  -Russell Baker
F.Y.I.
Moving into a new home typically costs 8 to 10% of the value of your current home. If your home is worth $300,000 and you’re thinking about spending more than $30,000 on some type of remodeling, moving might make better economic sense. However, don’t forget to factor in quality of life issues. How much you like your home, its locations and the disruption of moving.