When the Rate Goes Up

It’s not “if” the rate goes up but “when” the rate goes up; it could make a big difference for some buyers. Freddie Mac predicts that mortgage rates will be at 4.5% a year from now.

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If buyers can afford a home with higher interest rates, it means higher payments. Higher payments might mean they won’t have the money to spend on other things like furniture or improvements to the home or an unrelated purchase like a new car.

When the rate moves 0.50% on a $250,000, the payment goes up by $70.66 a month. If it moves 1.00%, the payment goes up by $143.74 per month, each and every month for the entire term of the mortgage which means paying over $50,000 more for the house.

The question facing every borrower in this situation is “How will you feel about having to pay more to live in the same house because you were not ready to commit?”

Then, there’s the borrower who is absolutely maxed out as to what they can qualify for or sometimes, it is a borrower who just refuses to pay a higher payment. When that’s the case, the buyer has to make a larger down payment. In the same example, a 0.50% increase in rate would require $14,873 more in down payment. That could make the purchase impossible or require the buyer to buy a lesser price home that will not have the same amenities.

Mortgage rates have been low for so long that some people think that is what they should be. There are some economists who believe that the economy will not be strong again until mortgage rates are in the 7% range.

To see how this type of scenario might affect you, go to the If the Rate Goes Up calculator.

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Dust-Free Home

Having a dust-free home isn’t difficult, but it takes a serious commitment and a housekeeping strategy that addresses the dust and its causes. Whether your motive is cleanliness or to eliminate the cause of some allergies and asthma symptoms, it will be worth it.

1. Try to dust your home at least twice a week. Dust the tallest items and work your way down. Dust picture frames, blinds, baseboards and anything that stands out from the wall.

2. Feather dusters can spread more dust than they collect compared to microfiber cloths that attracts dust because they have an electrostatic charge.

3. Filters on heating and air-conditioning systems should be changed often not only to remove dust from the air but to increase the efficiency of the units themselves. Special HEPA filters can improve the overall indoor air quality.

4. Frequently changing the bag or emptying the container in your vacuum is helpful in eliminating dust.

5. Vacuum the floors at least once a week. Vacuum under furniture and periodically, move appliances to clean behind and underneath. Use the proper attachments to vacuum upholstered furniture and under cushions.

6. Eliminate dust magnets like carpet, heavy drapes and upholstered furniture. Consider hard surface flooring like wood or tile instead of carpet.

7. Keep windows closed to keep dust out.

8. Clean your pillows and drapes.

9. Damp mopping and dusting with plain water helps hold the dust and is environmentally friendly.

10. A humidifier can eliminate static electricity which holds dust.

11. Air purifiers circulate are and capture dust and other pollutants.

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Pay Off Your Mortgage?

Becoming debt free is as much a part of the American Dream as owning a home but there certainly can be conflicting circumstances that make the decision to pay off your mortgage early unclear.

The advantages of paying off debt early is increased cash flow, less interest paid and a higher credit score. The disadvantages are lower cash flow available as discretionary funds for meals, entertainment and other things. If the ultimate goal is financial security, is it worth the intermediate sacrifice?

Whether you pay off your mortgage early is a personal decision that may be right for one person and not for another. Consider the following before you get started:

Reasons you should

  1. Peace of mind knowing that you don’t have a mortgage
  2. You’ll save interest regardless of how low your mortgage rate is
  3. Lowering your housing costs before you retire

Reasons you shouldn’t

  1. You can invest at a higher rate than your mortgage
  2. You have other debt at a higher rate than your mortgage that needs to be paid off
  3. You might need the money in the future and want to remain liquid
  4. You might not qualify for a mortgage currently
  5. You should pay off other debt with higher interest rates
  6. Your employer has a matching retirement plan that would benefit you more
  7. You have more urgent financial needs like emergency fund, life, health and disability insurance
  8. You expect high inflation and the value of your mortgage debt will decrease
  9. You expect high inflation and the value of your mortgage debt will decrease

    Use this Mortgage Accelerator to determine how quick you can pay off your mortgage.

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Two Negotiations

There are two negotiation periods in some home sales. The primary negotiation takes place when the contract is agreed upon that includes the price, closing and possession. Buyers and sellers alike feel relieved once this first round has resulted in an agreement but there may be more negotiations to come if there are contingencies for financing, inspections or other things.

The purpose of an inspection is for the buyer to receive an objective evaluation about the condition of the home and its components to identify existing defects and potential problems. The expense for inspections can be several hundred dollars and it’s reasonable for buyers to not want to spend the money before they find out if they can come to terms with the seller. From a different perspective, sellers want to know quickly if the buyer is going to reject the home due to the inspections.

Sometimes, buyers will expect sellers to make all of the repairs listed on the report and this is where the second round of negotiations begins. If the seller refuses, the negotiations can go back and forth until the other party accepts the offer on the table or the contract falls apart.

When purchasing a new home from a builder, it is expected for everything to be in working order; after all, it is new. However, it is reasonable to expect that existing homes, that are not new, have a different standard. While it’s understandable that buyers would want to be aware about major items that are not in “working order”, normal wear and tear of components based on its age should be expected.

In a highly competitive seller’s market, buyers might do whatever they can to get their contract accepted, realizing that there is another place to negotiate when they’re not competing with other buyers’ offers to purchase.

For this to be a WIN-WIN negotiation, both seller and buyer must feel good about the transaction. Neither party should feel that they have been taken advantage of.

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Ready for Retirement?

It’s surprising to realize that most people spend more time planning their next vacation or cell phone purchase than they do on their own retirement. Let’s look at a hypothetical situation where you have $35,000 to invest for your retirement in 15 years. Have you compared where you might have the best opportunity?

The safest place to put it might be a certificate of deposit because it’s insured but unfortunately, rates would be less than 2%. The value would grow to $47,233.26 at the end of the 15 year holding period.

Investing in a mutual fund has more risk but also a greater opportunity to earn a higher rate of return. An estimated 7% return would project an accumulated value of $99,713.14.

Using the $35,000 for a 20% down payment and closing costs on a $150,000 rental home could realize much higher proceeds. Using a familiar investment analysis spreadsheet, the $35,000 could grow to a future wealth position of $153,302. This analysis considers leverage, 3% appreciation, re-investing cash flows, 7% sales expenses and paying applicable taxes which the previous examples do not.

The rate of return on these three examples are 2% for the CD, 7% for the mutual fund and a comparable 14.19% return on the rental. As the rate of return increases on investments, additional risk is reasonable.

Most people are much more familiar with homes than they are with mutual funds, bonds and other similar investments. The same REALTOR® who helped you with your home can help you invest in a rental home. Call me, as I can help!!!!

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Avoid Wasting Time

“If you waste my time, don’t expect me to hang out with you very long.” This could have been said by a Buyer or Seller or a Real Estate Agent. Time is valuable and no one wants to waste their time. This relationship is a TEAM!

Most people can’t put their lives on-hold while they’re trying to buy or sell a home. Whether they have a family, a couple or single, life continues and the time constraints of moving can become burdensome.

Me as your Realtor is committed to helping you save time while making the experience memorable. I know the process and the potential problem areas and can help you move through them.

To preserve your time, please consider the following:

  • If your plans to buy or sell change, let me know.
  • Be on time for appointments or if it is necessary, cancel them with as much notice as possible.
  • Get pre-approved through a trusted mortgage professional. (I can provide you with referrals too!)
  • Cooperate with your loan professional by providing all requested documentation.
  • Don’t wander into builder or REALTOR® open houses without your Realtor. If you find yourself in that situation, immediately notify them that you have a Realtor.
  • Only talk to the other party through your agent until after closing.

    I will be working to help you meet your goals! Things work best when it’s like a partnership where each party mutually respects the other and their resources including their time.

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Picture This!

Listing photos may be one of the most important marketing efforts that lead to a potential buyer.

Nearly, all buyers use the Internet during the home search process. They usually start looking at homes online before they contact an agent. It’s far more efficient to screen properties by looking at the pictures that have been posted than to make appointments with each homeowner, drive all over town and waste a lot of time looking at homes that would never meet a buyer’s criteria.

  • There needs to be enough pictures of a property to adequately represent the home; most websites allow for at least 24 and more may be needed if it is a large home.
  • Take horizontal shots to accommodate the format of most listing websites.
  • The pictures should be well-lit so that it is easy to see all of the features of the room.
  • Natural light is preferred over the limitations of flash.
  • They should be taken with a wide-angle lens so that you can see the majority of the room in one picture.
  • Large rooms can be taken from different angles to give the buyers a different perspective.
  • Rooms should be set if not staged prior to taking the pictures so they will give the buyer an idea of what the room might look like with their own things in it.
  • Arrange pictures in website to help buyers visualize the floorplan as if walking through it.
  • Think about using a tripod; professionals do to absolutely hold the camera still.
  • They should definitely not be “photoshopped” to modify factual elements like removing power lines.

    Everyone occasionally takes a great picture but it doesn’t make them a photographer. Since the photography can be one of the most important marketing efforts, consider hiring a Realtor who uses a professional photographer to show the home to its best advantage. For more information on my services, please email me at KimberlyWoodard@ebby.com or call me at (214) 632-2092

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