4 Simple Strategies to Shave Years Off Your Mortgage

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Note: This article was originally posted on Trulia Blog (www.zillow.com/blog) on Feb 17, 2015 by Zillow Team http://www.zillow.com/blog/shave-years-off-your-mortgage-169704/

Just because you’ve got a 30-year loan doesn’t mean you have to spend 30 years paying it off. These tips can help you reach the finish line up to 10 years early.

No one wants to spend longer making mortgage payments than they have to. The obvious way to pay off a mortgage faster is to get a shorter-term loan, like a 15-year instead of a 30-year. But on a $300,000 home purchase with 10 percent down, you’ll pay about $620 more per month on a 15-year loan than on a 30-year loan (including mortgage insurance), which might be too expensive for you.

So how do you fix your budget with a loan you can afford, yet still pay it off early if you have extra money? Here’s a look at four common approaches.

Refinance, then reinvest savings

It’s always prudent to evaluate refinancing when rates drop, but unless you refinance from a 30-year loan to a 15-year loan, refinancing doesn’t automatically shave years off your mortgage.

If you bought a home for $300,000 with 10 percent down five years ago, the rate on your 30-year fixed loan of $270,000 was about 4.875 percent, giving you a payment of $1,429 (plus mortgage insurance). With today’s refinance rates of about 3.625 percent on your remaining $247,494 balance, your new payment would be $1,129, saving you $300 per month.

It’s a huge savings, but you’re resetting your payoff clock from 25 years back to 30 years. However, if you take the extra step of applying the $300 savings toward your new loan each month, you’ll shave 9.5 years off your new mortgage, giving you a shorter term for the same budget.

You can run your own refinance calculations to find the best balance between monthly budget and the fastest loan payoff.

Make biweekly payments

A biweekly payment plan is the simplest way to shorten your mortgage without a material budget increase. This plan shaves about four years off your mortgage by paying half your payment every other week.

Doing so means you’re making 26 biweekly payments per year, which is the equivalent of 13 monthly mortgage payments per year instead of 12. Your budget can usually absorb this because you’re simply chopping your mortgage payment in half and paying each half every other week.

On a $300,000 home purchase with 10 percent down, a 30-year fixed rate of 3.625 percent gives you a payment of $1,231 (plus $88 in mortgage insurance). By paying half ($616) every two weeks, you’re paying your loan down by an extra $103 per month, ultimately saving $26,511 in interest and paying off your loan in about 26 years.

Your lender can brief you on how to set up a biweekly payment plan.

Increase your monthly payment amount

The biweekly example above shortens your 30-year loan term four years by paying about $100 extra per month, but what if you could afford more?

If you paid $200 extra per month on your 30-year fixed loan at 3.625 percent on a home purchase of $300,000 with 10 percent down, you’d save $42,969 in interest and pay off your loan six years and eight months years early.

If you paid $300 extra per month, you’d save $57,122 in interest and pay off your loan eight years and 11 months early.

And if you paid $400 extra per month, you’d save $68,426 in interest and pay off your loan 10 years and 10 months early.

Once you go higher than this, it’s worth looking at whether your budget can accommodate a 15-year loan, because rates on 15-year loans are about 0.5 percent lower than 30-year fixed loans, which means $113 less interest per month versus the 30-year loan.

That’s a clear interest cost savings, but your budget is higher: you pay $1,881 per month (plus $59 for mortgage insurance) for a 15-year loan versus $1,231 per month for a 30-year loan (plus $88 for mortgage insurance).

Make one-time loan payments when you get extra cash

If you can’t commit to the 15-year loan budget but know you may have cash infusions along the way — like bonuses from work, inheritances, or selling other properties or investments — you can shave years off your 30-year mortgage by doing a large loan pay-down.

Here are two scenarios using a $300,000 purchase price with 10 percent down:

  • If you got a bonus at work and paid down your loan by $10,000 in year three, you’d save $15,747 in interest and pay off your loan one year and eight months early.
  • If you got a signing bonus for a new job and paid down your loan by $25,000 in year five, you’d save $32,556 in interest and pay off your loan three years and 10 months early.

Normally, when you pay extra on your loan, it shaves years off your mortgage, but your payment stays the same. However, for large one-time pay-downs like this, some lenders may lower your payment, too. When you’re shopping for mortgage lenders, ask them in advance if they’re willing to do this.

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Is Your Home Ready to Sell This Spring?

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Note: This article was originally posted on Zillow Blog (www.Zillow.com/blog) on Feb 9, 2015 by Brendon Desimone http://www.zillow.com/blog/home-ready-to-sell-spring-169458/

Put these four tasks on your to-do list for a quick and painless sale.

Selling a home doesn’t happen overnight. To maximize your sale price, stand out from the competition and sell quickly, your home needs to go on the market in tip-top condition.

Prepping the home rarely happens in one weekend. It takes time and thoughtful planning. If you intend to sell your home this spring, here are a few steps you need to take now.

Have your home inspected

It may seem counterintuitive to spend money on a property inspection, but you need to know about your home’s condition. If there are issues — big or small — you need to address, it is better to know about them early so you can either remedy them prior to going to market or account for them with a lower listing price.

The last thing you want is for the buyer to uncover flaws once they are under contract. You will get stuck paying more under those circumstances than it would cost you to address the issues now.

Stash your stuff

As you prepare to sell, think of your home as an investment and start to see it through the eyes of potential buyers and the market. When you’re trying to sell your home, the less-is-more approach applies.

Put away big furniture and personal items. Store or put away all the things you won’t be using until you move into your new home. In the kitchen, make space in the cabinets for items you will need to use daily, but will want to put away for showings.

Paint, clean and make small improvements

It’s common for sellers to make cosmetic improvements before they list. Kitchens and bathrooms sell your home. Plan to have the bathroom grout cleaned and have some parts of the house painted to give it a fresh look.

Consider cleaning rugs, refinishing hardwood floors or painting kitchen cabinets. If you plan to list in the spring, you likely have a good local real estate agent on your side by now. Get their advice and ask for referrals to do the work. There are lots of inexpensive contractors who can help spruce up your home quickly.

Research like a buyer

Today’s buyers have research in their DNA and will investigate all they can. Check with your local building department and ensure there are no outstanding issues with your home.

Verify that property records reflect your home accurately, and prepare to remedy any discrepancy. Make sure your title report is clean, and talk about potential disclosure items with your agent. Banks won’t lend if there are outstanding issues, and you don’t want to jump through hoops at the eleventh hour. Researching now will keep you one step ahead of the buyers.

The sale of your home is likely one of your biggest financial transactions. Get a real estate agent on your team early, and make a list of all the tasks you need to complete before listing this spring. Now is the time to have those discussions. Smart planning and a good strategy will ensure a quick, painless and profitable home sale.

Thoughts? Suggestions? Or just pure reactions? Tell us what you think by completing the form below and let us know, we’ll be more than delighted to hear from you!

6 Insiders Reveal Secrets Every House Hunter Should Know

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Note: This article was originally posted on Trulia Blog (www.Trulia.com/corp) on Jan 30, 2015 by Laura Agadoni http://www.trulia.com/blog/6-insiders-reveal-secrets-every-house-hunter-know/

Before you go house hunting, arm yourself with some secret insider tips. 

One of my favorite Disneyland experiences was the time I went with a neighbor who worked there. Although it was a crowded Fourth of July evening, my neighbor knew how to navigate around the park to avoid the crowds and the best spot for watching the fireworks.

That’s because he knew all the insider secrets.

Insider info can also benefit you greatly when house hunting. Here are a few tips to keep in mind before you begin:

1. Look beyond the upgraded kitchen

When I was recently looking for investment property, I lost count of how many houses I saw that had stunning kitchens with brand-new appliances. But underfoot was a creaky unleveled floor … or the house had cracks in the foundation walls … or the backyard had water drainage issues.

The kitchen remodel in these cases was, as the saying goes, “like putting lipstick on a pig.” Many sellers hope you’ll fall for this ploy by not looking past the shiny stuff.

Be smart by hiring a home inspector to help you avoid possible costly repairs down the road. You can also do some screening on your own by looking for common problem areas.

Here’s what structural engineer Adam Green, CEO of Crosstown Engineering, says to look for:

  • Cracks in walls larger than ⅛ inch
  • Doors and windows that stick when opening
  • Sloping or uneven floors
  • Noticeable damage to the exterior (which indicates the property has been overlooked)

2. Land a house in a hot market

Nothing can be more frustrating than looking for a house in a popular area during a seller’s market. But there are ways to gain an advantage over the competition.

KXAN News of Austin, TX, reported in August 2014 that Austin was the “hottest real estate market in the country.”

Justine A. Smith, an Austin real estate agent, shares two strategies she uses to help her clients land their dream homes:

  • Smith pulls tax records of sellers to get information to use to write a personal note.
  • She also shares her buyers’ needs on social media and with other agents to find property not yet on the market.

3. Get the inside scoop

It’s second nature for journalists and detectives to go below the surface to ferret out information. But even amateurs can discover some useful dirt.

Kate Shields, a board member of MORe, a real estate organization in Illinois, says to “go in stealth mode.” Look for a garage sale in the area and casually “ask the homeowner questions as you’re shopping.”

No garage sale? Ryan J. Halset, a Seattle real estate agent, says that “many neighbors are out watering their lawn just hoping you’ll come talk with them.” Halset has uncovered issues with a home just by starting a conversation with a neighbor.

Shields also recommends that buyers return to a property they like at night. “Those light-up billboards certainly aren’t that bright during the day.”

4. Use pricing psychology

You’ve probably heard that people are more likely to buy something that ends in a “9″ instead of a “0,” such as being more willing to shell out for an item that costs $59 instead of $60.

Pricing strategy becomes important when you’re making an offer to a seller in a competitive market.

Brian Horan, a Los Angeles real estate broker, says not to “leave a ’5′ or an ’0′ at the end of a price.”

He gives this example: If the property is listed at $325,000 and you know there are three offers and that you will be offer number four, you might want to go about 3% higher and offer $335,000.

Don’t do it,” says Horan, who recommends that instead you offer $336,000, or even better, $341,000.

The important thing is to go one number over “5″ or “0″ to be the highest bid by just a little bit more.

5. Be the likable guy or gal

A seller attached to a home is typically more inclined to accept an offer from a buyer he or she likes.

Ryan Halset says to look around the home for “a shared area of interest.” Your agent can then personalize the offer cover letter from you this way: “I noticed that you have several books on Ireland, and I just recently visited there for a family reunion.”

“Be genuine,” says Halset. “A small connection can go a long way.”

Horan suggests that buyers have their picture taken in front of the house they wish to make an offer on. “When you submit a photo with you in front of the seller’s house, it psychologically allows the seller to picture you living there.”

6. Don’t be “afraid of no ghosts”

Channel your inner Ghostbuster for this tip, and do as Jenelle Isaacson, owner of Living Room Realty in Portland, OR, suggests: don’t be wary of homes where the owner passed away.

“If you see original wallpaper, pink Formica, and vinyl, pounce on it!” she says.

The reasoning is that “seniors usually take better care of their homes,” says Isaacson. “Quality finishes and maintaining the property always make a better home long term, even if you remodel after purchase.”

Home Buyers: 3 Signs It’s Time to Enlist a Real Estate Pro

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Note: This article was originally posted on Zillow Blog (www.Zillow.com/blog) on Jan 23, 2015 by Brendon Desimone http://www.zillow.com/blog/when-to-contact-real-estate-pro-168239/

You can research the market and attend open houses on your own, but call in a local real estate agent when you’re ready to take your home search to the next level.

The growth of online real estate listings means consumers are equipped with information very early in the home buying process. A generation ago, to get listing information and access to historical data, home buyers needed to connect with a real estate agentmuch sooner — sometimes even prematurely. But today’s home buyers can do a lot of the legwork themselves, conducting research online and using home search and research applications independently, in addition to attending open houses.

But this access to information doesn’t mean home shoppers can entirely go it alone. Buying a home is a major transaction, and all the data in the world can’t replace a knowledgeable and experienced local real estate agent.

Here are some signs that you are ready to engage with a buyer’s agent:

You think you’ve found the home of your dreams, and you don’t know what to do next.

If you’ve been looking at homes for some time, you likely have a good feel for what you get for the money. You’ve gone to some open houses and have a few homes or searches saved online. Home shopping has become a hobby. But once you find the home of your dreams, it becomes a part-time job.

Independent shoppers get comfortable with the market until their dream home hits them like a ton of bricks. The house is the motivator to take things up a notch. Reaching out to an agent will take you out of the dreaming phase and move you in the direction of actually buying a home.

You’ve found a home that appears too good to be true, but you can’t figure out what the problem is.

Suppose you stumble upon a house that seems like a great deal. It’s priced accurately for the neighborhood, but has been sitting on the market for weeks, if not months. You may have reached out to the listing agent to see the home in person or asked some questions of the agent at the open house. But that agent represents the seller, so you are not sure what the story is.

In this case, you don’t know what you don’t know. That uncertainty, coupled with your curiosity about the home, is the best reason to pair up with a good local agent. They may know the house, its market history or, via their network, have access to information about the home.

The house may have some major structural issues. Or the agent might point out that it is on a less desirable road or in a tough school district. These are the types of things that new, uneducated buyer wouldn’t know on their own.

You’ve been hit by a major life or financial event and need hard information to make a decision.

Sometimes you get news that changes your life’s course. Your landlord is selling your building, and you have 60 days to vacate. You’ve received the job opportunity of a lifetime or a huge increase in pay. Or you’ve done some tax planning and realize you are paying so much in taxes that you need to take advantage of the benefit realized by homeownership.

When you need information fast, rather than taking the time to study the market independently, it’s easier to go right to the source. In a 30-minute phone call or in-person meeting, a local agent can get you up to speed on the market, pricing, timing and what to expect. You can quickly marry this information with your personal financial situation and start to devise a plan.

A generation ago, potential home buyers, curious about getting into the market, had access to little information about homes for sale. They might have checked the open house section of the Sunday paper to get started. Or they simply called a local agent and engaged them. They may not have been quite ready to pull the trigger at that point, but they needed an agent to get them in the game, many times well before they were ready to purchase. While that agent is still an integral part of the process, today’s buyers can hold off a bit longer — as long as they know when the time is right to enlist help.

Thoughts? Suggestions? Or just pure reactions? Tell us what you think by completing the form below and let us know, we’ll be more than delighted to hear from you!

The Sacrifices Couples Make in the Name of Homeownership

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Note: This article was originally posted on Trulia Blog (www.Trulia.com/corp) on Jan 15, 2015 by Learn Vest http://www.trulia.com/blog/sacrifices-couples-make-name-homeownership/

3 ways that millennials are scaling back to save up for a new home.

After months of wedding-planning stress, a relaxing honeymoon can be just what the doctor ordered for weary newlyweds. Yet 60% of couples would give it all up if it meant they could afford a house down payment, according to a March 2014 survey from ERA Real Estate. What’s more, almost 50% of women said they’d sacrifice a big engagement ring, too, if it meant they could confidently pony up the cash for a new home.

What’s behind their willingness to sacrifice? ERA suggests it’s the bonding experience. “Our findings suggest that homeownership is an increasingly important part of a relationship, especially among the first-time homebuyer generation who are investing in their future,” Charlie Young, president and CEO of ERA Real Estate, said in a press release.

And it’s not just couples willing to work for their down-payment money. In a Trulia survey, more than a third of millennials said they’d take on a second job to pad their new-home savings.

How else are first-time homebuyers swinging their down payments? Here are three ways they’re finding the money — plus pitfalls to beware — courtesy of Marketwatch.

1. Scaling back on nonessentials

Karen Carlson, director of education and creative programs for nonprofit InCharge Education Foundation, says some of the best ways to hit your down-payment savings goals are to trade in your car for cheaper payments, cut cable, and find — and sell — items you don’t use.

Easy enough, right? Just one problem: The Trulia survey found that millennials aren’t particularly interested in following that advice. 65% said they’d never give up their cars to fund their down-payment accounts, and another 13% said scaling back on dining out was a bridge too far.

2. Ask family for a gift or loan

Half of millennials would consider asking their parents or grandparents for help with a down payment, which is a great resource — if you can get it.

But don’t forget to create a paper trail, warns Phyllis Caldwell, director of the Center for Homeownership, in Winston-Salem, NC. (A cashier’s check should do the trick.) Your mortgage lender may inquire where the money came from.

3. Borrowing from a 401(k)

About 15% of buyers take loans from their retirement funds — but this really isn’t your best course of action. Not only are there limits to how much you can take out, but also if you don’t pay it back in the allotted amount of time, you’ll be subject to additional penalties and taxes. Plus, you’ll be missing out on the magic of compound interest.

Thoughts? Suggestions? Or just pure reactions? Tell us what you think by completing the form below and let us know, we’ll be more than delighted to hear from you!