Here's this month's roundup of news and resources.
REACH YOUR GOALS
Rates are Rising. Should You Buy Now?
Both mortgage rates and rent prices are rising, which makes the "rent or buy?" question trickier than ever. While this has caused some would-be homebuyers to put their plans on hold, you may not be content to do this, especially if your rent continues to increase with every new lease.
While interest rates are a big consideration when buying a home, there are other important factors to consider.
Are you ready to put down long-term roots? If so, it could be well-worth buying now. However, if you're planning to move again in a few years, this strategy may end up costing you any equity you earn, especially if property prices stagnate.
Are you prepared to take over maintenance? Unless you buy a warrantied new home, you may be faced with major bills during the first years of homeownership unless the previous owner has recently replaced older HVAC, plumbing or electrical systems.
What about future possibilities? For example, if you plan to buy with a spouse, what will happen if one of you are laid off? Do you plan to eventually move an elderly parent in with you? Will you still have an emergency nest egg after making a down payment?
What if you find a bargain? It could make sense to buy this home with a smaller deposit, even if you can afford to put 20% down. Here's why: it's important to have assets on hand to keep your investment in homeownership safe, even if you're required to pay mortgage insurance during the first years in your new home. This strategy will help you truly enjoy the perks of homeownership without money worries.
I'm always ready to answer your questions about home financing, so feel free to call if you're considering a move. 1
MORTGAGE IQ
How to Buy a Home with a Friend
According to a recent Realtor.com survey, nearly one in three American homeowners have bought a home with someone other than their spouse. It's easy to see why: in addition to lowering each person's costs, it may be easier to qualify with a good friend or relative as co-borrower. If you're considering this approach, here are some topics to discuss with your potential co-owner.
Have an honest conversation. Both of you will need to consider each other's personal and financial expectations. Deciding how to handle additional bills, such as utilities and repairs, should be done ahead of time. Pets are another topic, especially if one of you are allergic and the other plans to bring pets into the home. Also, are your incomes and credit scores similar? If there are major differences, this could cause problems during the loan application process.
Create a contract together. This agreement should define your responsibilities in detail, with a potential maximum home purchase budget. Be sure to include potential profits such as tax benefits. Also, unmarried co-buyers may choose from several ownership structures, including Joint Tenants and Tenants in Common. The Tenants in Common may be best if you don't plan a 50-50 split on all costs.
Prepare a legally binding exit strategy. While this may not be fun, you'll both need to establish guidelines if one of you decides to sell their stake in the property, can't pay their share of the loan, or dies. 2
FINANCIAL NEWS
Savings, Meet Higher Interest Rates
If rising prices have convinced you to put off major purchases for the time being, or if you're looking for an alternative to traditional savings accounts, here are some strategies for making your money work harder.
A high-yield savings account (HYSA) offers higher interest rates than a typical savings account. Some HYSAs currently offer rates over 2%, which may increase again if the Federal Reserve announces another rate hike. More good news: many HYSAs have dropped their minimum balance requirements.
A money market account goes a big step further than a savings account, as it also provides check writing and debit card privileges combined with a higher rate. These are popular with savers who prefer limited access to these funds, as withdrawals may be limited. Some of these accounts may include other bonuses, such as the opportunity to earn frequent flyer points.
A certificate of deposit (CD) is a savings tool that earns interest over a set timeframe. During this time, the funds will not be accessible without penalty. However, CD customers are rewarded with higher interest rates. CDs often provide a higher rate for larger deposit sums and longer maturity periods.
I Bonds, aka Series I Savings Bonds, have become popular thanks to historically high interest rates. These bonds use a combined fixed and inflation rate to create the bond's composite rate. The fixed rate doesn't change through the five-year life of the bond, while the inflation rate changes twice a year, in May and November. Some I Bonds are currently offering a composite rate of over 9.0% this month. 3
DID YOU KNOW?
Buying an Old House Can Preserve History
More homebuyers – both new and experienced – are going the old house route. These have become easier to locate with the popularity of TV shows like Cheap Old Houses and This Old House.
Restoring an older home can be both satisfying and profitable, but it's also a major commitment. Here are some things to keep in mind before you begin shopping for that Greek Revival or Italianate fixer-upper.
Research the home's style and history. This helps identify the home's original building materials and will help you find suitable substitutes if needed. It's also worth contacting your state's restoration society or historical commission website for guidance. Some states may offer you a grant, tax credit, or both in exchange for helping preserve local history.
Check out possible limitations. If your chosen home is in a "historical district" or similar, you may be required to follow certain guidelines or obtain permission before you begin your restoration or remodeling work.
Find the right contractor. If you're confident you have the skills to complete restoration on your own, this is a big plus. However, you may need to hire a specialist if you run across major structural, plumbing, or electrical problems. This is because your home's foundation or electrical wiring may be very different from modern homes.
Start renovations in the right area. This is especially important if you're purchasing a property without modern heat or cooling. Experienced renovators often make the main bedroom, bathroom, and kitchen habitable before move-in. This ensures they'll always have a comfortable living area...something you'll want, too. 4
PERSONAL FINANCES
A Deep Dive into Mortgage Interest Rates
While the Federal Reserve's recent rate increases are one factor that affect mortgage rates, there are other factors at work, including investor demand. Let's take a closer look at how their strategies affect homebuyers and lenders.
Investors view most mortgages as similar to bonds. Both offer lower risk and a more stable return than many stocks.
Unpredictable consumer behavior translates into lower FICO scores for borrowers, which increases their mortgage interest rate. This is because investors' risk is higher when they purchase these.
Investors expect higher rates of return in exchange for taking on additional risk.
This still leaves a few questions, mainly about the investor side of the mortgage rate coin.
Q. Why do some investors choose mortgages instead of stocks and bonds?
A. The reasons may be the competitive rate of return, acceptable risk, and even the longer terms of a mortgage.
Q. Why would investors prefer a long-term mortgage?
A. These investors are counting on making their money back by collecting over time. Some even pay a premium for this. Here's an example to illustrate how this works:
$100,000 = a 30-year, fixed-rate mortgage loan's principal amount
$104,000 = what an investor might pay a mortgage lender to obtain the loan
Depending on the loan's interest rate, the investor will recoup the $4,000 premium before the loan's term ends. For example, if this $100,000 loan has a 4.0% interest rate, the total interest during the 30-year term will add up to considerably more than the $4,000 premium paid by the investor. 5
REAL ESTATE TRENDS
Chic Halloween Decorations
Halloween doesn't have to be styled the same way year after year, and you can even combine spooky with chic autumn accents and create a "Falloween" vibe. Better yet, visit sites like Etsy where hundreds of hand-crafted, original, and even custom-made items are available for sale.
Here are three suggestions to incorporate classic fall and Halloween items with your existing décor.
Posh Pumpkins
While there's nothing wrong with carving a jack-o-lantern for your front porch, your indoor pumpkins can go further. Fabric pumpkins made of velour, burlap or even velvet can go almost anywhere in your home. You can even go for more glamour with painted ceramic or glass pumpkins.
Classy Craniums
The human skull became stylish when English designer Alexander McQueen began adding them to his couture collections. And while skeletons are always a favorite with trick-or-treaters, you can bring them indoors in all sorts of ways. Go up-market with glassware, garden pots or even a crystal decanter adorned with a stylized skull. Or pick up a few spooky animal skeletons at a big-box retailer.
Lighten Up
You can go gothic and subtly spooky without using dark colors, especially as this also tends to make small areas look smaller. Instead, go light with natural-looking spider webs. You can add all sorts of floating ghosts, made from anything from tissue to fabric. Park or hang a few above a lamp, or move a spotlight underneath them, and bring them to life for the evening. 6
Have any questions? Reach out to us. We are your home loan experts and are up to date with all the market industry information. kevnik@kevnikmortgage.com
Positively Changing Your Home Finance Experience. 🏠
NMLS#1639268 | AZ BK# 0932828 | Licensed by the DFPI under the CRMLA | Equal Housing Opportunity
Sources: 1cnbc.com; 2mymortgageinsider.com; 3thepennyhoarder.com; 4ahs.com; 5mortgagenewsdaily.com; 6housebeautiful.com
