Category Archives: real estate

The Cost of Selling Your Home Without a Real Estate Agent

Everybody likes to save a little money. So when Rossana was ready to sell her condo a few years ago, she figured she could save some cash by selling it herself — without using a real estate agent. After all, her property was in a hot real estate market and she thought: “How hard could this be?”

Rossana, a busy mother of one, had become overwhelmed juggling her daily responsibilities in addition to managing her rental condo. She had grown tired of being a landlord and dealing with a revolving door of tenants — so when the family currently renting it was moving out, she decided that it was time to sell.

In hopes of saving some money, Rossana chose to sell her condo herself instead of working with a real estate agent. She thought: How hard could it be? She figured it would be easy to just hire a company that charges a flat fee to photograph the condo for her and advertising the property online. After all, she could handle the rest of the details herself. Right?

What she quickly discovered was that this approach didn’t work.

Missed Opportunities

“I found the service I used was not the best,” Rossana says. First, she says the service might have turned off potential buyers with unprofessional photos, “Honestly, I could have done a better job if I had done it myself.”

Second, when it came to marketing her property, Rossana says the marketing plan wasn’t aggressive enough to expose her condo listing to a large population of potential buyers. “My condo just didn’t get the same visibility if it would have had on MLS.”

Her condo was not widely promoted, and the service she used was not authorized to advertise on Realtor.ca (also known as MLS), which is many Canadians’ first stop when starting their home search.

Low Buyer Confidence

Rossana found buyers who had real estate agents wouldn’t come to view her property since she was selling it herself. “I think they lacked confidence that the sale would go through, or that it would be a complicated process because I didn’t have an agent.”

While she wasn’t getting a great deal of interest, Rossana still had to be on-site for open houses over the weekends. “I was living at the other end of the city at the time, so the commute was terrible. It was so much work, but I wasn’t getting much traction.”

Less-than Attractive Offers

When offers did get presented, they were far below the listing price. Plus, agents came in very confident with their clients’ offers, and Rossana didn’t feel she had the experience to handle these types of negotiations.

“I felt people were trying to take advantage of me, because I was trying to sell on my own. And I didn’t have the full picture of the market. I didn’t have the background to stand up to those low offers.”

Making the Decision to Hire an Agent

After more than five weeks of trying to sell the property on her own, Rossana decided to list her home with a professional real estate agent, after getting a referral from a friend.

“I immediately saw the difference in having a real estate professional in my corner,” Rossana recalls. “She offered staging, took really nice photos, and her level of professionalism was so impressive. And when there was an offer coming in, she was able to negotiate on my behalf.”

In the end, Rossana sold her condo — about two weeks after hiring an agent — and for a price she was very happy with.

“I really underestimated the amount of time an effort needed to sell a home myself. For anyone looking to sell their home, I highly recommend working with a real estate professional.”

Reasons to Use a Real Estate Professional

Rossana’s experience is a valuable tale for those thinking of taking a DIY approach to selling a home. While there is a cost to selling with a real state agent in the form of commission, the cost to sell without one may be greater.

Here are five benefits to working with a real estate agent:

  1. Market Knowledge. Rossana’s real estate agent knew what comparable condos in her neighbourhood had sold for, and the inventory on the market at the time. This enabled her to have an informed perspective on a reasonable listing price and acceptable end selling price.
  2. Visibility and Presentation. From professional staging to high quality photos, Rossana’s real estate agent presented her home in a highly attractive manner that was appealing to potential buyers. And because she could list the property on Realtor.ca, those looking for properties online could browse the photos and features of Rossana’s condo 24/7.
  3. Administration and Coordination. One of the things that Rossana underestimated was the time commitment required to sell a home privately. Her real estate agent took care of all the showings and open houses, allowing Rossana to be completely hands off until it came time to review an offer.
  4. Professional Real Estate Networks. As an established agent, Rossana’s real estate agent could connect with others working with buyers in the neighbourhood, and present the property to those in her network, further widening the net of potential purchasers.
  5. Negotiation Skills. Rossana’s real estate agent had significant experience negotiating deals and was in a great position to get Rossana the best possible price for her condo — Rossana didn’t have to do any of the negotiating herself.

Thinking about selling your home? Let Rossana’s story be a reminder of the benefits to working with a real estate professional.

Not sure how to find one or what to look for in a real estate professional? Discover Seven Things to Look for in a Real Estate Professional for some valuable tips.

Source: RoyalBank.com – By Diane Amato February 19, 2019
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How Much You Need to Earn to Buy a Home in America Today

Seven years after the U.S. housing market bottomed in February 2012, the market has staged a dramatic recovery. U.S. housing prices are now about 11 percent higher than their 2006 peak, according to the latest S&P/Case-Shiller U.S. National Home Price Index data.

National Averages

While that surge in home prices is great for homeowners, it’s made it difficult for homebuyers, particularly younger buyers in large cities where the real estate market is hottest.

To make matters worse, rising interest rates have pushed mortgage rates higher than they’ve been in years, creating yet another obstacle for buyers. HSH.com recently compiled a list of the most- and least-affordable U.S. metro housing markets. The list incorporates median housing prices, interest, taxes and insurance payments and is ranked by the salary a homebuyer would need to afford the average home in each market.

On a national level, the salary needed to comfortably afford a home is $61,453, according to HSH.com. That estimate is based on an average mortgage rate of 4.9 percent on a median home price of $257,600. That average home price is up 3.95 percent from a year ago. The average monthly mortgage payment is around $1,433.

Least Affordable Markets

Of course, some markets are much pricier than the national average. The following are the top five most expensive housing markets:

San Jose, California

  • Median home price: $1.25 million
  • Year-over-year change: -1.5 percent
  • Monthly payment: $5,946
  • Salary required: $254,835

San Francisco, California

  • Median home price: $952,200
  • Year-over-year change: +3.5 percent
  • Monthly payment: $4,642
  • Salary required: $198,978

San Diego, California

  • Median home price: $626,000
  • Year-over-year change: +2.6 percent
  • Monthly payment: $3,071
  • Salary required: $131,640

Los Angeles, California

  • Median home price: $576,100
  • Year-over-year change: +4.1 percent
  • Monthly payment: $2,873
  • Salary required: $123,156

Boston, Massachusetts

  • Median home price: $460,300
  • Year-over-year change: +2.6 percent
  • Monthly payment: $2,491
  • Salary required: $106,789

Most Affordable Markets

If these numbers are enough to make the average American earner dizzy, there are also plenty of metro housing markets around the country that are much more affordable. The following are the five most affordable cities to buy a house, according to HSH.com:

Pittsburgh, Pennsylvania

  • Median home price: $141,625
  • Year-over-year change: +4.9 percent
  • Monthly payment: $878
  • Salary required: $36,659

Cleveland, Ohio

  • Median home price: $150,100
  • Year-over-year change: +6.9 percent
  • Monthly payment: $943
  • Salary required: $40,437

Oklahoma City, Oklahoma

  • Median home price: $161,000
  • Year-over-year change: +5.3 percent
  • Monthly payment: $964
  • Salary required: $41,335

Memphis, Tenessee

  • Median home price: $174,000
  • Year-over-year change: +4.3 percent
  • Monthly payment: $966
  • Salary required: $41,400

Indianapolis, Indianapolis

  • Median home price: $185,200
  • Year-over-year change: +7.4 percent
  • Monthly payment: $986
  • Salary required: $42,288

Millennials Getting Burned

In addition to paying higher prices for homes, a recent survey by Bankrate suggests that millennials are being too hasty about jumping into the market. One in three millennials under the age of 35 own a home, but 63 percent of those young homeowners admitted to having regrets about the home they purchased.

The biggest source of buyer’s remorse for millennial homeowners is underestimating the amount of hidden costs associated with owning a home. Insurance costs, property taxes and closing costs can add up to between 2 and 5 percent of the total value of the home, but many buyers don’t consider these fees when shopping for homes.

Homeowners should also set aside at least 1 percent of the value of the home each year for repairs and maintenance, according to HGTV.

In addition to paying too much, nearly 1-in-5 (18 percent) of millennial homeowners regret not buying a larger house.

 

Source: News Republic – March 11, 2019 

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4 problems with Canada’s mortgage stress tests that are hurting homebuyers and the economy

Photo: James Bombales

Economic researcher Will Dunning has a problem with the mortgage stress test the federal government imposed about a year ago.

Actually, he has four.

Last January, the Canadian government expanded its standard stress testing, which requires borrowers to qualify at a higher mortgage rate than they are signing on for. Before that, it only applied to insured mortgages. Mortgage insurance is needed if a homebuyer can’t muster a downpayment of 20 percent or more, so previously, those who could managed to sidestep stress testing.

Dunning, who describes himself online as an “iconoclastic economist” outlines what he says are four significantly harmful shortcomings of the stress testing.

1. The stress test ignores potential income growth

“The tests fail to consider the income growth that will occur by the time mortgages are renewed” — that’s Dunning’s first issue, as outlined in his latest study.

The point of the stress test is to makes sure borrowers are up to the task of making higher mortgage payments upon renewal, typically five years from signing on. So federally regulated lenders now need to make sure all borrowers can afford to pay the higher of the Bank of Canada’s qualifying rate or the contract rate plus two percentage points.

Problem is, this method ignores rising incomes. Borrowers’ ability to make interest payments in five years is based on incomes today. Dunning notes that over the past five years, incomes have grown a cumulative 11.6 percent on average.

2. It’s also bad for the economy

“They have negative consequences for the broader economy,” Dunning says, summing up his second issue.

BMO suggests that the pace of residential construction has been slowing down as a the mortgage stress test has taken a bite out of homebuying activity. In fact, Canadian home sales were down 4 percent in January on a year-over-year basis, according to the Canadian Real Estate Association, which chalked up at least some of the decline to the stress tests.

Dunning estimates that Canada will lose 90,000 to 100,000 jobs when the labour market fully adjusts to the slowdown in starts.

3. Ditto for long-term best interests of Canadians

“They prevent Canadians from pursuing their long-term best interests,” says Dunning as his third strike against the current test. After all, a mortgage is really “forced savings,” he says. Sure, in the short term a roughly 60-percent portion of mortgage payments are going towards interest, and initially renting is usually the cheaper option.

But that changes over time. “Rents increase; for home ownership, the largest element of costs (the mortgage payment) is fixed (usually for the first five years). The total monthly cost of renting will rise more quickly than the cost of owning.”

4. Housing supply problems are going to intensify

Back to that slowdown in housing construction. Job losses aren’t the only negative consequence of less home construction taking place. “Suppressed production of new housing will worsen the shortages that have developed,” Dunning warns.

Dunning says construction needs to speed up, not slow down, to meet demand. The country’s population has been increasing at a rate of 1.25 percent annually for the past three years, above the long-run average of 1.1 percent.

“Long-term, the stress tests will add to the pressures that Canadians are already experiencing in the housing market.”

Source: Livabl.com –  

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Down Payment Assistance Programs Across Canada

Canadian down payment assistance programs help first-time home buyersSo many young people want to build home equity and get out from under their landlord’s thumb.

But they can’t. They don’t have the down payment to qualify for a mortgage.

For many modest-income Canadians, saving up the 5 percent minimum down payment (or 20 percent if you want to avoid CMHC insurance) can take years—many, many years.

While some are able to rely on gifts from parents/family (39% of first-time buyers according to a 2018 Mortgage Professionals Canada study) or loans from family (25%), or RRSP withdrawals (38%) to make their down payment, those options aren’t available to everyone.

That’s where government down payment programs come in. Scattered across Canada, these little-publicized municipal and provincial programs are helping first-time home buyers fund their down payments and make the transition from renter to owner.

Since most people don’t know about them, their uptake is typically low. When the B.C. government launched its program in 2017, for example, it thought 42,000 residents would participate in the first three years. After nine months, only 1,400 had done so.

To some onlookers, giving buyers government money to buy a house may seem a bit too socialist, but municipalities have an interest in transitioning financially stable renters from apartments to houses. Among other reasons, it frees up rental units and grows their property tax base.

To help homebuyers find such assistance, the Spy has rounded up some of the more popular programs. What follows are grant or loan programs that provide a portion of the down payment to qualified borrowers. Note that this list isn’t exhaustive and that the status of these programs change regularly. Moreover, once quotas are reached many such programs end, so contact the source for the latest info.

 

Alberta

Program: PEAK Housing Initiatives (formerly PEAK Program)
Provider: Joint initiative between Trico Residential, the Government of Alberta Municipal Affairs, CMHC and Habitat for Humanity
Details: PEAK housing units are priced at market value and recipients must be able to qualify for and hold a mortgage. Once approved for the program, PEAK provides a second mortgage for either a partial or full down payment up to a maximum of 5 percent of the purchase price. PEAK has so far helped 111 individuals and families purchase a home of their own.
How to apply: http://www.peakinitiative.ca/

Program: Attainable Homes (specific to Calgary only)
Provider: The City of Calgary
Details: This program has been in place since 2009 and is geared towards moderate-income Calgarians. Successful applicants must be able to contribute $2,000 towards the downpayment of their home, and the Attainable Homes program contributes the rest.  If and when the homeowner sells the home, the growth in the home’s value is split between the homeowner and the program, with that money reinvested to assist other homebuyers. The longer the homeowner remains in the house, the more their share of the appreciation increases.
How to apply: https://attainyourhome.com/

 

British Columbia

The province of B.C. ended its Home Owner Mortgage and Equity Partnership on March 31, 2018. It has no widely available down payment assistance programs at this time.

 

Manitoba

Program: Rural Homeownership Program
Provider: Manitoba Housing
Details: This program is limited to those renting a home owned by Manitoba Housing in selected rural communities or those who would like to purchase a vacant home owned by Manitoba Housing. Applicants must have a maximum household income of $53,441 if they don’t have children, and $71,255 if there are children or dependents. The program has two components, a loan worth 10 percent of the purchase price, which is forgivable on a pro-rata basis over five years. Another 15 percent loan is forgivable after 15 years of continuous ownership and occupancy of the property.
How to apply: http://www.gov.mb.ca/housing/progs/homeownership.html

 

Saskatchewan

Program: 3% Down Payment Assistance Program
Provider: National Affordable Housing Corporation
Details: Provides Saskatchewan homebuyers with a 3 percent non-repayable down payment assistance grant towards the purchase of a home from one of the NAHC’s partner housing providers. Saskatchewan households with incomes less than $90,000 per year are eligible for financial support under this program.
How to apply: http://nahcorp.ca/assistance/nahc-3-down-payment-assistance-program/

Program: Mortgage Flexibilities Support Program
Provider: City of Saskatoon, CMHC and the Saskatchewan Housing Corporation
Details: This program is for designated projects in the city of Saskatoon and provides qualifying homebuyers with a 5 percent down payment grant for the purchase of a home. The household income limit must be less than $69,975 for one person and $74,640 for two people. Their maximum net worth must also be less than $25,000.
How to apply: https://www.saskatoon.ca/services-residents/housing-property/incentives-homebuyers

 

New Brunswick

Program: Home Ownership Program
Provider: Government of New Brunswick
Details: This program offers assistance in the form of a repayable loan worth up to 40 percent of the purchase price of an existing home, or a maximum of $75,000 for new builds. It’s available to those with household incomes below $40,000. Applicants must be first-time homebuyers or be living in a sub-standard housing unit; have been living in New Brunswick for at least one year prior to application; and have a good credit rating and meet all financial institution lending requirements for obtaining a first mortgage.
How to apply:http://www2.gnb.ca/content/gnb/en/services/services_renderer.8315.Home_Ownership_Program.html

 

Newfoundland & Labrador

Program: Home Purchase Program (HPP)
Provider: Government of Newfoundland and Labrador
Details: This program will remain open over 2018/19 until funding has been fully committed to up to 330 homebuyers. Grants of $3,000 are available to qualifying individuals and families to assist with the down payment of a new home valued up to $400,000 (including HST).
How to apply: http://www.nlhc.nf.ca/programs/programsHpp.html

 

Nova Scotia

Program: Down Payment Assistance Program
Provider:
 Housing Nova Scotia (Government of Nova Scotia)
Details: This is a pilot program to assist Nova Scotians with a household income of $75k or less. The program offers an interest-free loan of up to 5 percent, to a maximum purchase price of $280,000 in the Halifax Regional Municipality and $150,000 elsewhere in the province. The loans will range from $7,500-$14,000 and must be repaid in 10 years. More than 150 first-time buyers benefitted from the program in its first year, and it will remain open until March 31, 2019.
How to apply: https://housing.novascotia.ca/downpayment

 

Ontario

Housing programs in Ontario are administered by municipalities based on the premise that they know their community’s needs best. Below is a selection of just several first-time homeowner assistance programs from some key municipalities.

Barrie (Simcoe County)

Program: Homeownership Program
Details: This program offers 10 percent down payment assistance in the form of a forgivable loan.
There is presently a waiting list, but applicants are still encouraged to apply. A percentage of available funding is designated for applicants currently living in Social Housing or those who self-identify as Aboriginal households.
More details: http://www.simcoe.ca/dpt/sh/apply-for-the-homeownership-program

Hamilton

Program: Homeownership Down Payment Assistance Program
Details: This program provides support to low- and moderate-income residents who qualify for a mortgage with a maximum home price of $375,000. To qualify, applicants must have a maximum household income of $80,000,
More details: https://www.hamilton.ca/social-services/housing/homeownership-down-payment-assistance-program

Kitchener (Region of Waterloo)

Program: Affordable Home Ownership program
Details: This program provides individuals and families with a loan of up to five percent of the purchase price of a home (up to a value of $386,000). Applicants must currently renting in the Region of Waterloo, be able to qualify for a mortgage, and have a maximum household income of $90,500.
More details: https://www.regionofwaterloo.ca/en/living-here/funding-to-help-buy-a-home.aspx

 

Prince Edward Island

Program: Down Payment Assistance Program
Provider: Government of Prince Edward Island
Details: This program assists Prince Edward Islander’s with modest incomes by providing a repayable loan of up to five percent of the purchase price of a new or existing home to a maximum price of $11,250. The loan amount must go towards the down payment and not towards financing or other closing costs. The loan bears a fixed interest rate of 5% per annum. The purchase price of the home must be no more than $225,000.
How to apply: https://www.princeedwardisland.ca/en/information/finance-pei/down-payment-assistance-program

 

Quebec

Program: Accès Condos
Provider:
 Société d’habitation et de développement de Montréal (SHDM)
Details: Launched in 2005 by the SHDM, Accès Condos has provided more than 3,600 affordable units that promote home ownership throughout Montreal. Qualifying buyers must make a minimum $1,000 deposit and receive a 10% purchase credit, which is used for the down payment on the house in an approved development.
How to apply: https://accescondos.org/en/

 

financial support

National Non-Loan Programs

First-Time Home Buyers’ (FTHB) Tax Credit

Provider: Government of Canada
Details: The FTHB Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief.
Link: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

 

Home Buyers’ Plan (HBP)

Provider: Government of Canada
Details: The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.
Link: http://www.cra-arc.gc.ca/hbp/

 

GST/HST New Housing Rebate

Provider: Government of Canada
Details: You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house.
Link: http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html

Source: RateSpy.com – By  on November 26, 2018

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Mark Cuban Says the Best Investment Is Paying Off Your Debt — Is He Right?

Mark Cuban Says the Best Investment Is Paying Off Your Debt -- Is He Right?

Image credit: Invision/AP/REX/Shutterstock via GOBankingRates

Billionaire investor and Shark Tank star Mark Cuban said that the safest investment you can make right now is to pay off your debt, according to an interview with Kitco News earlier this year.

 

“The reason for that is whatever interest you have — it might be a student loan with a 7 percent interest rate — if you pay off that loan, you’re making 7 percent,” said Cuban. “And so that’s your immediate return, which is a lot safer than trying to pick a stock, or trying to pick real estate or whatever it may be.”

Cuban is mostly right: More often than not, paying down debt as fast as possible is going to provide the most value in the long run. And perhaps more importantly, it will do so without any real risk that comes with most investing. That said, each person’s financial situation is different, so it is worth a closer look at when it’s better to pay off debt or invest.

Debt is like investing but in reverse.

One important thing to note is that the same principals that make investing so important also make paying off your debt similarly crucial. As Cuban points out, the interest rate on your loan is essentially like the rate of return on your investments but backward. In fact, many investments are simply ways you’re letting your money get loaned out to others in exchange for them paying interest.

As such, it’s important to keep in mind that as satisfying as it might be to watch your money grow in investments, it’s doing just the opposite when you have debt.

Every loan is different.

Although debt chips away at your net worth through interest, it’s important to note that different types of borrowing do so in very different ways. Every loan is different, with some offering terms that are actually quite favorable and others that can be excessively costly.

An overdue payday loan can lay waste to your financial health in no time, but a 30-year fixed-rate mortgage with a competitive rate can be relatively easy to manage with good planning. Borrowers should be sure they understand what kind of debt they have and how it’s affecting their finances.

 

Focus on the interest rate.

The key factor to take note of when considering how to allocate funds is the interest rate — usually expressed as your APR. Debt with a high APR is almost always going to be better to pay down before you focus on any other financial priorities beyond the most basic necessities.

The average APR on credit cards as of August 2018 was 14.38 percent. That’s well in excess of what anyone can reasonably expect to sustain as a return on most investments, so it shouldn’t be hard to see that investing instead of paying down your credit card is almost always going to cost you money in the long run.

Does your interest compound?

Another crucial factor in understanding how your debts and your investments differ is whether or not your interest is compounding. Compounding interest — like that on most credit cards — means that the money you pay in interest is added to the amount due and you’ll then have to pay interest on it in the future. That can lead to debt snowballing and growing exponentially. So, not only do credit cards have high interest rates, but they also make for debt that’s growing faster and faster unless you take action to pay it down.

However, that same principle can work in reverse. Gains on something like stocks will also compound over time, so there’s a similar dynamic at work when comparing your investment returns to fixed interest costs.

Know your risk tolerance.

Another factor that plays a big part in the conversation is your level of risk tolerance. Note that the question Cuban was responding to earlier was about what the “safest” investment was. For most people, erring well on the side of caution when it comes to something like personal finance just makes sense, and in that case, focusing on paying off debt is pretty crucial.

However, others might decide that the long-term payoffs that are possible make it worth rolling the dice on their future. Borrowing money for investments is common despite the risks associated, with everyone from massive investment banks to investors with margin accounts opting to take a calculated risk that their returns will ultimately outpace the cost of borrowing.

 

Costs of debt are set, investment returns often are not.

One important aspect of understanding the risks involved is that the cost of your debt is usually set and predictable, but the returns on your investments are not. It might be easy to look at the historical returns of the S&P 500 at just under 10 percent a year and assume that it’s worth it to put off paying down debt for an S&P 500 ETF or index fund as long as your APR is under 10 percent.

However, that long-term average does not reflect just how chaotic the markets really are. Sure, it might average out to about 10 percent, but some years will be in the negative — sometimes over 30 percent into the red. Even with bonds — where your rate of return is fixed — there is always a chance that the borrower will default and leave you with nothing.

If you have a variable rate loan

Of course, if your loan has variable interest rates, the equation changes yet again. You could see your interest rate rise or fall depending on what the Federal Reserve does, adding another layer of uncertainty to the decision — especially when it’s impossible to say with certainty which direction interest rates are headed in for the long run.

So, although debt will typically have more certainty associated with its costs than investing, that’s not always the case and variable rate loans could change things for some borrowers.

Don’t forget taxes.

You should also remember that the tax code includes a number of provisions that promote investment, and those can boost the value of investing. In particular, contributions to a 401(k) or traditional IRA are made with before-tax income, meaning that you can invest much more of that money than you would have with your after-tax income that would be used to pay down debt.

That’s especially true when you have an employer who matches your 401(k) contributions. If your employer matches, you’re essentially getting a chance to not just avoid paying taxes on that income, but you’re doubling its value the moment you invest — before it’s even started to accrue returns.

 

Some opportunities are unique.

Another important factor to consider is what type of investments you can make. In some very specific cases, you might have access to an investment opportunity that brings with it huge potential returns that could tip the scale. Maybe a specific local real estate investment you’re particularly familiar with or a startup company run by a family member where you can get in on the ground floor.

Opportunities like this usually come with enormous risks, but they can also create transformational shifts in wealth when they pay off. Obviously, you have to gauge each opportunity very carefully and make some hard choices, but if you do feel like it’s a truly unique chance to get the sort of returns that just don’t exist with publicly-traded stocks or bonds, it might be worth putting off paying down debt — especially if those debts have fixed rates and a reasonable APR.

What really matters with debt and investments

At the end of the day, you certainly shouldn’t opt to invest money that could be used to pay down debt unless the expectation for your returns is greater than the interest rate on your debt. If your personal loan has an APR of 15 percent, investing in stocks is probably not going to return enough to make it worthwhile. If that rate is 5 percent, though, you could very well do better with certain investments, especially if that’s a fixed rate that doesn’t compound.

But, even in circumstances where you might have reasonable expectations for returns higher than your APR, you might still want to take the definite benefits of paying down debt instead of the uncertain benefits associated with investments. When a wrong move might mean having to delay retirement or delay buying a home, opting for the sure thing is hard to argue with.

Which decision is right for you?

Unfortunately, there’s no magic bullet for knowing whether your specific circumstances call for you to prioritize paying down debt over everything else. Although paying down debt is typically going to be the smartest use for your money, that doesn’t mean you should do so blindly.

Putting off paying down your credit card balance to try your hand at picking some winning stocks is a (really) bad idea, but failing to make regular 401(k) contributions in an effort to pay off your fixed-rate mortgage a couple of years early is probably going to cost you in the long run — especially if you’re missing out on matching funds from your employer by doing so.

So, in a certain sense, Mark Cuban is right: Paying down debt is very rarely going to be a bad idea, and it’s almost always the safest choice. But that said, it’s still worth taking the time to examine the circumstances of your specific situation to be sure you’re not the exception that proves the rule.

Source: Entrepreneur – Joel Anderson , 

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The 4 Key Trends Home Buyers and Sellers Should Watch in 2019

 | Nov 28, 2018

We’re entering the home stretch of 2018, when you can actually say, “See you next year!” to someone you’ll see in just a few weeks. It’s a time to look ahead, to make new plans, to achieve new dreams.

And if those dreams include buying your own home, you should keep an eye on the ever-changing tides of the housing market. Now, markets are like the weather: You can’t entirely predict how they will act, but you canget a sense of the forces that will push things in one direction or another.

The realtor.com® economic research team analyzed a wealth of housing data to come up with a forecast of what 2019 might hold for home buyers and sellers—and it looks like both groups are going to be facing some challenges.

Here are the top four takeaways. For more information, see the full realtor.com® 2019 forecast.

1. We’ll have more homes for sale, especially luxury ones

We’ve been chronicling the super-tight inventory of homes for sale for several years now. Yes, homes have been hitting the market, but not enough to keep up with the demand. Nationwide, inventory actually hit its lowest level in recorded history last winter, but this year it finally started to recover. We’re expecting to see that inventory growth continue into next year, but not at a blockbuster rate—less than 7%.

While this is welcome news for buyers who’ve been sidelined, sellers must confront a new reality.

“More inventory for sellers means it’s not going to be as easy as it has been in past years—it means they will have to think about the competition,” says Danielle Halerealtor.com‘s chief economist.

“It’s still going to be a very good market for sellers,” she adds, “but if they’ve had their expectations set by listening to stories of how quickly their neighbor’s home sold in 2017 or in 2018, they may have to adjust their expectations.”

Although next year’s inventory growth is expected to be modest nationwide, pricier markets will tell a different story. In these markets—which typically have strong economies (read: high-paying jobs)—most of the expected inventory growth will come from listings of luxury homes.

We’re expecting to see the biggest increases in high-end inventory in the metro areas of San Jose, CASeattle, WAWorcester, MABoston, MA; and Nashville, TN. All of those metro markets, which may include neighboring towns, could see double-digit gains in inventory in 2019.

2. Affording a home will remain tough

It’s no secret that home sellers have been sitting pretty for the past several years. But is the tide about to change in buyers’ favor?

“In some ways, life is going to be easier for home buyers; they’ll have more options,” Hale says. “But life is also going to be more difficult for home buyers, because we expect mortgage rates to continue to increase, we expect home prices to continue to increase, so the pinch that they’re feeling from affordability is going to continue to be a pain point moving into 2019.”

Hale predicts that mortgage rates, now hovering around 5%, will reach around 5.5% by the end of 2019. That means the monthly mortgage payment on a typical home listing will be about 8% higher next year, she notes. Meanwhile, incomes are only growing about 3% on average. That double whammy is toughest on first-time home buyers, who tend to borrow the most heavily and who don’t have any equity in a current home to draw on.

3. Millennials will still dominate home buying

Just a few years ago, millennials were the new kids on the block, just barely old enough to buy their own homes. Now they’re the biggest generational group of home buyers, accounting for 45% of mortgages (compared with 17% for baby boomers and 37% for Gen Xers). Some of them are even moving on up from their starter homes.

As we mentioned above, things will be tough for those first-time buyers. But the slightly older move-up buyers will reap the benefits of both their home equity and the increased choices in the market.

And regardless of whether they’re part of that younger set starting a career or the older set that’s starting a family, “they’re going to be more price-conscious than any other generation,” says Ali Wolf, director of economic research at Meyers Research.

That’s because they typically are still carrying student debt and want to be able to spend on experiences, like travel. That takes away from the funds they can put aside for a down payment, or a monthly mortgage payment.

“They want to maintain a certain lifestyle, but they still see the value in owning a home,” Wolf says.

So they might compromise on distance from an urban center, or certain amenities, or space—70% of millennial homeowners own a residence that’s less than 2,000 square feet, Wolf notes.

There’s plenty of time to expand those portfolios, though, as millennials’ housing reign is just beginning: This group is likely to make up the largest share of home buyers for the next decade. The year 2020 is projected to be the peak for millennial home buying—the bulk of them will be age 30.

4. The new tax law is still a wild card

At the time of last year’s forecast, the GOP’s proposed revision of the tax code was still being batted around Congress. While there was talk that it might discourage people from buying a home, no one really knew how it might affect the real-estate market.

This year … well, we still don’t really know. That’s because most taxpayers won’t be filing taxes under the new law until April 2019. And while some people might have a savvy tax adviser giving them a better idea of what’s in store, for many, the reality check will come in the form of a bigger tax bill—or a bigger refund.

Renters are likely to have lower tax bills, but might not be tempted to buy while affordability remains a challenge, and with the new, increased standard deduction reducing the appeal of the homeowner’s mortgage-interest deduction.

“I think the new tax plan will affect mostly homeowners and home buyers in the upper parts of the distribution,” says Andrew Hanson, associate professor of economics at Marquette University in Milwaukee, WI. “Those who either own or are buying higher-priced homes are going to pay a lot more.”

Sellers of those pricier homes will also take a hit, as buyers anticipating bigger tax bills won’t be as willing to pony up for a high list price.

The biggest change resulting from the new tax law, Hanson predicts, will be in mortgages, since people will be less inclined to take out large mortgages.

“If anyone is going to be upset about the tax plan, it’ll be mortgage bankers,” he says.

Source: Realtor.com  –  and Allison Underhill | Nov 28, 2018

Cicely Wedgeworth is the managing editor of realtor.com. She has worked as a writer and editor at Yahoo, the Los Angeles Times, and Newsday.
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How Long Does It Take to Improve Your Credit Score Enough to Buy a Home?

How long does it take to improve your credit score? If you’re hoping to buy a home, having a good credit score is key, since it helps you qualify for a mortgage. So if your credit score is low, knowing how long it takes to raise it to home-buying range can help you plan.

While raising a credit score can’t happen overnight, it is possible to raise your credit score within one to two months. However, it could take longer, depending on what’s dragging down your score—and how you handle it. Here’s what you need to know.

How long does it take to raise a credit score?

First off, what’s considered a good score versus a poor one? Here are some general parameters:

  • Perfect credit score: 850
  • Excellent score: 760-849
  • Good credit score: 700 to 759
  • Fair score: 650 to 699
  • Low score: 650 and below

While it varies by area and type of loan, generally lenders will look for a score of 660 or higher to grant a mortgage (here’s more on the minimum credit score you need for a home loan).

If you’re looking to boost your credit score fast, here are some actions you can take.

Correct errors on your credit report

Correcting errors on your credit report is a relatively quick way to improve your credit score. If it’s a simple identity error—like a credit card that’s not yours showing up—you can get that corrected within one to two months.

If it’s an error on one of your accounts, though, it could take longer, because you need to involve your creditor as well as the credit bureau. The entire process typically takes 30 to 90 days. If there’s a lot of back-and-forth between you, the credit bureau, and your creditor, it could take longer.

The first step to correcting errors is to get a copy of your credit reports from TransUnion, Equifax, and Experian (the three major credit bureaus), which you can do at no cost once a year at annualcreditreport.com. Next, review them for errors. If it’s an error on one of your accounts, you must refute that error with the bureau by providing documentation arguing otherwise. For example, if you paid a credit card on time and the card issuer is reporting a late payment, find a bank statement showing that you paid on time.

Credit bureaus typically have 30 days to investigate the error. If they agree that it’s an error, they will remove the item. The credit bureau may also ask for additional information or ask you to discuss the information with the creditor involved. If that’s the case, stay on top of communications with your creditor so you can get things resolved as quickly as possible.

Deal with delinquent accounts

Bringing delinquent accounts current and settling accounts that are in collections can also boost your score fairly quickly. Once the creditor or collection agency reports your account update, you should see a positive bump in your score. Keep in mind, though, that your late payment history will remain on your credit report for seven years.

If you have bad accounts that have been on your report for six years or more, you may not want to worry about settling them or bringing them up to date. This can re-age the account, and if you fall behind again, it will stay on your credit report for another seven years.

“Make sure you don’t re-age these accounts, because they’re going to drop off soon,” says Nathan Danus, CDMP and Director of Housing and Community Development at DebtHelper in West Palm Beach, FL. Negative information typically “falls off” your credit report after seven years, so if you’re close, it’s best to just wait it out.

Lower your credit utilization

Credit utilization refers to how much you owe compared with the amount of credit you have available. For example, if you have a $10,000 credit limit across all your credit cards and you have balances totaling $9,000, you’ve utilized 90% of your credit. This drags down your credit score.

“What these consumers often need to do is pay down the balances on their existing credit accounts, which can be a challenge if they’ve allowed the balances to creep up over time,” says Martin H. Lynch, compliance manager and director of education at Cambridge Credit Counseling of Agawam, MA. “The ratio of what’s owed to the amount of credit available represents 30% of the consumer’s score, so rapid improvement is possible if there’s a large amount of money available to pay down balances.”

Linda L. Jacob, a financial counselor at Consumer Credit of Des Moines, IA, recommends paying down balances to below one-third of your credit line. Any payments you make will be reflected on your credit report as soon as your creditors report your payment to the credit bureaus. Credit scores are updated on an ongoing basis, and creditors typically report once per month, so if you make a payment that lowers your credit utilization, that should be reflected on your credit score within two months.

If you’re regularly using your credit card but you want to keep your utilization low so you can apply for a mortgage, you may want to pay down your credit-card balance on a weekly or biweekly basis. This ensures that your balance is as low as possible whenever your creditor reports your payment history to the credit bureaus.

You can also decrease your card utilization by getting more credit, but this approach can backfire. Consumers sometimes assume that by getting more credit, their credit score will improve. If you have a $3,000 balance on a card with a $4,000 credit limit and you’re approved for a new credit card with a $1,000 limit, you now have $5,000 in total credit lines. Instead of using 75% of your available credit, you’re now using 60%. That’s better, right?

Not necessarily. “Just applying for credit lowers your credit score, and that effect lasts for months,” warns Mike Sullivan, personal finance consultant at Take Charge America in Phoenix, AZ. “For the first few months after you apply for credit, your credit score may actually go down.”

You can try getting around this by asking a credit limit increase on a card you already have. Be sure to ask whether they do a “soft” credit pull rather than a “hard” credit pull, though, since hard credit inquiries are the ones that impact your credit. A creditor may be willing to give you a credit line increase with a “soft” pull, which will not hurt your credit score.

Soft inquiries are for background purposes only. For example, a credit card company may do a soft pull to see if you’re eligible for certain credit card offers, or an employer may do a soft pull before offering you a job. Soft pulls can be done without your permission and do not impact your credit score. Hard pulls require your permission, and are done when lenders or credit card companies are assessing whether to grant you a loan or line of credit.

How to raise your credit score for the long haul

Once you’ve corrected errors, settled your delinquent accounts, and brought your credit utilization under control, the only other things that will improve your score are time and developing good payment habits. For example, if you tend to forget to make payments, you can set up automatic payments so you don’t forget.

And here’s some good news for people with bad credit: Generally, people with the lowest scores will see the biggest gains the fastest.

“It’s a lot like dieting,” says Sullivan.

For instance, if your score is 550, “you could probably get it up 30 points in a matter of a couple months, if you’re really dedicated and really careful,” he explains.

On the other hand: “If your credit score is already a 750 and you’re trying to get it to 780, that can take double or more the time.”

Still, it’s worth doing whatever you can to get the best interest rate possible.

For more smart financial news and advice, head over to MarketWatch.

Source: Realtor.com –   | Nov 28, 2018 Melinda Sineriz is a writer living in Bakersfield, CA. She writes about personal finance and real estate for several websites and businesses.
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