Interesting pros and cons of paying off your mortgage.
http://www.gobankingrates.com/mortgage-rates/does-it-make-sense-to-pay-off-your-mortgage/
Monday, May 30, 2011
Sunday, May 29, 2011
For Retirees, A New Mortgage Presents Challenges.
Good article about the reality of obtaining a mortgage in today's market.
http://www.cleveland.com/business/index.ssf/2011/05/for_retirees_a_new_mortgage_pr.html
If you are well prepared, mortgage loans are not hard to obtain. You will be asked more questions, and you will need to be preparded to document income and non-payroll related deposts, but with interest rates being so low, it will be worth the effort.
http://www.cleveland.com/business/index.ssf/2011/05/for_retirees_a_new_mortgage_pr.html
If you are well prepared, mortgage loans are not hard to obtain. You will be asked more questions, and you will need to be preparded to document income and non-payroll related deposts, but with interest rates being so low, it will be worth the effort.
Wednesday, May 11, 2011
Vacation-home market faces long road to recovery
Here's an article from USA Today regarding second homes.
http://www.usatoday.com/money/economy/housing/2011-05-08-cnbc-vacation-homes_n.htm
The buyers' market for vacation homes is likely to continue for years, with activity largely limited to buyers with enough cash to circumvent a tighter, post-recession lending environment.
Thirty-six percent of all vacation-home buyers in 2010 did not use a mortgage — versus 29 percent the year before — while more than half of them financed less that 70 percent of the purchase price, according to the National Association of Realtors.
Of those who bought a second home as a rental investment, 59 percent paid cash.
http://www.usatoday.com/money/economy/housing/2011-05-08-cnbc-vacation-homes_n.htm
The buyers' market for vacation homes is likely to continue for years, with activity largely limited to buyers with enough cash to circumvent a tighter, post-recession lending environment.
Thirty-six percent of all vacation-home buyers in 2010 did not use a mortgage — versus 29 percent the year before — while more than half of them financed less that 70 percent of the purchase price, according to the National Association of Realtors.
Of those who bought a second home as a rental investment, 59 percent paid cash.
"Mortgage lending in the past three years has been pretty rough, with much higher underwriting standards," says Paul Bishop, NAR's vice president for research. "People drawn into the market at this point are buyers with substantial cash, or people not dealing with a mortgage. If your credit is strong and you put down a sizeable down payment, lenders are more interested."
Vacation homes remain the hardest-hit sector of the U.S. real estate market. Sales fell 1.8 percent to 543,000 in 2010, according to the NAR's 2011 Investment and Vacation Home Buyers Survey. The median price was $150,000 in 2010, down 11.2 percent from $169,000 in 2009.
"Vacation homes are one of the truest forms of discretionary purchases," says Bishop. "No one needs one."
"Anywhere you look, you are going to find prices we haven't seen since 2001," says Michael Sanders, a Sarasota, Fla. broker active in second-home sales. He say that's largely because of foreclosures and short sales of homes for less than what's owed on them.
The market decline has slowed but it was fast and furious at its worst. By 2008, sales of second homes and investment properties at resorts were down to half of their 2006 highs, when a better economy and easy credit turned over 1.7 million units.
"That was the peak of a very robust market," says Bishop. "After the tech-stock bust, there was a desire on the part of many people for another way to invest. As we saw, many people took equity out of their primary residences and bought another."
For years, anyone affluent enough to cover the monthly costs was rewarded by the eventual sale of that unit, adds Ralf Garrison, owner of The Advisory Group, a Denver-based resort consulting firm. "That model is broken. Anyone who bought a vacation home in 2007-2008 is not very happy about it."
Now, as with other parts of the housing market, negative equity and foreclosures are common. Foreclosure or trustee sales in 2010 amounted to 11 percent of vacation home sales.
Bargain hunters also appear to be selective. Sales and prices are up at least in the high single digits over 2009 at such well-known resort areas as Hilton Head, Palm Beach, Cape Cod and Palm Springs, according to brokers there. Ditto for Lake Tahoe, Napa Valley, Scottsdale, Oahu, Pebble Beach and the Pocono Mountains.
Today's buyers are also different than the past, when many bought a second home as an investment.
More than eight in ten buyers of vacation homes plan to use their property for vacations or family retreats. Three in ten expect to convert their vacation home to a principal residence in the future.
In many other areas, any rebound is still down the road.
"In some areas of the country - California, Arizona Nevada, Florida - there was unrealistic growth based on cheap money and little risk," says Garrison. "
Now, the depressed second-home market threatens the very health of some U.S. resorts, where real estate and construction provide the main lynchpins to the local economy.
In Colorado ski country, the Vail area employed 31,000 people in 2008. By the third quarter of 2010, employment was down 20 percent, with construction jobs down 46 percent.
"If you lose construction, you lose the locals," Garrison said. "It's a fragile economy, with an imbalance that's particularly acute in those areas that have all their eggs in the one basket of real estate and tourism."
After his $200-million residence hotel project in Telluride, Colo. ended up in bankruptcy, Alain Longatte, a veteran resort developer and founder of Scottsdale-based Resort Advisory Group International, is now concentrating his efforts in Brazil and Uruguay.
Langatte said. ""Since year end 2008 development for destination resorts has come to a screeching halt in this country. The money dried up. There are lots of very good projects in the U.S. at standstill. I suspect it will remain nonexistent for the foreseeable future."
Vacation homes remain the hardest-hit sector of the U.S. real estate market. Sales fell 1.8 percent to 543,000 in 2010, according to the NAR's 2011 Investment and Vacation Home Buyers Survey. The median price was $150,000 in 2010, down 11.2 percent from $169,000 in 2009.
"Vacation homes are one of the truest forms of discretionary purchases," says Bishop. "No one needs one."
"Anywhere you look, you are going to find prices we haven't seen since 2001," says Michael Sanders, a Sarasota, Fla. broker active in second-home sales. He say that's largely because of foreclosures and short sales of homes for less than what's owed on them.
The market decline has slowed but it was fast and furious at its worst. By 2008, sales of second homes and investment properties at resorts were down to half of their 2006 highs, when a better economy and easy credit turned over 1.7 million units.
"That was the peak of a very robust market," says Bishop. "After the tech-stock bust, there was a desire on the part of many people for another way to invest. As we saw, many people took equity out of their primary residences and bought another."
For years, anyone affluent enough to cover the monthly costs was rewarded by the eventual sale of that unit, adds Ralf Garrison, owner of The Advisory Group, a Denver-based resort consulting firm. "That model is broken. Anyone who bought a vacation home in 2007-2008 is not very happy about it."
Now, as with other parts of the housing market, negative equity and foreclosures are common. Foreclosure or trustee sales in 2010 amounted to 11 percent of vacation home sales.
Bargain hunters also appear to be selective. Sales and prices are up at least in the high single digits over 2009 at such well-known resort areas as Hilton Head, Palm Beach, Cape Cod and Palm Springs, according to brokers there. Ditto for Lake Tahoe, Napa Valley, Scottsdale, Oahu, Pebble Beach and the Pocono Mountains.
Today's buyers are also different than the past, when many bought a second home as an investment.
More than eight in ten buyers of vacation homes plan to use their property for vacations or family retreats. Three in ten expect to convert their vacation home to a principal residence in the future.
In many other areas, any rebound is still down the road.
"In some areas of the country - California, Arizona Nevada, Florida - there was unrealistic growth based on cheap money and little risk," says Garrison. "
Now, the depressed second-home market threatens the very health of some U.S. resorts, where real estate and construction provide the main lynchpins to the local economy.
In Colorado ski country, the Vail area employed 31,000 people in 2008. By the third quarter of 2010, employment was down 20 percent, with construction jobs down 46 percent.
"If you lose construction, you lose the locals," Garrison said. "It's a fragile economy, with an imbalance that's particularly acute in those areas that have all their eggs in the one basket of real estate and tourism."
After his $200-million residence hotel project in Telluride, Colo. ended up in bankruptcy, Alain Longatte, a veteran resort developer and founder of Scottsdale-based Resort Advisory Group International, is now concentrating his efforts in Brazil and Uruguay.
Langatte said. ""Since year end 2008 development for destination resorts has come to a screeching halt in this country. The money dried up. There are lots of very good projects in the U.S. at standstill. I suspect it will remain nonexistent for the foreseeable future."
Don't tap 401(k) to pay off mortgage
Q. How can we take money out of 401(k), pay off our mortgage and not pay taxes on it all if we do it all at the same time? Can any of it be deferred? The amount we'd want to take out is $105,000.
Unless you're in danger of losing your house, you generally shouldn't take money out of a 401(k) and use it to pay off a home loan.
Why? Because your money is growing inside your 401(k) at a faster rate than you're paying out for your loan. Also, your mortgage interest may be deductible if you itemize on your federal income tax return.
If you've recently refinanced, you're probably paying less than 5 percent for your mortgage. (I just refinanced to a 15-year at 3.75 percent.)
If you itemize, your net interest rate is somewhere around 3.5 to 4 percent. That's basically like free money, and over time you'll do a lot better by keeping the cash inside your 401(k).
In addition, if you're under 59 1/2, you'll not only pay taxes, but you'll also pay a 10 percent penalty on your withdrawal.
So the real question is why would you want to take out that much money to pay off your mortgage? And if you did, that much of a withdrawal from your 401(k) would probably put you in a higher tax bracket, causing you to pay even more federal income taxes on the amount you take out.
The only way to get tax-free cash is to borrow from your 401(k). But, again, I don't recommend it. If you lose your job, you'll have to replace all the cash within 60 days, plus you'll be losing out on any return your retirement cash would generate inside your 401(k).
The risks are extremely high that you could be caught short and wind up losing your home if you couldn't come up with enough cash.
My suggestion is to keep your 401(k) money where it is and focus on finding additional ways to save in your budget to throw more cash at your mortgage.
Unless you're in danger of losing your house, you generally shouldn't take money out of a 401(k) and use it to pay off a home loan.
Why? Because your money is growing inside your 401(k) at a faster rate than you're paying out for your loan. Also, your mortgage interest may be deductible if you itemize on your federal income tax return.
If you've recently refinanced, you're probably paying less than 5 percent for your mortgage. (I just refinanced to a 15-year at 3.75 percent.)
If you itemize, your net interest rate is somewhere around 3.5 to 4 percent. That's basically like free money, and over time you'll do a lot better by keeping the cash inside your 401(k).
In addition, if you're under 59 1/2, you'll not only pay taxes, but you'll also pay a 10 percent penalty on your withdrawal.
So the real question is why would you want to take out that much money to pay off your mortgage? And if you did, that much of a withdrawal from your 401(k) would probably put you in a higher tax bracket, causing you to pay even more federal income taxes on the amount you take out.
The only way to get tax-free cash is to borrow from your 401(k). But, again, I don't recommend it. If you lose your job, you'll have to replace all the cash within 60 days, plus you'll be losing out on any return your retirement cash would generate inside your 401(k).
The risks are extremely high that you could be caught short and wind up losing your home if you couldn't come up with enough cash.
My suggestion is to keep your 401(k) money where it is and focus on finding additional ways to save in your budget to throw more cash at your mortgage.
Sunday, May 8, 2011
3 Steps to a More Productive Day
I define productivity as "doing what I said I was going to do in the time frame I said I was going to do it". Your definition may be a little different but the end result is the same for you to feel your day was productive.
Here are the 3 steps I feel are necessary for me to be productive:
1. Start with a "To Do" list and identify the highest priorities. Next, tackle the most difficult items first. Ever read the book "Eat That Frog"? http://www.amazon.com/That-Frog-Great-Ways-Procrastinating/dp/1583762027/ref=sr_1_1?s=books&ie=UTF8&qid=1304864287&sr=1-1
The tendency is to take care of the easy ones first but I have found it is best to work from toughest to easiest. Give it a try!
2. Time Block. Turn off your phones,, exit out of your email, and put a "Do Not Disturb" sign on your door if you need to. I try to target 30 minute increments several times a day, then I reward myself by setting a goal. For example, I may say, I am going to devote 30 minutes to this project and when I finish I will go to lunch. Sounds simple enough, but how many times have you said I will go to lunch first and tackle the task when I get back, only to have an interruption come up and your day ends without completing the task you set as a high priority at the beginning of the day?
3. Minimize office Chit Chat. Sure, it's fun to discuss the latest episode of American Idol, but leave that to after hours if you want to have a more productive day.
I hope these steps help you take on your day in a more productive manner!
Here are the 3 steps I feel are necessary for me to be productive:
1. Start with a "To Do" list and identify the highest priorities. Next, tackle the most difficult items first. Ever read the book "Eat That Frog"? http://www.amazon.com/That-Frog-Great-Ways-Procrastinating/dp/1583762027/ref=sr_1_1?s=books&ie=UTF8&qid=1304864287&sr=1-1
The tendency is to take care of the easy ones first but I have found it is best to work from toughest to easiest. Give it a try!
2. Time Block. Turn off your phones,, exit out of your email, and put a "Do Not Disturb" sign on your door if you need to. I try to target 30 minute increments several times a day, then I reward myself by setting a goal. For example, I may say, I am going to devote 30 minutes to this project and when I finish I will go to lunch. Sounds simple enough, but how many times have you said I will go to lunch first and tackle the task when I get back, only to have an interruption come up and your day ends without completing the task you set as a high priority at the beginning of the day?
3. Minimize office Chit Chat. Sure, it's fun to discuss the latest episode of American Idol, but leave that to after hours if you want to have a more productive day.
I hope these steps help you take on your day in a more productive manner!
Sunday, May 1, 2011
Some signs of life in housing, credit drought goes on
The housing market in the Augusta, GA area remains relatively strong in comparison to other parts of the country, but it's not necessisarily an easy process. Here’s an interesting article from Reuters regarding the effects of the tightening of credit. It’s not impossible to obtain a mortgage these days, but expect the process to be detailed. You may feel as if you have been through an IRS audit or head-to-toe medical exam.
http://www.reuters.com/article/2011/04/25/us-usa-housing-market-idUSTRE73O0YF20110425
By Nick Carey
CHICAGO Mon Apr 25, 2011
(Reuters) - Like an increasing number of well-heeled Americans, the Hodgsons decided it was time to buy a new home, even if most of the U.S. housing market remains in the dumps.
After years in an apartment building, "we were just tired of sharing space with other people," says Cari Hodgson, 32. "It was time to have space of our own."
She and her commodities trader husband sold the condo and recently bought a $1.2 million, five-bedroom home in Chicago's north side, sealing the deal with the kind of big down-payment that is heating up the high-end of the U.S. property market.
Cari, a part-time nurse, declined to say how much of their own money the couple put into the house. But she did say the mortgage was less than a so-called jumbo loan, which are bigger than most U.S. mortgages and currently start at $730,000.
That means the Hodgsons put down at least 40 percent of the house's value, a chunk far out of reach for most Americans.
"We were told by a number of people that it was very difficult to qualify for a jumbo loan," Cari Hodgson said. "So we didn't even try to get one."
Four years after U.S. housing prices began to nose-dive, eventually triggering a global financial crisis, signs of life are appearing at the top and the bottom ends of the market.
By contrast, a sustained recovery remains far off for the vast middle ground of the U.S. housing sector.
Affluent Americans are feeling more secure as the impact of the recession fades and the stock market racks up big gains.
"People who have decent income are saying, maybe I can trade up, buy a better property," said Bill Hardin, director of the real estate program at Florida International University.
"Some people are even saying, I'm willing to take a loss on the property I'm selling now to get something I couldn't buy during the housing peak."
Sales of homes worth over $1 million, which account for about 1.5 percent of total U.S. sales, have risen in most states so far in 2011.
Realtors, brokers and others in the housing industry report the first bidding wars for expensive homes since the crash.
"There is a surge of confidence among high-end buyers and we're unfortunately short on inventory," said Pamela Liebman, chief executive of New York property firm The Corcoran Group.
Her firm saw a doubling in the sale of luxury co-ops, worth more than $10 million, in the first three months of 2011.
At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out.
It's a different story in the middle of the market.
Properties worth between $100,000 and $500,000 make up more than 60 percent of U.S. housing. Sales in that category in March were down across every region of America from the same month a year earlier, when tax breaks were propping up demand.
Foreclosures and short sales -- whereby struggling homeowners sell their homes for below what they owe, with the consent of their lenders -- are still a big drag. Credit remains tight and middle-income families are more pessimistic than their wealthier compatriots about the economy.
So this year's Spring selling season, when buyers typically start to look for a home after winter, has mostly been a dud.
Access to credit is cited as a broad problem. While the rich can simply put more money down, for most would-be buyers the need for more 'skin in the game' is a deal-breaker.
Realtors and brokers complain that the credit drought is as extreme as the flood of loose lending
of the boom years.
"The pendulum has swung from too far to the left to too far to the right," Corcoran's Liebman said. "We need to find some balance in lending."
"IT'S HARD TO BE POSITIVE"
On a recent sunny Sunday afternoon, in Leawood, near Kansas City, realtor Ted DeVore patiently waited inside an elegant ranch home priced at $344,900, eager to point out the lush backyard, new roof, remodeled kitchen and updated bathrooms.
But most of the visitors to the open house were curious neighbors, not would-be buyers.
Middle-income Americans in Middle America are not yet ready to get back into the market. Homes that do sell in the Kansas City area are often going for between 20 percent to 30 percent below the listed price.
"There are so many people questioning things right now, asking themselves, am I going to have my job in six months?" DeVore said, affable but seemingly resigned to a slow Spring. "The indicators are very mixed for the whole economy and the real estate market very closely follows the overall economy."
"It's hard to be positive," he added.
http://www.reuters.com/article/2011/04/25/us-usa-housing-market-idUSTRE73O0YF20110425
By Nick Carey
CHICAGO Mon Apr 25, 2011
(Reuters) - Like an increasing number of well-heeled Americans, the Hodgsons decided it was time to buy a new home, even if most of the U.S. housing market remains in the dumps.
After years in an apartment building, "we were just tired of sharing space with other people," says Cari Hodgson, 32. "It was time to have space of our own."
She and her commodities trader husband sold the condo and recently bought a $1.2 million, five-bedroom home in Chicago's north side, sealing the deal with the kind of big down-payment that is heating up the high-end of the U.S. property market.
Cari, a part-time nurse, declined to say how much of their own money the couple put into the house. But she did say the mortgage was less than a so-called jumbo loan, which are bigger than most U.S. mortgages and currently start at $730,000.
That means the Hodgsons put down at least 40 percent of the house's value, a chunk far out of reach for most Americans.
"We were told by a number of people that it was very difficult to qualify for a jumbo loan," Cari Hodgson said. "So we didn't even try to get one."
Four years after U.S. housing prices began to nose-dive, eventually triggering a global financial crisis, signs of life are appearing at the top and the bottom ends of the market.
By contrast, a sustained recovery remains far off for the vast middle ground of the U.S. housing sector.
Affluent Americans are feeling more secure as the impact of the recession fades and the stock market racks up big gains.
"People who have decent income are saying, maybe I can trade up, buy a better property," said Bill Hardin, director of the real estate program at Florida International University.
"Some people are even saying, I'm willing to take a loss on the property I'm selling now to get something I couldn't buy during the housing peak."
Sales of homes worth over $1 million, which account for about 1.5 percent of total U.S. sales, have risen in most states so far in 2011.
Realtors, brokers and others in the housing industry report the first bidding wars for expensive homes since the crash.
"There is a surge of confidence among high-end buyers and we're unfortunately short on inventory," said Pamela Liebman, chief executive of New York property firm The Corcoran Group.
Her firm saw a doubling in the sale of luxury co-ops, worth more than $10 million, in the first three months of 2011.
At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out.
It's a different story in the middle of the market.
Properties worth between $100,000 and $500,000 make up more than 60 percent of U.S. housing. Sales in that category in March were down across every region of America from the same month a year earlier, when tax breaks were propping up demand.
Foreclosures and short sales -- whereby struggling homeowners sell their homes for below what they owe, with the consent of their lenders -- are still a big drag. Credit remains tight and middle-income families are more pessimistic than their wealthier compatriots about the economy.
So this year's Spring selling season, when buyers typically start to look for a home after winter, has mostly been a dud.
Access to credit is cited as a broad problem. While the rich can simply put more money down, for most would-be buyers the need for more 'skin in the game' is a deal-breaker.
Realtors and brokers complain that the credit drought is as extreme as the flood of loose lending
of the boom years.
"The pendulum has swung from too far to the left to too far to the right," Corcoran's Liebman said. "We need to find some balance in lending."
"IT'S HARD TO BE POSITIVE"
On a recent sunny Sunday afternoon, in Leawood, near Kansas City, realtor Ted DeVore patiently waited inside an elegant ranch home priced at $344,900, eager to point out the lush backyard, new roof, remodeled kitchen and updated bathrooms.
But most of the visitors to the open house were curious neighbors, not would-be buyers.
Middle-income Americans in Middle America are not yet ready to get back into the market. Homes that do sell in the Kansas City area are often going for between 20 percent to 30 percent below the listed price.
"There are so many people questioning things right now, asking themselves, am I going to have my job in six months?" DeVore said, affable but seemingly resigned to a slow Spring. "The indicators are very mixed for the whole economy and the real estate market very closely follows the overall economy."
"It's hard to be positive," he added.
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