What is the Homestead Exemption?

Q: What is the homestead exemption and how do I know if I qualify? 

A: The homestead exemption can help you save a significant amount on your taxes and offer other legal provisions. Read on for all your questions on the homestead exemption, answered. 

What is the homestead exemption?

The homestead exemption is a legal provision in a state’s tax laws that reduces the property tax on a home, can protect a home from bankruptcy and provides specific rights to surviving spouses. 

A homestead refers to a dwelling that is inhabited by the homeowner. It can be a manufactured home, a condo or a three-story colonial, though the exact criteria will vary by state.

The “homestead exemption” generally refers to the exemption the homeowner can claim when filing taxes to lower the taxable value of their home by a specific dollar amount. However, a homestead exemption can also provide additional legal protections, such as preventing the homeowner from having to sell the home after declaring bankruptcy. The homestead exemption also includes a feature of probate law, wherein the homestead does not have to be included during probate and can allocate an allowance for a surviving spouse or children.

What are the qualifying factors for a homestead exemption?

Eligibility requirements for the homestead exemption are different in each state. However, the principal qualifying factor in most states is that the homestead is the primary place of residence for the homeowner. Generally, the homeowner must be able to prove they have lived in the homestead on Jan. 1 of the taxable year to be eligible for an exemption. 

Some states make a general homestead exemption available to all homeowners who reside in the home. In other states, only senior citizens, surviving spouses of veterans and former military members and people with a disability can qualify for the exemption. There may be income limits for the exemption, as well. Other states establish qualifying criteria around the homestead alone. Still others, such as New Jersey and Pennsylvania, don’t offer the homestead exemption for tax filers at all. [In XXX, the homestead exemption is available for…]

How much money can I save with a homestead exemption? 

The homestead tax exemption can lower a property tax bill by a substantial amount. The dollar amount of your exemption can be directly deducted from the total taxable value of the home. For example, if you qualify for a $30,000 exemption on a $250,000 home, your taxable home value will only be $220,000. 

As mentioned, criteria for the homestead exemption can vary tremendously by state, and this is true of the exemption amounts as well. Most states have established a maximum amount for the exemption, which starts at just $5,000 and goes all the way up to $500,000 in states like Massachusetts and Rhode Island. In Florida, the homestead exemption can be as high as $50,000, Texans can write off $25,000 in a homestead exemption for school district taxes, and Californian homeowners can deduct $7,000 off their taxable home value. 

The average homestead exemption amount in the U.S. is approximately $30,000 to $50,000.

In addition to the dollar savings on your taxes, a homestead exemption can also freeze your home’s assessed value or limit how much the future assessed value can increase. 

How can the homestead exemption shield me from unsecured creditors?

The homestead exemption offers a limited amount of protection from unsecured credit lenders, which includes credit cards, personal loans and lines of credit. This means these types of creditors cannot force the homeowner to sell the home if they are owed money. The amount of financial protection offered for unsecured credit varies by state, with some states, including Florida, Iowa, Kansas and Texas, providing unlimited financial protection to qualifying homeowners against unsecured creditors.

It’s important to note that protection limits are relevant for the equity of the home and not for the value of the property. Consequently, if the equity of your home is less than the limit, the law prevents creditors from selling your property. However, if the equity of the home exceeds the state limit, creditors can force the sale of the home in question but will need to share a portion of the proceeds with the homeowner. 

Secured credit, however, like mortgage loans, cannot be protected by the homestead exemption. That means a homeowner can, therefore, lose their home to a mortgage lender if they are not up-to-date on their mortgage payments, even if they qualify for a homestead exemption. 

How can the homestead exemption help a surviving spouse?

Homestead exemptions are part of the probate code to help a surviving spouse. After someone dies, their surviving spouse and family may be granted the right to continue living in the homestead as their residence, even if the title of the house transfers to someone else. The right to live in the homestead may continue until the surviving spouse passes or the youngest child turns 18 years old.

In addition, some states preclude a property with a homestead exemption from probate proceedings. This can significantly lower the amount of estate tax owed to the state after the death of a loved one. 

Finally, homestead allowances can provide a surviving spouse with a specific amount of money, which is also protected from creditor claims. It’s important to speak with an estate attorney to find out exactly what you’d qualify for as a surviving spouse under the homestead exemption. 

How do I file for a homestead exemption?

To receive a homestead tax exemption, you’ll typically need to make a homestead declaration by filling out an application. The deadline is usually toward the beginning of the year, before the first quarter’s property taxes are due. The exact deadline will vary by state, so be sure to verify your state’s deadline and file the application in time. You’ll likely need documents to show proof of residency when filing an application for a homestead exemption. Depending on your eligibility criteria, you may also need additional documentation. 

Your Turn: Do you qualify for a homestead exemption? Tell us about it in the comments. 

Don’t Forget to Follow Up on Your Home Inspection!

If you’re under contract for a new home, you’ve likely had an inspection conducted on your new home. This inspection is an important part of the home-buying process, and is generally required by the mortgage company. It can help you find any major defects in the home, such as a faulty roof or dying HVAC system, which may prompt you to walk away from the deal. Alternatively, the seller can choose to repair any areas needing major work before the closing. 

In addition, a home inspection often reveals other, smaller recommendations the seller is not required to fix. This can include a long list of items that need minor repairs or replacements, such as a leaky faucet, overstuffed gutter, or an insecure stair railing. Often, in the rush to close on the home and all the tasks that must be tended to before the big move, these repairs are forgotten about and never get fixed. 

Some homeowners mistakenly assume that it’s no big deal to leave some repairs on their newly purchased home unfixed. Unfortunately, though, nothing will fix itself. Instead, the longer you wait to make a repair, the more likely it is that you will need to make more extensive and expensive repairs or replace the faulty system, appliance or part. Consequently, it’s best to make any necessary repairs on your home as quickly as possible. 

Here’s what you need to know about following up on a home inspection.

Hold onto the list of recommendations

Most inspectors will leave the potential buyer with a list of items that need repairs. While some will require urgent attention, the less-important items on the list can be forgotten about and never tended to at all. You may not have the time or resources to fix everything on the inspector’s list before you move, but it’s a good idea to hold onto that list for future reference. File the list in a safe place so it won’t get lost during the move. You can also snap a photo and upload it to a digital storage space so you can always find it if the original document is misplaced. 

Categorize repairs according to urgency

Once the dust has settled after your move and you’re ready to tackle the household repairs you haven’t yet gotten to, dig out your list and categorize repairs by urgency. Look for repairs that can cause extensive damage if left unfixed, such as a leaky pipe, faulty exterior drainage or the presence of mold or mildew. These should be tended to as soon as possible. Cosmetic repairs, on the other hand, can be delayed without major consequences. Create a new list with all the repairs written in order from most to least urgent. 

Identify what you can do on your own

It’s almost always cheaper to do home repair projects on your own. However, there are some areas that are best left to the experts. In addition, if you will need to spend a lot of money on supplies you will use just for this one-time repair, it can actually be cheaper to call in the experts. Keeping these two factors in mind, look through your list carefully to see what you can realistically do yourself.

Start working through your list

Now that you’ve sorted your list according to urgency and you’ve identified which repairs you can do on your own, you’re ready to start tackling the repairs. Start with the most urgent repairs, and set aside time on weekends for the repairs you plan to do on your own. When hiring professionals, be sure to do your research carefully and to ask for references of past clients. 

Uphold general household maintenance

It may be a while before your entire list of repairs is complete. To help prevent further damage, and to keep your home in the best condition at all times, follow these tips for general upkeep and maintenance:

  • Make sure faucets and showerheads are completely turned off when not in use.
  • Keep the air clean by vacuuming and dusting regularly.
  • Look for discolored spots on ceilings and walls, which can indicate an internal leak.
  • Keep your home heated in very cold weather, even when you’re not home, to prevent freezing pipes. 
  • Drain your outdoor sprinklers completely before turning off for the winter.
  • Keep all trees and shrubs near your home well-trimmed. 
  • Control moisture levels with a dehumidifier or humidifier, as necessary.
  • Clean your dryer vent and all heating vents regularly.

A home inspection is an important part of the home-buying process. Don’t forget to follow up on the list of recommended repairs!

Your Turn: Have you followed up on your home inspection recommendations? Tell us about it in the comments.

How to Prepare Your Home for Spring

Winter is on its way out, and spring is on its way in. That means it’s time to stop hibernating and get outside! Before you do, though, you’ll need to help your home recover from the damage incurred during winter and take steps to prepare it for spring. Don’t stress about what you need to do; just follow our lead with these six steps for preparing your home for spring. 

Step 1: Clean your yard

It’s been a while since you’ve spent an extended amount of time in your yard, and it’s likely got leaves and other debris scattered about. Take time in early spring to rake up all the leaves, loose twigs and anything else your yard has collected over the winter. If you own a mulching mower, you can shred the leaves and allow them to compost on your lawn to provide it with important nutrients. 

Step 2: Prep your grass and other plants and trees

At winter’s end, you’ll want to ensure your grass, shrubs, flowers and trees are all set to bloom in the spring. Prune all dead and diseased branches from trees with a handsaw and use a strong bypass lopper for pruning smaller bushes and shrubs. Be sure to cut all branches away from you so they don’t fall toward you. 

At this time, you’ll also want to prep your lawn for optimal grass growth. Pull up all weeds and crabgrass, making sure to pull up the entire root. Use a shovel or a weed-whacker to make the job easier. If your lawn has heavy weed growth, you may want to use a strong herbicide to stop the weed before it takes over your entire lawn. Finally, fertilize and seed your lawn to promote new, healthy roots and strong grass growth in the coming seasons. 

Step 3: Clear your gutters

Clogged gutters can cause severe damage to your home. After a long winter, your gutters may be full of leaves, twigs and other debris. Use a gloved hand to clear your gutters of all objects and then flush the gutters with a running hose. This will help you find any leaks that need to be repaired. Also, if using a ladder, be extra cautious to avoid falls and injury.

Step 4: Clean the exterior of your home

It’s time to get the outside of your home looking beautiful again! If you own a pressure washer and already have the specialized cleaning solution to use with it, you’re ready to go. Otherwise, you can rent a pressure washer from a home improvement store, like Lowe’s or Home Depot, and purchase the cleaning solution in these stores as well. Load the washer with the solution and clean the outside of your home with slow movements. Let the solution rest for a few minutes, and then rinse with water from the washer or a garden hose. 

Step 5: Prepare your patio

To prepare your patio or deck for spring, check for any damage it may have incurred over the winter. Make any necessary repairs and clean the entire area with a broom, garden hose and/or pressure washer. If there is any mildew growth, use a scrub brush and specialized deck cleaner to remove it. You may also want to reseal your deck if it’s showing significant signs of aging. 

Next, take your patio furniture out of storage and check it over for damage. You may need to wipe each piece down with a damp cloth or wipe. Set up your outdoor rugs, planters, lighting and wind chimes as well. 

Finally, prepare your grill. It’s best to remove your grates and scrub them with a wire brush to remove any caked-on debris. For tougher stains, use a spray-on grill cleaner. Be sure to clean the inside and outside of the grill thoroughly with hot, soapy water and then rinse with water, then allow it to dry before using. 

Step 6: Prepare your A/C units

Make sure your home is ready to handle the heat by inspecting your A/C units early in the season. Check your outdoor unit panels, removing all leaves, twigs and other debris that may have accumulated over the winter. Also, check the interior of the unit to be sure it’s clear of any debris that may have blown inside. Finally, it’s a good idea to change your HVAC system’s air filter before you turn it on for the season. 

Your home is ready for the new season! Have a wonderful spring. 

Your Turn: How do you prepare your home for spring? Share your tips with us in the comments. 

All You Need to Know About Taking Out a Home Loan in 2022

The real estate market has shifted tremendously since the start of the coronavirus pandemic. Now, as we approach the two-year mark since COVID-19 reached the U.S., the market continues to adjust to the changing economic environment, rising inflation and fluctuating demand. If you’re looking to take out a home loan in the near future, it’s important to learn about the current market trends and what you can expect in the coming months. Here’s what you need to know about taking out a home loan in 2022.

Market trends

Experts are predicting a somewhat cooler real estate market in 2022. Here’s what to expect among some of the different factors in the market. 

  • Supply and demand. 2021 was the year of frenzied bidding wars, as the supply of homes on the market fell well below the heightened demand. Despite these conditions, home sales were up by 44% in 2021 compared to 2020, according to Realtor.com. Looking forward, experts expect the demand to remain high in 2022, but they also anticipate the supply of available homes to inch closer to the demand as more new-construction homes hit the market. In addition, the trickle-down effect of the end of the government’s moratorium on foreclosures will likely increase the supply of available homes on the market. 
  • Home prices. In 2021, the average price of homes rose to an estimated 14.75%. According to the National Association of Realtors, home prices will continue to increase in 2022, but at a far more modest rate of just 2.8%. Fannie Mae projects a 7.4% increase, while mortgage bankers expect home prices to rise 5.1%. 
  • Mortgage rates. Mortgage rates remained at historic lows in 2021, with the average 30-year fixed-rate hovering around 3% at the end of the year. Economists expect mortgage rates to increase in 2022, but to continue to remain relatively low. The National Association of Realtors claims that mortgage rates will increase to 3.7% in the first quarter of 2022, while Fannie Mae anticipates the 30-year fixed mortgage to average 3.3% throughout the year.

Tips for buying a house in 2022

If you plan on buying a house in 2022, here’s how to make the most out of your search:

  • Get pre-approved. It’s always a good idea to get preapproved for a mortgage before you start your search. It’s even more important in a sizzling real estate market like the one buyers are facing today. A preapproval gives you a leg up on bidding wars, shows potential sellers that you’re serious about buying and helps you keep your search within parameters you can afford. 
  • Shop around for a mortgage. While mortgage rates are still relatively low, each lender sets their own rates and closing costs. Shopping around before choosing a mortgage lender can save you money in the short term and long term. 
  • Use a local real estate agent. In a tight housing market, it’s important to use an agent who knows the area well and can give you a realistic picture of what you can expect to pay for the home you want. 
  • Prioritize carefully. Every homebuyer has a wish list of features they’d love to have in their new home and neighborhood. But, when supply is limited, absolute must-haves need to be chosen carefully. Narrow your list as much as possible before beginning your search, as it will help you to avoid disappointment later on. 

Keep these tips and considerations in mind as you begin your quest for the perfect new home. A little “pre-home” work can help make a big difference in the enjoyment of your home and your overall financial health for years to come!  [If you’re entering the market for a new home, we can help! Advantage One Credit Union offers home loans for qualifying members that feature competitive interest rates, an efficient and smooth application process, and the personalized service you’ve come to expect. Call, click or stop by today to get started.] 

Your Turn: Have you recently taken out a home loan? Tell us about it in the comments.

Practical ways to save on heating costs this winter

As the outside temperature falls, we raise the temperature inside, and with it, heating costs go up, too. While peaceful white snowfall may be picturesque, the winter utility bills are not quite as pretty.

If you’ve been to a gas station or store recently, you’ve seen first-hand how the 6.8% inflation rate is affecting prices on just about everything nowadays. The smaller supply along with increased demand for fuel will really hit home as a result.

Almost half of U.S. households use natural gas heat as their primary fuel source, which costs over 25% more than last year, and consumers are projected to spend 30% more than last winter, on average.

The 41% of U.S. households that heat with electricity, which is up 6.5%, are slated to spend 6% more, according to the Winter Fuels Outlook 2021 report from the U.S. Energy Information Administration.

The 4% of households that heat mostly with heating oil, or the 5% who use propane, could see even bigger cost hikes, between 43-54%.

While we can’t change the weather or the economy, we can change our habits to be smarter for our budget and more environmentally friendly.

Here are some practical ways to keep more heat inside your home and more money inside your wallet.

  1. Add rugs to your floors, such as in the bathroom, to help keep rooms insulated. Dress in layers, warm sweaters and socks. Use flannel sheets and more blankets at night to keep your body heat inside.
  2. Clean or change air filters for heating devices. Debris is unclean for breathing and will keep the warm air from circulating. Move furniture and curtains away from heaters to enable air flow and prevent fire hazards.
  3. Lower the thermostat by 7-10 degrees when everyone is out for the day. An electronic thermostat usually allows you to set the temperature to automatically increase or decrease as your schedule changes each day. If going away for a few days, do not reduce temps to less than 55 degrees to prevent pipes from freezing.
  4.  Call a professional to inspect your furnace and either clean it or upgrade it. The cost can be well worth the savings in heating. An old and dirty furnace system can work at 60 to 70% efficiency; switching to a newer, high-efficiency system can work at 90 to 98%.
  5.  Contact your utility company for a free home check-up. Costs for service or upgrades can be offset by federal tax credits, and utility rebates are available for many energy-efficient upgrades.
  6. Check windows for leaks. Detect air leaks by lighting a candle and watching if it blows in a certain direction. Seal windows with caulking or spray-foam insulation, or cover with plastic insulation sheets. Put draft stoppers under doorways.
  7. Open the shades during sunlight hours to let the sun naturally heat up your space. Close curtains at night to retain your heat and prevent cold night air from entering. Insulated curtains can help to better trap the heat than basic curtains would.
  8. Use plug-in space heaters to warm up isolated areas instead of turning on entire heating zones if all the space is not in use. Place them in open areas, away from flammable items and children or pets. Close vents in rooms that are not being used to avoid unnecessary output.
  9. Switch to LED light bulbs. They use about 75 percent less energy and last about 25 times longer than incandescent bulbs. Though their initial cost is higher, it pays off in the form of reduced electric bills over time. Unplug devices that are not in use.
  10. Reduce your water heater temperature to 120 degrees. Many houses or buildings have water heaters set to a burning temperature of 140 degrees. Reducing it to a comfortable 120 degrees is safer for skin and easier on heating costs.

Following a few of these easy-to-implement tips and hacks for saving on heat costs can make a big difference. Put them to good use so you can sit back and enjoy a cup of hot cocoa during this cold winter, content that you are staying warm and also saving money.

Your Turn:  Are you thinking about putting any of these heat-saving tips into action this winter? Any that should be on our list that we missed? Share in the comments. 

What are the Tax Benefits of Owning a Home

Q: I’m in the market for my first home, and I’m trying to get a complete picture of how owning a home will affect my finances. What are the tax benefits of owning a home?  

A: Owning a home can provide you with significant tax benefits. It’s important to learn how home ownership can impact your taxes so you know which home-related expenses to claim on your returns for maximizing your savings potential. 

Before we explore the specifics, let’s review how an income tax deduction works. A deduction reduces your taxable income by a percentage, which depends on your tax bracket. You can choose to take the standard deduction ($12,550 for individuals filing as single taxpayers, or $25,100 for married couples filing jointly) or to itemize your deductions, which involves listing each eligible deduction separately. After adding up the total of your itemized deductions, you’ll multiply that amount by your tax bracket for your total deduction. 

With this understanding, let’s take a deeper look at the tax benefits of owning a home. 

Tax benefits of buying a home

Purchasing a home offers the buyer several tax benefits. 

First, with the exception of very large loans, you can generally deduct the cost of the points you paid when securing your mortgage. If you’ve refinanced your original mortgage and paid points when taking out your new loan, the cost of these points can be deducted as well. 

Second, if you are an active-duty member of the armed services, you may be able to deduct your moving expenses from your taxable income. However, this tax perk is limited to active servicepeople who need to move because of a permanent change of station due to a military order. 

Tax benefits of owning a home  

There are multiple ongoing tax benefits to owning a home:

  • Mortgage interest deduction. Most homeowners can deduct the interest payments they make on their mortgage from their taxable income. There may be limits on how much you can deduct, which is dependent on how large your loan is. 
  • Real estate taxes. The money you pay in property taxes is deductible from your taxable income. If you pay through a lender escrow account, you’ll find the tax amount on your 1098 form. If you pay your taxes directly to your municipality, use your personal records, such as a copy of a check or automatic transfer, as proof. 
  • Private mortgage insurance (PMI). If you took out a loan that was equal to less than 20% of the home’s value, you may be able to deduct your PMI payments from your taxable income. This deduction depends on your adjusted gross income (AGI): If you’re single and your AGI is less than $50,000, you’re eligible for the PMI deduction. For married couples filing jointly, the threshold is $100,000. Once you’ve reached the max income allowed for the PMI deduction, the amount you can deduct begins to phase out.  
  • Home equity debt. If you’ve taken out a home equity loan or home equity line of credit against your home, the interest payments on these loans can be deducted from your taxable income, as long as the loan is used, in the words of the IRS, “to buy, build or substantially improve the taxpayer’s home that secures the loan.”
  • Home office expenses. If you use a part of your home exclusively for work purposes, you may be able to deduct related expenses.

Are there any tax credits available for homeowners? 

Unlike a tax deduction, a tax credit directly lowers your tax bill, dollar for dollar. You may be eligible for a mortgage credit if you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local governmental unit or agency under a qualified MCC program. In addition, depending on your home state, you may be able to claim a credit for a percentage of the costs of buying and installing items that help your home harness renewable energy, such as solar panels or geothermal heat pumps. 

Home ownership comes with many advantages, some of which include tax benefits. Keep that in mind as you explore your options, and as with all tax advice, please remember to consult a tax professional for the most current and accurate laws.

Your Turn: How has home ownership benefitted your taxes? Tell us about it in the comments. 

Should I Buy a House Now?

Q: I’ve been saving up for a down payment with plans to buy a house and feel ready. But, with the real estate market hotter than ever right now, I’m wondering if I should go ahead with my purchase or push it off until the market settles down. Should I buy a house now?

A: The real estate market has been hit particularly hard by the coronavirus pandemic. Coupled with several factors, like falling interest rates, moratoriums on foreclosures or evictions and an increase in demand, prices have driven upward across the country. 

According to a Zillow report published in April 2021, as many as 11% of Americans have moved since the pandemic’s outbreak, with more planning to move in the coming year. With remote work now possible in dozens of industries and the long months spent locked down in cramped apartments giving new meaning to “cabin fever,” Americans are seeking greener pastures. States that boast of a low or no property tax and an allegedly higher quality of life, like Texas and Florida, have been flooded by an influx of newcomers, as have suburbs all over the country and vacation hotspots. Homes are in such high demand, Zillow reports, that nearly half the homes up for sale in the U.S. during the month of May 2021 have sold in under a week. 

Naturally, this increase in demand has led to skyrocketing prices, and many homebuyers are delaying their purchase in hopes that the market will eventually cool off. However, under certain circumstances, it can still be an excellent time to buy a house.

Let’s take a look at some reasons to buy a house now. 

Interest rates are still historically low

While rates have risen since their all-time lows at the height of the pandemic, they continue to linger at record lows. On July 26, 2021, Bankrate placed the average APR* for a 30-year fixed mortgage at just 3.25%, and the average APR for a 15-year fixed mortgage at 2.62%. Many experts predict a sharp increase in rates over the next year and advise house hunters to take advantage of low rates while they last — even an increase of just 1% can translate into tens of thousands of dollars over a 30-year loan. 

There are more homes on the market than you may think

While it is a seller’s market and bidding wars are the norm right now, more homeowners are putting their houses up for sale. According to Realtor.com, home sales are up by 44% compared to a year ago. Also, now that the federal moratorium on foreclosures has ended, more homes are likely to enter the market in the next few weeks and months. Finally, new construction homes, which were put on hold for months during the pandemic, are beginning to fill the market again, offering more choices for homebuyers everywhere. 

It is generally the better financial choice to buy

While you’ll need to make sure you can actually afford to buy a house right now, owning a home is usually the better financial choice. Homeownership provides long-lasting equity, significant tax benefits and more stability than renting. Instead of throwing money at your landlord each month, every mortgage payment you make toward your home builds your own equity. 

Before you start house hunting, make sure you are financially prepared for homeownership. Mortgage eligibility requirements can be stricter than usual now, so it’s important to bring your credit score up to 720 or higher, work on paying down debt and to save up a sufficient amount of money before you start your search so you can comfortably cover the down payment and closing costs on your new home.

* APR = Annual Percentage Rate

Your Turn: Have you recently bought a house? Tell us about it in the comments. 

Should I Sell My House Now?

Q: Is 2021 a good time to sell my home?

A: While it appears to be a seller’s market, and the perfect time to put your home up for sale, there are many variables to consider before going forward. Below, we’ve outlined important points to know about today’s market so you can make an informed decision about selling your home in 2021. 

Is it a seller’s market now?

According to Realtor.com, the current supply of homes on the market is at an all-time low, the likes of which hasn’t been seen in more than two decades. This can be attributed to the federal moratorium on foreclosures, as well as the months-long halt on new construction.

At the same time, demand for homes is up, as many millennials are entering their peak homebuying years, mortgage rates hit record lows and more people are working from home than ever before. In fact, in 2020, more homes were sold than in any year since 2006, according to data from the National Association of Realtors.

Naturally, when demand exceeds supply, prices will go up. Let’s take a look at some of the current trends driving this market, as shared by Realtor.com and Redfin.com:

  • Home sales are up by 44% from a year ago. 
  • The median home price for all listings increased by 12.2% over last year for the week ending June 19, 2021.
  • The national median home price for all housing types in May 2021 was $380,000.
  • Homes are on the market for 33 fewer days than last year. 
  • In May 2021, the average home sold in just 16 days.
  • 54% of homes sold in May 2021, sold above their list price

Clearly, it is a seller’s market.

Will the market conditions last throughout 2021?

Most experts are doubtful that the current seller’s market will remain through the rest of the year. They cite several reasons for their prediction. 

First, while demand for homes is currently strong, the rising prices of homes across the country are driving many buyers out of the market, thereby slowly decreasing demand. At the same time, more sellers are putting their homes up for sale to take advantage of favorable market conditions, increasing supply. Also, with the federal moratorium on foreclosures and evictions ending on July 31, more homes are expected to enter the market. Finally, mortgage rates have already started to climb upward: according to Bankrate’s most recent survey of the nation’s largest mortgage lenders. As of June 27, the average 30-year fixed mortgage rate is 3.10%, up two basis points from the previous week. All of these factors combine for a likely market cooldown over the next few months, with demand for new homes decreasing as supply increases, until the two are a lot closer than they are now. 

If you do want to sell your home this year, it’s best to act as soon as possible to take advantage of favorable market conditions. 

Why might it be a bad idea to sell my home now?

Under certain conditions, it may not be in your best interest to sell your home now. 

First, a real estate market that favors sellers works both ways: You will be on the wrong side of the aisle when buying a new home. If you are upsizing, you will likely need to pay a lot more for your new home than you would when the market settles down. With moving costs, home repairs and improvements you may need to make when putting your home on the market, and the realtor’s commission, you can end up losing money from the sale, even with the higher price you may get for your old home. 

Also, with the demand for new homes currently outpacing supply, you’ll have slim pickings when searching for a new home. You may need to settle for a home that doesn’t meet your wants, or even your needs, simply due to the lack of a better choice. 

However, if you are downsizing or moving to an area that is not as in-demand as your current neighborhood, this can be a great time to get top dollar for your home and walk away with a nice profit. Before you put your home on the market, though, it’s a good idea to do some research to ensure you can find and easily afford a new place to live. 

It’s a seller’s market right now, but that doesn’t mean you should rush to put your house on the market. Research the current market conditions carefully and read the points outlined above so you can make an informed and responsible decision. 

Your Turn: Have you decided to sell your home in 2021? Tell us about your decision in the comments. 

All You Need to Know About HELOCs

If you’re a homeowner in need of a bundle of cash, look no further than your own home. By tapping into your home’s equity, you’re eligible for a loan with a, generally, lower interest rate and easier eligibility requirements. One way to do this is by opening up a home equity line of credit, or a HELOC. Let’s take a closer look at HELOCs and why they can be an excellent option for cash-strapped homeowners. 

What is a HELOC?

A HELOC is a revolving credit line that allows homeowners to borrow money against the equity of their home, as needed. The HELOC is like a second mortgage on a home; if the borrower owns the entire home, the HELOC is a primary mortgage. Since it is backed by a valuable asset (the borrower’s home), the HELOC is secured debt and will generally have a lower interest rate than unsecured debt, like credit cards. You will need to pay closing costs for the line of credit, which are generally equal to 2-5% of the total value of the loan.

How much money can I borrow through a HELOC?

The amount of money you can take out through a HELOC will depend on your home’s total value, the percentage of that value the lender allows you to borrow against and how much you currently owe on your home. 

Many lenders will only offer homeowners a HELOC that allows the borrower to maintain a loan-to-value (LTV) ratio of 80% or lower. 

A quick way to find a good estimate of the maximum amount you can borrow with a HELOC is to multiply your home’s value by the highest LTV the lender allows. For example, continuing with the above example, if your home is valued at $250,000 and your lender allows you to borrow up to 80% of your home’s value, multiply 250,000 by 0.80. This will give you $200,000. Subtract the amount you still owe on your mortgage (let’s assume $100,000) and you’ll have the maximum amount you can borrow using a HELOC: $100,000. 

Is every homeowner eligible for a HELOC?

Like every loan and line of credit, HELOCs have eligibility requirements. Exact criteria will vary, but most lenders will only approve the line of credit for homeowners who have a debt-to-income ratio of 40% or less, a credit score of 620 or higher and a home with an appraised value that is at minimum 15% more than what is owed on the home. 

How does a HELOC work?

A HELOC works similarly to a credit card. Once you’ve been approved, you can borrow as much or as little as needed, and whenever you’d like during a period of time known as the draw period. The draw period generally lasts five to 10 years. Once the draw period ends, the borrower has the choice to begin repaying the loan, or to refinance to a new loan. 

How do I repay my HELOC?

The repayment schedule for a HELOC can take one of three forms:  

Some lenders allow borrowers to make payments toward the interest of the loan during the draw period. When the draw period ends, the borrower will make monthly payments toward the principal of the loan in addition to the interest payments. 

For many borrowers, though, repayment only begins when the draw period ends. At this point, the HELOC generally enters its repayment phase, which can last up to 20 years. During the repayment phase, the homeowner will make monthly payments toward the lHELOC’s interest and principal. 

In lieu of an extended repayment phase, some lenders require homeowners to repay the entire balance in one lump sum when the draw period ends. This is also known as a balloon payment. 

How can I use the funds in my HELOC?

There are no restrictions on how you use the money in your HELOC. However, it’s generally not a good idea to use a HELOC to fund a vacation, pay off credit card debt or to help you make a large purchase. If you default on your repayments, you risk losing your home, so it’s best to use a HELOC to pay for something that has lasting value, such as a home improvement project. 

How is a home equity line of credit different from a home equity loan?

A home equity loan is a loan in which the borrower uses the equity of their home as collateral. Like a HELOC, the homeowner risks losing their home if they default on it. Here, too, the exact amount the homeowner can borrow will depend on their LTV ratio, credit score and debt-to-income ratio.

However, there are several important distinctions between the two. Primarily, in a home equity loan, the borrower receives all the funds in one lump sum. A HELOC, on the other hand, offers more freedom and flexibility as the borrower can take out funds, as needed, throughout the draw period. Repayment for home equity loans also works differently; the borrower will make steady monthly payments toward the loan’s interest and principal over the fixed term of the loan. 

A home equity loan can be the right choice for borrowers who know exactly how much they need to borrow and would prefer to receive the funds up front. Budgeting for repayments is also simpler and can be easier on the wallet since they are spread over the entire loan term. Some borrowers, however, would rather have the flexibility of a HELOC. They may also anticipate being in a better financial place when the repayment phase begins, so they don’t mind the uneven payments. 

Your Turn: Have you taken out a HELOC? Tell us about it in the comments.

Learn More:
creditkarma.com
marketwatch.com
thepennyhoarder.com
investopedia.com

Essential Tools for Every New Homeowner

As a new homeowner, you likely have a long list of items you need or want to purchase for your new digs. From welcome mats to plungers and wall hangings, there’s lots to buy in the first weeks after moving day. As you browse through window treatments and home decor, don’t forget to stock up on the basic tools every new homeowner needs.

A well-stocked toolbox is essential for every homeowner, but choosing which tools to pack inside that kit can be confusing. What do you really need, and what’s just an extra? Can you get by with only one screwdriver, or do you have to spring for the whole set? So many questions — and we’ve got answers! We’ve compiled a guide to stocking a homeowner’s toolbox at every skill level. Happy fixing!

Basic tools

If you’ve never pretended to be a handyman, but you’d like to have basic tools in the house in case something needs minor repair, here’s what belongs in your toolbox:

  • Claw hammer. From hanging up pictures to securing loose railings, a hammer is your go-to tool for most basic jobs around the house. Consider also getting a lightweight pin hammer for smaller jobs.
  • Screwdriver set. It’s worthwhile to invest in a set of screwdrivers so you have various sized flat-heads and Phillips-heads handy for any kind of job. You can pick up a set of 10 screwdrivers at your local home improvement or hardware store, or order one from Amazon.
  • Pliers set. Here too, a set of different sizes and types is your best bet. Look for pliers with a good grip and that are sized well for your hands.
  • Adjustable wrench. A wrench will enable you to tighten or loosen virtually anything.
  • Allen wrench set. A universal allen wrench set will set you back just $10. You’ll use these wrenches anytime you order a piece of furniture that requires assembly.
  • Handsaw. A handsaw is great for trimming lumber and cutting through drywall, fiberglass and other thin materials.
  • Extension cord. Every house should have, at minimum, one indoor extension cord and another outdoor cord for jobs requiring electric tools.
  • Utility knife. Use this handy cutter to open boxes, hard plastic packages, shave wood and more.
  • Tape measure. A retractable 25-foot tape measure will come in handy when you need to measure space for new furniture or decor items. You may want to get a pocket-sized tape measure as well so you can bring it with you when you measure items at a store.
  • Hardware. Keep a generous selection of screws and nails on hand in case you need one in a hurry.
  • Level. A simple floating-bubble model will help keep your wall pictures and shelving straight.
  • Flashlight. It’s always a good idea to have a source of battery-powered light in case of an outage. Also consider a rechargeable flashlight that can be recharged by hand so you are never without a source of light.

The next step

Once you’ve filled your toolbox with the basics, and you become more skilled at around-the-house repairs, consider adding these more advanced tools to your collection:

  • C-clamp. When working on a woodworking project, a clamp will help you hold the wood in place.
  • Stud finder. This ingenious tool will keep you from creating unnecessary holes or drilling where nails already exist.
  • Cordless drill. A cordless drill has dozens of household uses, especially if you get into woodworking or light construction around the house.
  • Hacksaw. These are great for cutting through plastic and metal pipes, tubing, conduit and wood.
  • Safety gear. You’ll need safety goggles, ear protection and dust masks when using power tools.
  • Putty knife. Designed for applying spackle, you can also use your putty knife to remove old paint and to apply grout to tile floors and backsplashes.
  • Wire stripper. Perfect for cutting materials like aluminium, copper, brass, iron and steel, wire strippers are essential for the committed DIYer.

Advanced tools

If you’re exceptionally handy, consider adding these to your toolbox:

  • Sanders. Put the finishing touches on your woodworking projects with a power sander. For best results, you may want to invest in several types of sanders and use each one when it fits the job best. For example, a random orbital sander may be best for simple  home projects, while a belt sander is great for sanding rough surfaces and a rotary sander is your go-to choice for edge work.
  • Carpenter’s square. Made up of a metal ruler and interchangeable heads, a carpenter’s square is used to measure level, right angles, the center of a circle and to check depth. It can be an incredibly useful tool in complicated woodworking, metal and masonry projects.
  • Table saw. This power tool, also known as a saw-bench, is a mounted woodworking tool that is considered the workhorse of any well-equipped woodshop. A table saw can rip,
    cross-cut, miter-cut, square, rabbet and apply shapes to edges of wood stock.

Your toolbox is all set! Now you’ll be fully prepared for anything that needs fixing in your home.

Your Turn: What do you have inside your toolbox? Tell us about it in the comments.

Learn More:
thisoldhouse.com
movement.com
homedepot.com
hgtv.com
butlerheating.com
washingtonpost.com