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Five Best Home Finance Moves.
Praesent Now may be the best time to gauge exactly where you
are in the home financing cycle. It's always good to step
back and look at the entire financing picture—where
you've been, where you intend to go and where you'd like to
be in five years. Homestore.com has discussed this "home
finance check up" with a number of finance and housing
experts to determine the five best home finance moves you
could make right now. Some suggestions:
Best Move Number One: Wake Up and Smell the Green
Assess where you are today financially speaking, and where
you'd like to be in five years. Start by getting a detailed
picture of how much you are spending to maintain your lifestyle,
where you want to be several years down the road and how you
expect to achieve that. Make sure you have checked your credit
report at least once in the past six months. Examine your
credit report carefully to make sure no one else has requested
credit in your name and closed accounts you no longer use.
This will prepare you for the future should you decide to
refinance or trade up to a newer, larger home.
Best Move Number Two: Take Advantage of the Rise in Home Values
Lisa Mihailuk, senior vice president at Countrywide, one of
the nation's largest mortgage operations, notes that savvy
individuals can use additional equity built up in their homes
to pay off high-interest credit card debt or to modernize
their current home. "In recent years, some homes that
were valued at $85,000 are now worth $95,000. People can tap
into that equity to pay off credit card debt or make improvements,"
says Mihailuk. Not only that, but interest on credit card
debt is not deductible while mortgage interest is.
Best Move Number Three: Play It Smart When Refinancing Your
Mortgage
Before you sign up for a refinance deal, first talk to at
least three financial professionals: a direct lender such
as a bank, an experienced mortgage lender and a mortgage broker.
All have advantages. The direct lender may offer lower rates
because it doesn't have to share fees. And a mortgage banker
can act quickly; if he or she likes the loan application,
they can make a commitment immediately. Last, don't overlook
a mortgage broker, since they represent 50 or more lenders
and can shop the loan around.
Best Move Number Four: Seek No-cost Refinancing
The reason? "Any loan fee you pay has to be amortized
over the life of the loan," says noted real estate broker
and syndicated columnist Bob Bruss of San Francisco. "Say
you pay a $1,000 loan fee or points for a refinance,"
he continues, "that has to be amortized over the life
of the loan, which can be about $33 a year on a 30-year mortgage.
Instead, pay a little higher interest rate and get a no-cost
loan where you don't have to pay title insurance, credit report
and appraisal fees out of your own pocket. It may be at a
little higher interest rate—7.12% instead of 7% —but
it will all be deductible."
Best Move Number Five: Renovate Rather Than Relocate
With the economy going through an uncertain phase, now may
not be the best time for a move. If it isn't, don't deny yourself
creature comforts. If you want that gourmet kitchen, then
go for it —finance the renovation through a home equity
loan. By using an equity line of credit, you can deduct the
interest on your income tax. But check with your real estate
professional to make sure that the improvements you make will
add value to the home.
Duis Five Worst Home Finance Moves.
DonecNobody's perfect. Sometimes we make inadvertent mistakes
even when we have the best intentions. But good intentions
may yield some bad decisions when it comes to your personal
finances. For homeowners, or even those who want to buy a
home someday, here are the five worst mistakes you can make.
Worst Move Number One: Not Keeping Your Financial House in
Order
There are a few simple things you can do to keep your finances
in good condition. Among them:
* Check your credit report twice a year.
* Make sure your will is updated.
* Is your insurance protection updated? Do you need more insurance?The
last one is a biggie. It's very important that you have enough
insurance to protect your dependents and income—to say
nothing of your home—in case of death or disability.
Also, keep in mind that you can save several hundred dollars
a year on homeowner's insurance and renter's insurance by
shopping around. Compare rates.
Worst Move Number Two: Thinking the Good Times Will Last Forever
As the stock market has shown, what goes up must come down.
So start tightening your belt now, just in case. Control impulse
buying by using shopping lists and sticking to them. Avoid
going into debt to support a lifestyle you cannot afford and
never borrow money to spend. (That can mean taking out a loan,
or even using a credit card to buy something you don't have
money for today.) Remember: If you want to buy a bigger house
tomorrow, you've got to plan now.
Worst Move Number Three: Failing to Be Charitable
Charitable deductions can add up to tax savings later on and
now is the time to take them. Storing an old printer or monitor
in the basement? Donate it. It might be worth several hundred
dollars to a charitable organization. And you get to take
the deduction on April 15.
Worst Move Number Four: Refinancing Too Large an Amount
Edith Lank, syndicated columnist and author of "The Homebuyers
Kit" and "The Homeseller's Kit," says one of
the worst home finance moves "is falling for those offers
to mortgage your home for 125% of its value—and there's
a new one just out for 105% from a reputable bank that should
know better." The noted financial and residential real
estate author cites several reasons for such refinance deals
being a worst move: "You probably pay high interest,
and the Internal Revenue Service (IRS) lets you deduct only
the interest paid on the actual value of your home. [In the
end, such] risky, financial problems could result in loss
of your home."
Worst Move Number Five: Getting a So-so Refinance Rate
Shop around. You may think it's easier to work with your existing
mortgage lender but in most cases your lender will require
the same documentation that others do. Your current lender
will still have to verify your employment income and the like.
So it might pay to talk to other lenders as well.
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