Paydown or Invest?

Is It Better to Pay Down Your Mortgage Faster or Invest?
excerpted from apartmenttherapy.com

by Liz Steelman

It is a fact that you could save significantly on interest by paying a little bit more towards your principal over the scope of your home loan. However, it is also true that instead of paying more toward your principal, you may benefit more by investing that same money. For example, if the interest rate on your mortgage is 5%, and the current 30-year market growth rate for a portfolio of investments is around 8%, then you should invest that money instead of paying down your mortgage faster.

Let’s look at how this using some very simple numbers: If you have a $300,000 30-year, fixed-rate mortgage at 5% interest and you commit to paying an extra $100 every month, you’ll save nearly $40,000 in interest over the term of the home loan. However, if you opt to put that $100 monthly payment into an investment that compounds annually with an 8% rate of return of 30 years, you’re likely to end up with $140,855 when your mortgage ends. You will, however, have to pay the extra $39,937.25 on your mortgage by forgoing the extra principal payment. So your actual return will only be around $100,000. However, that still is considerably more than $40,000. This, however, is a simplistic look at the concept, but it gives you an idea on what the rate of return of investment could be.

Financial experts note that it is always a smart idea to look at the spread (the difference between the two interest rates) between what you could get through investing versus your mortgage rate (which drives what you can get early-paying your mortgage). However, these days an 8% return on investment is a little more aggressive than reality. Additionally, investment rate of return usually doesn’t include tax considerations—which can affect your rate of return (since mortgage interest is tax-deductible. Additionally, the investment timelines for portfolios with 6-8% return are usually long-term return rates. So consider how long you have left on your mortgage and compare it with the term required by your investment.

On top of that, investment rates are not often guaranteed. And, if you do earn slightly more with an investment, the freedom and peace of mind that comes with paying off your mortgage early may be priceless.

Is Missing a Payment a Problem?

35% of your FICO score depends on payment history and a single missed payment can adversely affect that score.

But, according to a US News and World Report Survey from August 2020…

41% of Americans polled don’t know that a missed payment negatively impacts credit score

~ and ~

Almost 11% think your Credit Score is not affected until you miss more than one payment.

Don’t get caught in a bad credit situation that can be easily avoided, just because you are lazy. Or if you are currently caught in a bad situation due to the ongoing COVID-19 Crisis, make sure you PROACTIVELY contact your lending institution to see what can be done to protect your credit status.

Think You Can’t Buy a House? Dig Deeper

Instead of relying on second-hand information, spend some time with an experienced, reputable real estate professional who can give you the facts.

There are thousands of people who believe, for one reason or another, that they can’t afford to buy a home right now.  Some people  may not be able to for any number of reasons. However it may be surprising that some people who actually can qualify to purchase a home don’t, solely because they received some bad information when they first started looking.  It’s worth digging a little deeper to find out the facts.

John and Karen have been renting a home for the last five years at $2,000 a month.  During that time, the value of the home they were renting went up by $30,000 in value, while the unpaid balance on the mortgage decreased by $18, 400.  Even though they were fortunate enough to have their rent remain constant over those five years, they missed out on nearly $50,000 of equity that the property’s owner realized instead of them.

Also, with today’s low interest rates, it’s quite common for a mortgage payment to be lower than what a tenant is paying for rent for a similar property.  So, in this example, John & Karen also paid more over that period than they would have if they were making house payments and getting the benefit of equity growth.

It is true that not everyone can afford to buy a home.  A down payment and closing costs may be too much of a burden at this time.   Buyers also need to have steady income and good credit to qualify for the mortgage.  But if you are interested in buying a property, why not talk to a real estate professional to find out if there is a way to make it work.

There are many low-down payment mortgages available, including 100% financing for qualified veterans and USDA eligible buyers.  Additionally, while it may be difficult to find sellers willing to pay all or part of a buyers closing costs, lenders do allow it.  It is a matter of finding the willing seller who can see the opportunities they may receive from selling their property at that time..

The source of a down payment could be a gift from a family member, as long as there is no repayment expected.  Many parents or grandparents are willing to help a relative get into a home.  Funds for a down payment may be available as loans or withdrawals from qualified retirement programs like IRAs or 401k plans.  It’s worth investigating options you may have based on the retirement programs available to you.

Good credit is necessary to qualify for a loan but buyers should not assume that theirs is not adequate.  A trusted mortgage professional can assess a situation and may be able to suggest some actions that will not only raise your score enough to be approved for a loan, but may possibly even raise the score enough to qualify for a better interest rate.

There are a lot of misunderstandings about whether a person can or cannot qualify for a home at this time.  Instead of relying on word-of-mouth information or random facts on the Internet, spend some time with a real estate professional who can give you the facts, assess your situation and help you get in touch with a trusted mortgage professional.  

If after reading this, you realize you may have been overlooking your actual buying power, call us at 510. 244.0085 to schedule an appointment so we can help you dig deeper to determine your true buying power.

Want more information? Download our Buyers Guide now.

Tips for a Safe Road Trip During COVID-19

Have fun, enjoy yourself and BE SAFE!

  • Pack hand samitizer, disinfecting wipes, disposable gloves and disposable plastic bags and tissues
  • Wear a mask in all indoor public spaces
  • Maintain 6-foot distance from others
  • Use credit & debit cards and disinfect after use
  • Use papertowls or tissues to touch fixtures or door handles after washing your hands
  • Dine-in restaurants may be a challenge; take-out is easier to find and to control your environment
  • Make hotel reservations in advance; sanitize high touch areas yourself
  • Know if your destination requires quarantine upon arrival

Grilling Safety

Peppers, Green Chilies, Corn, Onion, Hamburgers, Brats, and Kabobs arranged on a charcoal grill

Close to 20,000 patients per year visit the emergency room due to injuries involving grills.

More people grill in July, June & August than any other months and correspondingly, there are more injuries, as well as fires, due to grilling accidents in those months. Even though Labor Day is in September, we still need to be aware of safety.

Close to 20,000 patients per year visit the emergency room due to injuries involving grills. Approximately half of the injuries involving grills are thermal burns. If you are around fire, there’s a chance of getting burned.

About 2/3 of American households own at least one outdoor barbecue, grill or smoker. Interestingly, gas grills contribute to more fires than charcoal grills. In addition, there are over 10,600 home fires started by grills each year.

While grilling is associated with celebrations, good food, fun and friends, it is important to make sure that accidents don’t interrupt your activities.

BBQ GRILL

  • Only use BBQ grills outdoors and in ventilated areas
  • Place the grill away from home or anything that could be flammable
  • Keep grill stable
  • Keep fire under control
  • Keep children away from grill
  • Never leave the grill unattended
  • The grill lid should always be open before lighting it.
  • Grease should not be allowed to build up in the grill
  • Use long-handled utensils

GAS/PROPANE

  • Check the tank hose for leaks before using it for the first time each year by using a light soapy water solution to see if bubbles appear.
  • You should not smell gas when the grill is lit. Move away from the grill and call the fire department.
  • If the flame goes out, turn off the gas for 15 minutes and open the lid before re-lighting it.
  • Charcoal
  • Never add any starter fluid or other flammable liquid to a fire
  • Only use charcoal starter fluid and not gasoline, kerosene or other flammable liquid.
  • Keep starter fluid away from heat sources and out of reach of children.
  • Electric starters have a coil that ignites the charcoal.
  • When finished cooking, close off the grill vents to suffocate the fire and save some of the remaining charcoal.

Practice safe grilling and enjoy any occasion to cook outdoors and share time with your family and friends.

How to Keep Your Debit Card Transactions Safe

Excerpted from Investopedia.com (see complete article here)


A little vigilance can go a long way

By MICHELE LERNER
Updated Feb 24, 2020
General-purpose and private-label debit cards purchase value for goods and services totaled $3.019 trillion in 2017, the most recent figures available as of February 2020, according to the Nilson Report. While many consumers choose to use a debit card to avoid accumulating credit card debt, you may not be aware that you could lose more hard-earned money through debit card fraud than if you used a credit card for a purchase.

As you probably know, when you make a purchase with a debit card, the money is taken instantly from your checking account. If someone fraudulently uses your debit card number, you could be responsible for some or all of those charges.

KEY TAKEAWAYS

  • Check your bank statements on a regular basis and report any suspected fraudulent activity to the bank immediately.
  • The faster you report a problem, the more quickly you can cancel your debit card and prevent additional charges.
  • Only utilize ATMs that are associated with a bank; stay away from potential “skimming” locations such as gas stations and deli kiosks.
  • If you lose your card or suspect it has been stolen, report it immediately to your bank and cancel the missing card.
  • Change your personal identification number (PIN) and password every few months.
  • Unauthorized Charges on Your Debit Card
  • According to the National Consumer Law Center, if a consumer’s debit card has not been lost or stolen but there are unauthorized charges on the account, the consumer will be protected if he or she reports those charges within 60 days of when the statement was sent.

When a physical card goes missing or is stolen, consumers have just two business days after learning about the loss to notify the card issuer. Those who do so will limit their losses to $50. Otherwise, they could lose up to $500. If they take months to notify the bank, they may not recoup any money at all.

Many banks have improved their debit card protections for their customers and will go beyond the above rules and not make consumers responsible for any charges deemed to be fraudulent. This is especially true if consumers report the unauthorized transactions as soon as possible.

Experts advise debit card holders not to make a financial transaction on an e-commerce site that doesn’t have the “s” following http, as in https://. This symbol is an indication of a higher level of security.


8 Rules for Keeping Your Debit Card Safe
Take the time to follow these rules.

  1. Check your bank statements often
    As time is of the essence to receive full fraud protection from your bank, make it a habit to review your bank account online at least once a week or even daily.
  2. Protect your PIN number
    Don’t give your personal identification number (PIN) to anyone who asks, and don’t keep it written down anywhere in your purse or wallet. Don’t use your PIN at the gas pump. Instead, use your card in the credit purchase function to avoid someone seeing it. In fact, using your debit card in credit card mode may offer you extra liability protection, depending on your bank.
  3. Consider avoiding debit card use online
    Some consumers choose to use only credit cards online, because a fraudulent credit card transaction takes more time for your bank to process and can become an item of dispute rather than an instant removal of cash from your checking account. The Federal Reserve Bank of San Francisco recommends checking for a security symbol, such as an unbroken key or a padlock, on each website before you order anything because these symbols mean your information will be encrypted and therefore safer.
  4. Only use ATMs at a bank
    Automated teller machines (ATMs) located in convenience stores, subway stations, airports, and other places have a greater risk of having a “skimming” device attached by a thief, which could intercept and store your debit card data. This sometimes happens at banks, too, but it is easier to do in a place without surveillance cameras.
  5. Don’t use public wireless access for financial transactions
    Make sure you are using a password-protected wireless signal to check your bank account balance, pay bills, and shop, so that hackers have less chance to capture your password and account information.
  6. Report problems immediately
    While you would certainly report it right away if your wallet were stolen and your credit and debit cards were missing, you should also report any unauthorized transactions immediately.
  7. Consider filing a police report
    If your debit card is stolen, you may want to contact the police and keep a copy of the police report, so that you have extra support when you want your bank to reimburse the charges.
  8. Create your own security profile
    As long as you remember the answers, you can make up anything you want for your security questions. Using a pet’s name or your mother’s maiden name makes it too easy for cons to get into your account. The answers just have to be consistent; they don’t have to be true.

The Bottom Line
While you may find constantly using a debit card to be a great convenience, it won’t be so convenient if someone manages to drain your checking account. A little vigilance and some new habits can go a long way toward preventing a damaging debit card experience.

So Many Low Down-Payment Mortgage Options!

There are so many types of mortgage that you can apply for. But, you may find yourself asking, “What do I qualify for?” “Are there any hidden charges?” “Is this really the best choice for me?”

On top of that, so many companies advertise that THEY have the best, low down-payment option available. If you’re confused because there are too many options, let’s talk. We’re here to help!

Check Your Attic Insulation

If you are handy, this could be a DYI project. Some stores will loan you the blower if you purchase the insulation from them.

HOMEOWNER TIP!
CHECK YOUR HOME’S INSULATION

Look at the insulation in your attic to check that it is adequate to keep your home cool in the Summer and warm in the Winter. Over time, the original insulation will become compacted and less effective. You can have sheets of new, unbacked insulation added, or new insulation can also be installed with a blower.

Either way, taking care of your attic insulation can save you money while making your home more comfortable year-round!