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Move-Up vs. Second Home: Which One Is Right For You?

Move Up Vs Second Home - Which One is Right For You

The pandemic has changed the way many of us live, work, and attend school—and those changes have impacted our priorities when it comes to choosing a home.

Move Up Vs Second Home - Which One is Right For You According to a recent survey by The Harris Poll, 75% of respondents who have begun working remotely would like to continue doing so—and 66% would consider moving if they no longer had to commute as often. Some of the top reasons were to gain a dedicated office space (31%), a larger home (30%), and more rooms overall (29%).1

And now that virtual school has become a reality for many families, that need for additional space has only intensified. A growing number of buyers are choosing homes further from town as they seek out more room and less congestion. In fact, a recent survey found that nearly 40% of urban dwellers had considered leaving the city because of the COVID-19 outbreak.2

But not everyone is permanently sold on suburban or rural life. Instead, some are choosing to purchase a second home as a co-primary residence or frequent getaway. Without the requirements of a five-day commute, many homeowners feel less tethered to their primary residence and are eager for a change of scenery after spending so much time at home.

If you’re feeling cramped in your current space, you’ve probably considered a move. But what type of home would suit you best: a move-up home or a second home? Let’s explore each option to help you determine which one is right for you.

WHY CHOOSE A MOVE-UP HOME?

A move-up home is typically a larger or nicer home. It’s a great choice for families or individuals who simply need more space, a better location, or want features their current home doesn’t offer—like an inground pool, a different floor plan, or a dedicated home office.

Most move-up buyers choose to sell their current home and use the proceeds as a downpayment on their next one. If you’re struggling with a lack of functional or outdoor space in your current home, a move-up home can greatly improve your everyday life. And with mortgage rates at their lowest level in history, you may be surprised how much home you can afford to buy without increasing your monthly payment.3,4

To learn more about mortgage rates, contact us for a free copy of our recent report!
“Lowest Mortgage Rates in History: What It Means for Homeowners and Buyers”

One major benefit of choosing a move-up home is that you can typically afford a nicer place if you spend your entire budget on one property. However, if you’re longing for that vacation vibe, a second home may be a better choice for you.

WHY CHOOSE A SECOND HOME?

Once reserved for the ultra-wealthy, second homes have become more mainstream. Home sales are surging in many resort and bedroom communities as city dwellers search for a place to escape the crowds and quarantine in comfort.5 And with air travel on hold for many families, some are channeling their vacation budgets into vacation homes that can be utilized throughout the year.

A second home can also be a good option if you’re preparing for retirement. By purchasing your retirement home now, you can lock in a low interest rate, start paying down the mortgage, and begin enjoying the perks of retirement living while you’re still fit and active. Plus, it’s easier to qualify for a mortgage while you’re employed, although you may be charged a slightly higher interest rate than on a primary home loan.6

One advantage of choosing a second home is that you can offset a portion of the costs—and in some cases turn a profit—by renting it out on a platform like Airbnb or Vrbo. However, be sure to consult with a real estate professional or rental management company to get a realistic sense of the property’s true income potential.

Move Up Vs Second Home - Which One is Right For You?WHICH ONE IS RIGHT FOR ME?

You may read this and think: I’d really like both a move-up home AND a second home! But if you’re dealing with a limited budget (aren’t we all?), you’ll probably need to make a choice. These three tactics can help you decide which option is right for you.

1. Determine Your Time and Financial Budget

You may meet the bank’s qualifications to purchase a home, but do you have the time, energy, and financial resources to maintain it? This is an important question to ask yourself, no matter what type of home you choose.

Most buyers realize that a second home will mean double mortgages, utilities, taxes, and insurance. But consider all the extra time and expense that goes into maintaining two properties. Two lawns to mow. Two houses to clean. Two sets of systems and appliances that can malfunction. Second homes aren’t always a vacation. Make sure you’re prepared for the labor and carrying costs that go into maintaining another residence.

Of course, some move-up homes require more work than a second home. For example, if your move-up option is a major fixer-upper, you’ll probably invest more energy and capital than you would on a small vacation condo by the beach. Have an honest discussion about how much time and money you want to spend on your new property. Would a move-up home or a second home be a better fit given your parameters?

2. Rank Your Priorities

If you’re still undecided, make a wish list of the characteristics you’d like in your new home. Then rank each item from most to least important. This exercise can help you determine your “must-have” features—and which ones you may need to sacrifice or delay. Here’s a sample to help you get started:

# FEATURE
Dedicated home office
Extra bedroom
Pool
Walk to the beach
Big backyard
Close to friends and family
Short commute to the office
Investment potential

3. Explore Your Options

Once you’ve determined your parameters and priorities, it’s time to begin your home search.
If you’re still not sure whether a move-up home or a second home is right for you, we can help.

Contact us to schedule a free consultation. We’ll discuss your options and help you assess the pros and cons of each, given your unique circumstances.

We can also send you property listings for both move-up homes and second homes within your budget so you can better envision each scenario. Sometimes, viewing listings of homes that meet your criteria can make the decision clear.

LET’S GET MOVING

Whether you’re ready to make a move or need help weighing your options, we’d love to help. We can determine your current home’s value and show you local properties that fit within your budget. Or, if your heart is set on a second home in another market, we can refer you to an agent in your dream locale. Contact us today to schedule a free, no-obligation consultation!

Sources:
1. Zillow –
https://www.zillow.com/research/coronavirus-remote-work-suburbs-27046/
2. The Harris Poll –

Should you flee your city? Almost 40% have considered it during the pandemic


3. MarketWatch –
https://www.marketwatch.com/story/mortgage-rates-keeping-falling-so-will-they-finally-drop-to-0-2020-08-13
4. Toronto Star –
https://www.thestar.com/business/2020/08/07/you-can-get-a-fixed-rate-as-low-as-184-per-cent-which-is-unbelievable-low-mortgage-rates-driving-up-home-prices.html
5. Kiplinger –
https://www.kiplinger.com/real-estate/buying-a-home/601091/timely-reasons-to-buy-a-vacation-home
6. The Press-Enterprise –

5 tips on when should you buy a retirement house (hint: before you quit work)

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Lowest Mortgage Rates in History-What It Means for Homeowners and Buyers

Lowest Mortgage Rates

Lowest Mortgage Rates in History: What It Means for Homeowners and Buyers
Lowest Mortgage Rates
In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many Americans have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today’s rates truly a bargain?

While average mortgage rates have drifted between 4% and 5% in recent years, they haven’t always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It’s hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3

Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4

So what’s causing today’s rates to sink to unprecedented lows? Economic uncertainty.

Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5

However, according to National Association of Realtors Chief Economist Lawrence Yun, “the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities.” According to Yun, “we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed’s stance.”6

HOW DO LOW MORTGAGE RATES BENEFIT CURRENT HOMEOWNERS?

 Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don’t have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!

A growing number of homeowners are capitalizing on today’s rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.

The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.

 Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage

 

Loan Amount 4.0% 3.0% Monthly Savings Savings Over 30 Years
$100,000 $477 $422 $55 $20,093
$200,000 $955 $843 $112 $40,184
$300,000 $1,432 $1,265 $167 $60,277
$400,000 $1,910 $1,686 $224 $80,368
$500,000 $2,387 $2,108 $279 $100,461

Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we’d be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.

HOW DO LOW MORTGAGE RATES BENEFIT HOME BUYERS?

We’ve already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.

Now let’s assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That’s a budget increase of $35,000!

If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That’s $76,000 over your original budget! All because the interest rate fell by two percentage points. If you’ve been priced out of the market before, today’s low rates may put you in a better position to afford your dream home.

On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you’re planning to move, don’t miss out on the phenomenal discount you can get with today’s historically-low rates.

HOW LOW COULD MORTGAGE RATES GO?

No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact.

Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9,10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11

Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. “With rates now at all-time historic lows, it’s hard to imagine that people may be holding out for something even better,” warns Paul Buege, president and COO of Inlanta Mortgage.12 Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.

HOW CAN I SECURE THE BEST AVAILABLE MORTGAGE RATE?

Lowest Mortgage Rates in History

While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?

  1. Consider a 15-Year Mortgage Term

 Lock in an even lower rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you’ll pay off your home in half the time.13

  1. Give Your Credit Score a Boost

The economic downturn has made lenders more cautious. These days, you’ll probably need a credit score of at least 740 to secure their lowest rates.14 While there’s no fast fix for bad credit, you can take steps to help your score before you apply for a loan:15

  • Dispute inaccuracies on your credit report.
  • Pay your bills on time, and catch up on any missed payments.
  • Hold off on applying for new credit.
  • Pay off debt, and keep balances low on your credit cards.
  • Don’t close unused credit cards (unless they’re charging you an annual fee).
  1. Make a Large Down Payment

 The more equity you have in a home, the less likely you are to default on your mortgage. That’s why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.

  1. Pay for Points

Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren’t cheap. But the investment can pay off over the long-term in interest savings.

  1. Shop Around

 Rates, terms, and fees can vary widely amongst mortgage providers, so do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by multiple mortgage companies could have a negative impact on your credit score.16

 

READY TO TAKE ADVANTAGE OF THE LOWEST MORTGAGE RATES IN HISTORY?

 

Mortgage rates have never been this low. Don’t miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help.

 

We’d be happy to connect you with the most trusted mortgage professionals in our network. And if you’re ready to start shopping for a new home, we’d love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation.

The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

Sources:

  1. CNN Business –
    https://www.cnn.com/2020/07/16/success/30-year-mortgage-rates-record-low/index.html
  2. Freddie Mac –
    http://www.freddiemac.com/pmms/pmms30.html)
  3. Value Penguin –
    https://www.valuepenguin.com/mortgages/historical-mortgage-rates
  4. Federal Reserve Bank of St. Louis –
    https://fred.stlouisfed.org/graph/?g=NUh
  5. Bankrate –
    https://www.bankrate.com/mortgages/how-interest-rates-are-set/
  6. Washington Post –
    https://www.washingtonpost.com/business/2020/06/25/mortgage-rate-remains-historic-low/
  7. Yahoo! Finance –
    https://finance.yahoo.com/news/mortgage-refinancing-makes-big-comeback-151500346.html
  8. Bankrate –
    https://www.bankrate.com/mortgages/is-no-closing-cost-for-you/
  9. Freddie Mac June 2020 Quarterly Forecast –
    http://www.freddiemac.com/fmac-resources/research/pdf/202006-Forecast.pdf
  10. Mortgage Bankers Association Mortgage Market Forecast July 15, 2020 –
    https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary
  11. Fannie Mae July 2020 Housing Forecast –
    https://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_071420.pdf
  12. Washington Post –
    https://www.washingtonpost.com/business/2020/06/25/mortgage-rate-remains-historic-low/
  13. Investopedia –
    https://www.investopedia.com/articles/personal-finance/042015/comparison-30year-vs-15year-mortgage.asp
  14. Money –
    https://money.com/mortgage-rates-below-three-percent/
  15. Experian –
    https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/
  16. Equifax –
    https://www.equifax.com/personal/education/credit/report/understanding-hard-inquiries-on-your-credit-report/
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20 Ways to SAVE Money and Stretch You Household Budget

20 Ways to Save Money

Household Budget TipsThese days, it seems like everyone’s looking for ways to cut costs and stretch their income further. Fortunately, there are some simple steps you can take to reduce your household expenses without making radical changes to your standard of living. When combined, these small adjustments can add up to significant savings each month.

 

 

Here are 20 things you can start doing today to lower your bills, secure better deals, and begin working toward your financial goals.

 

  1. Refinance Your Mortgage – For prime borrowers, mortgage rates are at or near historic lows. Depending on your current mortgage rate and the terms you choose, refinancing could save you a sizable amount on your monthly payments. There are fees and closing costs associated with refinancing, so you’ll need to talk to your lender to find out if refinancing is a good option for you.

 

  1. Evaluate Your Insurance Policies – If it’s been a while since you priced home or auto insurance, it may be worthwhile to do some comparison shopping. Get quotes from at least three insurers or independent agents. Try bundling your policies to see if there’s a discount. And inquire about raising your deductible, which should lower your premium.1

 

  1. Bundle Cable, Phone, and Internet – You can also save money by bundling your cable, phone, and internet services together. Shop around to see who is willing to give you the best deal. If switching is too much of a hassle, ask your current provider to match or beat their competitor’s offer.

 

  1. Better Yet, Cut the Cord on Cable – In many cases, you can save even more if you cancel your cable subscription altogether. An antenna should give you access to the major stations, and many of your favorite shows are probably available on-demand through a less expensive streaming service subscription.

 

  1. Revisit Your Wireless Plan – You can often save by switching from a big brand to an independent, low-cost carrier. If that’s not feasible, ask your current provider for a better deal or consider downgrading to a cheaper plan.

 

  1. Adjust Your Thermostat – Turning your thermostat up or down a few degrees can have a noticeable impact on your monthly heating and cooling costs. To maximize efficiency, change your filters regularly, and make sure your windows and doors are well insulated.

 

  1. Use Less Hot Water – After heating and cooling, hot water accounts for the second largest energy expense in most homes.2 To cut back, repair any leaks or dripping faucets, install low-flow fixtures, only run your dishwasher when full, and wash clothes in cold water when possible.

 

  1. Lower Overall Water Consumption –   To decrease your water usage, take shorter showers, and turn off the sink while you brush your teeth and wash your hands. All of our local Coachella Valley water agencies can provide assistance and tips for using less water and reducing your water bill here in the Palm Springs area. If you don’t have a low-flow toilet, retrofit your current one with a toilet tank bank or fill cycle diverter. And irrigate your lawn in the morning or evening to minimize evaporation.

 

  1. Conserve Electricity – Save electricity by shutting off your computer at night and installing energy-efficient LED light bulbs. You can minimize standby or “vampire” power drain by utilizing power strips and unplugging idle appliances.4

 

  1. Purchase a Home Warranty – While there is an upfront cost, a home warranty can provide some protection and peace of mind when it comes to unexpected home repair costs. Most plans provide coverage for major systems (like electrical, plumbing, and HVAC) and appliances (such as your dishwasher, stove, or refrigerator).

 

  1. Outsource Less – From lawn care to grocery shopping to minor home repairs, we pay people to do a lot of things our parents and grandparents did themselves. To save money, try cutting back on the frequency of these services or taking some of them on yourself.

 

  1. Prepare Your Own Meals – It costs nearly five times more to have a meal delivered than it does to cook it at home.5 And home cooking doesn’t just save money; it’s healthier, cuts down on calorie consumption, and can offer a fun activity for families to do together.

 

  1. Plan Your Menu in Advance – Meal planning is deciding before you shop what you and your family will eat for breakfast, lunch, and dinner. It can help you lower your overall food bill, eliminate waste, and minimize impulse purchases. When possible, buy produce that is in season, and utilize nutrient-rich but inexpensive protein sources like eggs, beans, ground turkey, and canned tuna.

 

  1. Plant a Garden – You can save even more on produce by growing it yourself. If you have space in your yard, start-up costs are relatively minimal. Gardening can be a rewarding and enjoyable (not to mention delicious) hobby for the whole family. And it could save you around $600 per year at the grocery store!6

 

  1. Review Memberships and Subscriptions – Are you paying for services and subscriptions you no longer need, want, or can utilize? Determine if there are any that you should suspend or cancel.

 

  1. Give Homemade Gifts – Who wouldn’t appreciate a scratch birthday cake or tin of cookies? And if you enjoy crafting, Pinterest and Instagram are full of inspiring ideas. Show your recipient how much you care with a homemade gift from the heart.

 

  1. Minimize Your Debt Payments – The best way to reduce a debt payment is to pay down the balance. But if that’s not an option right now, try to negotiate a better interest rate. If you have a good credit score, you may be able to qualify for a balance transfer to a 0% or low-interest rate credit card. Keep in mind, the rate may expire after a certain period—so be sure to read the fine print.

 

  1. Get a Cash-back Credit Card – If you regularly pay your credit card balance in full, a cash-back credit card can be a good way to earn a little money back each month. However, they often come with high-interest rates and fees if you carry a balance. Commit to only using it for purchases you can afford.

 

  1. Ask for Deals and Discounts – It may feel awkward at first, but becoming a master haggler can save you a lot of money. Many companies are willing to negotiate under the right circumstances. Always inquire about special promotions or incentives. See if they are able to price match (or beat) their competitors. And if an item is slightly defective or nearing its expiration date, ask for a discount.

 

  1. Track Your Household Budget – One of the most effective ways to reduce household expenses is to set a budget—and stick to it. A budget can help you see where your money is going and identify areas where you can cut back. By setting reasonable limits, you’ll be able to reach your financial goals faster.

 

 

Want more help getting a handle on your finances? Use the budget worksheet below to track income and expenses—and start working towards your financial goals today! Please reach out to me for a downloadable version.

 

HOUSEHOLD BUDGET WORKSHEET
  Expected Actual Difference
HOUSING
Mortgage/taxes/insurance or Rent
Utilities (electricity, water, gas, trash)
Phone, internet, cable
Home maintenance and repairs
FOOD
Groceries
Restaurants
TRANSPORTATION
Car payment/insurance
Gas, maintenance, repairs
OTHER
Health insurance
Clothing and personal care
Childcare
Entertainment
Gifts and charitable contributions
Savings, retirement, college fund
INCOME
Salary/wages
Tips and other
MONTHLY TOTALS
Total Actual Income
Total Actual Expenses
ADDITIONAL SAVINGS

 

 

WE’RE HERE TO HELP

We would love to help you meet your financial goals. Whether you want to refinance your mortgage, save up for a down payment, or simply find lower-cost alternatives for home repairs, maintenance, or utilities, we are happy to provide our insights and referrals. And if you have plans to buy or sell a home this year, we can discuss the steps you should be taking to financially prepare. Contact us today to schedule a free consultation!

 

 

The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

 

 

Sources:

 

  1. Insurance Information Institute –
    https://www.iii.org/article/twelve-ways-to-lower-your-homeowners-insurance-costs
  2. Department of Energy –
    https://www.energy.gov/energysaver/water-heating/reduce-hot-water-use-energy-savings
  3. Money Crashers –
    https://www.moneycrashers.com/ways-conserve-water/
  4. Harvard University –
    https://green.harvard.edu/tools-resources/poster/top-5-steps-reduce-your-energy-consumption
  5. Forbes –
    https://www.forbes.com/sites/priceonomics/2018/07/10/heres-how-much-money-do-you-save-by-cooking-at-home/#2c53b2f35e54
  6. Money –
    https://money.com/gardening-grocery-savings/

 

 

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The Secret Of Wealthy Home Sellers

The Secret of Wealthy Home Sellers by Neal Nussbaum

The Secret of Wealthy Home Sellers by Neal NussbaumEver wonder why two identical houses sell for entirely different prices? The truth is, similar homes sell for varying prices all the time. Surely there must be some reason! These houses do not sell for more money by accident. This book reveals secrets wealthy sellers use to command a higher price for their home.

I wrote this book to really break down all the way I sell houses for more money and help the owners net more money from the sale of their home.

In the process of selling, you will spend an incredible amount of time holding open houses and showings for potential buyers. Unfortunately, many are not interested in buying your home.

What are you waiting for? Get your free copy here

 http://nealnussbaum.realtybooksource.com/