Author: Madolyn Greve, Real Estate Sales, Broker Associate, Callaway Henderson Sotheby's International Realty

Homeowners still have considerable advantages from the amortization of the mortgage and the appreciation enjoyed by most homes even with taking the standard deduction instead of itemizing to take the interest and property tax deduction.

There is an adage, “Rent or buy, you pay for the house you occupy.” You either pay for it yourself or for your landlord. The people who have job security, sufficient income, good credit and the funds for the down payment and closing costs can enjoy the many financial and emotional benefits of homeownership.

Looking at a $350,000 home purchased with an FHA mortgage with 3.5% down payment at 3.25% interest for 30-years, the total payment would be $2,420 a month. During the first year, the average monthly principal reduction is $573 a month which build the owner’s equity in the home.

At an estimated 3% appreciation, this home would increase in value at the rate of $875 a month during the first year which again builds the owner’s equity in the home.

Even if you consider the buyer will now be responsible for repairs and possibly homeowner’s association fees, the monthly net cost of housing in this example is $1,122 or less than half the monthly payment. The difference goes to equity which a tenant does not benefit from.

If the buyer were paying $2,750 monthly rent, they would be paying $1,628 more each month to rent than to own. In a year’s time, they would lose $19,500 of equity by continuing to rent. The down payment in this example is only $12,250 which would leave $7,000 to pay for buyer’s closing costs.

The equity for the homeowner in this example at the end of seven years would be almost $140,000 based on the appreciation and amortization of the mortgage. Whether you rent or buy, you pay for the house you occupy.

Use this Rent vs. Own to plug in your own numbers for the price home you’d like to buy. If you need help with it, contact me and we can do it over the phone at (609) 462-2505 or in an online meeting.

Homeownership is a privilege and a responsibility. Even after decades of owning a home, you may still need some help to handle some of its challenges by focusing on the three “M”s of homeownership: maintenance, minimizing expenses and managing debt and risk.

While many people recognize the benefits of annual wellness, financial, vehicle and equipment maintenance visits, an important checkup that you may not have considered is an annual homeowner advisory or real estate review. Why would you treat the investment in your home with less care than you treat your car or your HVAC system?

Consider exploring the following:

• Do you know the current value of your home? (You can, by obtaining a list of comparable sales in your immediate area, as well as what is currently on the market for sale.)
• Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes?
• Even if you’ve refinanced in the last two years, can you save money and recapture the cost of refinancing in the length of time you plan to remain in your home?
• Have you considered reducing your mortgage debt with low-earning cash reserves that will not be needed soon?
• Do you have a record of the improvements you’ve made to your home since you purchased it? Do you know what items can be included?
• Have you considered investing in rental homes in good neighborhoods to increase your yields and avoid the volatility of the stock market?
• When was the last time you updated your home inventory of personal belongings? Do you have pictures as well as written documentation?
• Do you need recommendations of repairmen and other service providers?

This service is part of my point of difference as a real estate professional to provide information to help homeowners not only when they buy and sell but all the years in between too. My goal is to create lifelong relationships with our customers as their “go to” person whenever they have a real estate question.

My strategy is to provide reliable, consumer-based information about homeownership on a regular basis through email and social networking. If it benefits you by helping you be a better homeowner, maybe you’ll consider us your real estate professional.

When you don’t know the answers to real estate questions, you know where to get them.

We’re always here to serve your real estate needs. By helping you with the three “M”s of homeownership, we can earn your confidence and trust for the next time you move or a friend of yours needs a recommendation.

If you’d like to have a list of the market activity in your area or any of the other information mentioned, please contact me at (609) 462-2505 or MadolynGreve

It takes a team of professionals to buy a home like the lender, the appraiser, the inspector, the property insurance agent, the title officer, and others but the real estate professional may play the most critical role.

Baking bread seems so simple. There are only four ingredients: flour, salt, yeast, and water; yet, there are steps that should be followed as well as a certain sequence to get the proper results. Some people mix all of the dry ingredients before adding the hot water to activate the yeast. Other people will activate the yeast in the warm water first to allow it to “bloom.”

Both methods can achieve satisfactory results but one knowledgeable person needs to be in charge of the bread instead of having multiple people to be concerned with just their one ingredient or contribution like mixing, kneading, fermentation, benching, shaping, proofing or baking.

Similarly, in a home purchase, the buyer’s agent can be the one who puts things in the proper order and sees that no steps are missed. The buyer’s agent coordinates between the other professionals with the common goal of getting the home closed on time according to the terms agreed in the sales contract.

Even if a buyer has been through the process before and possibly, multiple times, the buyer’s agent will most likely have far more experience because it is their job. They perform their job on a daily basis and are not personally or emotionally involved like a buyer is.

Your agent understands what and when the various steps should be done and by whom. They have worked with enough of the other professionals to know who is good at their job and can offer recommendations. They have seen the things that make a transaction go smoothly and what can derail one.

Experience is a great teacher, but the lesson does not have to be learned by going through it by yourself. Take the luxury of using your real estate professional’s experience acquired through years of study and practice. Allow your agent to advise you and coordinate the efforts to achieve the results you are expecting and deserve.

Learn more about the process and different steps by downloading the Buyers Guide

The last two months of the new normal stay at home has led many homeowners to rethink the way they live in their home. It has now become an office for working at home; a school for children; a gym to stay in shape; and a place for recreation.

The repurposing has people evaluating whether their home still meets their needs or if some changes are necessary. In some cases, adult children have moved back home, and, in others, there are parents who have moved in for the first time.

Staying at home and sheltering in place is necessary but how much togetherness can one family take and how long is it going to last? Temporary is stretching into longer than expected and even when vaccines and treatments are discovered, will things really go back to the way they were?

A home is a place to call your own; to raise your family, share with your friends and to feel safe and secure. Covid-19 has changed the scope of feeling safe and secure at home and may now be considered a sanctuary of safety more than ever before.

Many of the chief economists in the country feel that real estate will likely lead the country out of this recession. The housing market is experiencing low inventory and has for almost a decade. Building has not kept up with demand and prices of existing homes have continued to go up; 8% over last year.

With 30-year mortgage rates at close to 3.25% and prices expected to continue to rise, an investment in a home can fit your needs and show returns in satisfaction, comfort, enjoyment, and monetary value.

If you are going to be spending more time in your home for all the reasons mentioned, maybe now is the time to consider finding a home that better suits your needs. It can be done in a responsible and safe manner using an online meeting with your real estate professional. Find out what is available and what the process entails to protect you and your family.

During the mortgage meltdown that caused the Great Recession a decade ago, some homeowners lost their homes to foreclosure or constructed a short sale to get out from under the debt. In most of the cases, the lenders forgave all or part of the debt owed them.

Similarly, in the early 90’s after the failure of the Savings & Loans in the U.S., thousands of homeowners lost their homes in the same way but back then, the policy of the IRS was to consider the forgiven debt as income. Today, it is still considered income which means that a homeowner could lose their home because they could not afford to pay for it and to make matters worse, they would owe income tax on the debt relieved.

The good news is that in 2007, Congress passed the Mortgage Forgiveness Act and it has continued to be extended with its current expiration of 12/31/20.

The amount forgiven for income tax purposes may not be the same amount owed to the lender. Mortgage forgiveness has a limited exclusion for discharged home mortgage debt for a principal residence only; it does not include second homes or investment properties. Only the amount of mortgage debt that can be treated as acquisition indebtedness in included.

In the example below, a homeowner purchased a home and refinanced the home five years later at 80% of the market value. The new loan proceeds were used to payoff the original mortgage and make $30,000 of new capital improvements. The revised acquisition debt is the acquisition debt at the time of refinance plus the capital improvements made with the loan proceeds.

The new $400,000 loan produced $39,417 of home equity debt which is not considered acquisition debt. Home equity debt is money borrowed on a home and can be used for any purpose, but it may not be tax deductible or considered acquisition debt. Acquisition debt is money borrowed to buy, build or improve a principal residence subject to a $750,000 limit.

Assume that the borrower never made a payment on the new loan. If the new loan went through foreclosure while the Mortgage Forgiveness Relief Act is in effect, the forgiveness would be limited to the acquisition debt of $360,583 and the remaining amount of $39,417 would be considered income and subject to tax.

This article is meant to inform homeowners of liabilities associated with foreclosures and possible remedies that may be available. This example is meant to illustrate the portion of a loan that could be forgiven. Taxpayers should always consult their tax professional regarding their specific situation and the way the law would apply to their situation. For more information, see IRS Publication 4681.