Thursday, January 23, 2020

Downsizing in 2020



Approximately 52 million or 16% of Americans are age 65 and over.  It is easy to understand that some of them are thinking of downsizing their home because they don't need the same space they did in the past.

It can be liberating to divest yourself of "things" that have been accumulated over the years but are no longer needed.  Moving to a less expensive home, could provide savings for unanticipated expenditures or cash that could be invested for additional income.

Savings can be realized in the lower premiums for insurance and lower property taxes, as well as,  the lower utility costs associated with a smaller home.

Typically, owners downsize to a home to 2/3 to 50% of their current home's size.  In some situations, it is not only economically beneficial, but their interests may have changed so that a different style of home, area or city might fit their lifestyle better.

The sale of a home with a lot of profit will not necessarily trigger a tax liability.  Homeowners are eligible for an exclusion of $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers who have owned and used their home two out of the last five years and haven't taken the exclusion in the previous 24 months.

Homeowners should consult their tax professionals to see how this may apply to their individual situation.  For more information, you can download the Homeowners Tax Guide.

Call me at (404) 857-2508 to find out what your home is worth and what it would take to make the move to another home.

Types of Home Showings



Each type of showing plays a valid and necessary role in marketing the home.  Some buyers look at a home online leading them to drive by the home to see if it continues to be what they're looking for before they will make an appointment to look at the inside of the home.

Types of Home Showings



Each type of showing plays a valid and necessary role in marketing the home.  Some buyers look at a home online leading them to drive by the home to see if it continues to be what they're looking for before they will make an appointment to look at the inside of the home.

Fixed-rate Payments Change



Deciding between a fixed-rate mortgage and an adjustable-rate is one of the choices buyers make when getting a loan to purchase a home.  While the rate remains constant for the term of the mortgage on a fixed-rate loan, it does not mean that the payment will remain the same.

Most lenders require borrowers to include the monthly amount of the property taxes and insurance with each principal and interest payment.  The lender wants to be certain that the taxes are paid, and that the property is insured to protect their collateral for the loan.

The funds are held in escrow so they can be paid when they are due.  Periodically, the lender will audit the escrow account to see if there is enough money available.

If the taxes or insurance increase, the total payment will have to increase to cover the additional expense.  Once the lender determines there is not going to be adequate funds to pay the taxes and insurance, they can give the borrower the option to deposit additional funds to cover the shortage in the escrow account.

The borrower may choose instead to pay a higher payment that will accumulate by the time the expenses are due to equal the amount.

It is worth verifying the taxes and insurance premiums to see that the lender is using the correct amounts in case a mistake has been made.

Wednesday, January 22, 2020

Take the Standard Deduction & the Home



Now that the standard deduction is increased to $12,200 for single taxpayers and $24,400 for married ones, many homeowners are better off with the standard deduction than itemizing their deductions to write off their mortgage interest and property taxes.  There was some speculation that without the tax advantages, homeownership is not the investment it once was.

By looking at the other benefits, you can see that homeownership is still one of the best investments people can make.

A $275,000 home financed with a 4.5%, 30-year FHA loan would have an approximate total payment of $2,075.  The difference in the value of the home and the amount owed on the mortgage is called equity.  Two things cause equity to increase: the home appreciating in value and the principal loan balance being reduced with each payment made on an amortizing loan.

In this example, if the home were appreciating at 2% annually, the value would increase by $5,500 the first year which would be $458.33 per month.  At the same time, with each payment made, an increasing amount would reduce the unpaid balance which would average $363.00 a month in the first year.

The homeowner's equity would increase over $800 a month.  Instead of paying rent, the homeowner is building equity in their home.  It becomes a forced savings and lowers their net cost of housing.  In seven years, the homeowner in this example would have $80,901 in equity instead of seven years of rent receipts.

This example doesn't consider tax advantages at all.  If the homeowner would benefit from itemizing their deductions, it would lower their cost of housing even more.

The IRS recommends each year to compare the standard and itemized deductions to see which would benefit you more.  Items such as substantial charitable donations, mortgage interest, property taxes and large out-of-pocket medical expenses could increase the likelihood of itemizing deductions.

You can see the benefits using your own numbers without tax advantages by using the Rent vs. Own.

Types of Home Showings



Each type of showing plays a valid and necessary role in marketing the home.  Some buyers look at a home online leading them to drive by the home to see if it continues to be what they're looking for before they will make an appointment to look at the inside of the home.


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