Refinancing Your Home

Refinancing your home can be an excellent way to lower your monthly mortgage payment, raise cash, or consolidate debts with high interest rates.  However, you need to do your homework before deciding to refinance. 

One important factor is the difference between current interest rates and the rate of your original loan.  You also need to take into account the amount of time it will take to recoup the costs of refinancing.

Keep in mind - refinancing usually lengthens the time it takes to pay off your mortgage.  If you are 3 years into a 30-year mortgage and then refinance with a new 30-year loan, you'll end up making payments on the house for 33 years.  Nevertheless, if the monthly savings are substantial enough, you still could end up paying much less over the long haul with the new loan.

Be careful of lenders offering 100 or 125 percent home equity loans, as their rates are often markedly higher than traditional lenders.  In addition, any amount you borrow that is above the market value of the house is NOT tax deductible.  Check with your tax professional on this.

Talk with your lender about the different types of refinancing loans available today.  You should take some time to shop around and speak with several lenders before making a decision.  Be sure to discuss all the expenses and benefits, as well as what will be expected of you, in advance.  The more you educate yourself, the better your chances of finding the right refinancing package.

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Carrying a Home Loan Into Retirement?

Start with this question: Should your goal be to pay off your home loan so you can live mortgage-free in retirement, or instead, should you aim to reduce your monthly loan payments, thus freeing up cash that can then be used for other things?

If you have a large savings nest-egg and a modest mortgage, go for the loan payoff.  You might also think about trading down to a smaller home or, alternatively, work part time until you're rid of the mortgage.

One scenario, if you have cash sitting in a money-market fund held in a regular taxable account, also consider using these savings to reduce your loan balance.  Your mortgage may be costing you just 6% and the interest might be tax-deductible, but your money-market fund is likely yielding only 5% — and you have to pay tax on that income.

One thing you DON'T want to do is cash out a 401(k) to pay down debt.  A big 401(k) withdrawal would likely trigger a huge income-tax bill.  You'd be better off slowly tapping your 401(k) or IRA to make your regular monthly mortgage payments.  That way, you would also continue to enjoy the mortgage-interest tax deduction.

There are other options.  If you don't think you'll ever get to live mortgage-free, consider getting the mortgage payment down as low as possible by refinancing or trading down to a smaller home.  You might even refinance again later in retirement, further shrinking your monthly payment by extending your loan over 30 years.

Do you have any other suggestions or comments you might add to this article about carrying a home loan into retirement years?  We'd love to hear your feedback.  Leave us your comments by clicking the comment link below.

Home Heating Bills Will Increase

No matter how you heat your house, this year will cost you more than last, according to a government report issued recently.

Americans will spend $977 to heat their homes this year, averaging for all fuels across all sections of the country, according to the Energy Information Administration.

That's nearly 10 percent higher than the $889 spent last year and the highest amount ever, not adjusted for inflation.  The previous record was $948 in 2005-2006, according to EIA.

Those heating with oil can expect to pay $319 more this year compared to last.  Natural gas users, accounting for more than half of U.S. households, can expect to pay 10 percent, or $78 more this winter.

In addition to citing higher fuel prices, EIA said this winter is projected to be 4 percent colder than last - although still about 2 percent warmer than the 30-year average. Colder temperatures this winter compared to last account for some of the rise in heating costs.

Shopping for a Home in a Buyer's Market

The housing market now belongs to the buyer.  Home sales and prices sagged in 2006, and 2007 has not been much different.   Don't limit yourself.  While you should look for homes that are listed with real estate agents, don't discount properties that are for sale by owner. In many markets (there are a few exceptions) they make up about 20 to 25 percent of the market, and you may be able to find a good deal with one of them thanks to a lack of commission and fees.

Here are a few rules for shopping for a new home in a buyer's market:  

• Hold onto a property for a while.  Now is not the time to buy a condo or home to flip quickly for a profit.  Make sure you buy a property at a good value — you're more likely to have a good sale in the future.  

• Take your time.  There's no need to rush in this market, so don't worry about putting in the highest bid or writing a check the minute you like a place.  Research the neighborhood to find out if the asking price is consistent with other homes in the area.  

 • Ask for incentives.  To sell their homes, owners may be willing to throw in extras such as appliances, work sheds, drapes or even patio furniture for the asking price.  Try negotiating some extras.  

 • Shop around for a mortgage.  To get the best deal available, ask for as many quotes as you can.  If you get a pre-approved mortgage, you'll have even more leverage at the negotiation table.

If you're in the market for a new home, tell us how you feel about the current state of home sales.  Leave us your comment about the rules for shopping for a new home in a buyer's market.

Ten Rules for Selling Your Home

1. Understand that home buyers are looking for a lifestyle as well as a home.  Accentuate the lifestyle that your home and neighborhood provide.

2. Understand the real estate market.  Check the average number of days homes are on the market before they are sold.  When the number rises above 60, it is a buyer's market.  When housing inventory exceeds a 6 month supply, it is a buyer's market.

3. Know your bottom line.  What do you need to net from your home sale?

4. Maximize exposure of your home.  Make sure your home is listed on the MLS and Realtor.com.  Good signage, emotionally appealing advertising and submission to various online home related search engines puts your home out front.

5. Get feedback from showings.  How are potential buyers viewing your home?  Adjust your marketing strategy accordingly.

6. Stage your home.  This does not need to be expensive.  Cleaning, clearing clutter and painting are excellent tools.

7. Price your home realistically.  A comprehensive Comparative Market Analysis (CMA) is critical to establish a range of good pricing.  Asking a few thousand dollars less than closely comparable homes may mean your house sells while others linger on the market.

8. It is not mandatory, but having a home inspection by a certified professional can eliminate unpleasant surprises at a crucial moment in the sales process.  A home inspection before marketing your home allows you the opportunity to deal with any problems that may be discovered before they become a deal breaker.

9. Consider all offers.  A low offer is not an insult, but the beginning of the negotiation process.  Keep the lines of communication open, and make counteroffers.  Be creative.

10. Understand that a signed purchase agreement is not the end of the sale.  Your agent must keep on top of deadlines such as a mortgage commitment, an appraisal and other essentials, to bring the sale to closing.

If you have any questions about any of these 10 rules, leave us your comment or thought below by using the "Comments" link.