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The McMullen Group Blog


Is It Time To Remodel Your Kitchen?

Joseph Coupal - Tuesday, April 24, 2018

8 Things To Consider Before Committing To A Kitchen Renovation

Prime Lending, Hanover, Boston, MAThe kitchen is the heart of your home. It’s where you prepare meals and gather with loved ones. It’s the entertainment hub. It may be the spot where you sit to sip your morning coffee or where you kiss your kids goodbye before sending them off to the bus for school.

The kitchen is often the number one selling point of a home and if your kitchen is a little outdated, a kitchen makeover could boost your home’s resale value. Kitchen remodels are also often more complicated than remodels on other parts of a home — and more costly. According to HomeAdvisor, the average kitchen remodel costs homeowners more than $22,000. For a smaller project, such as painting walls, refacing cabinets and upgrading the sink, you may spend between $5,000 and $10,000. But a renovation that involves installing custom cabinets, new countertops, new floors, and high-end appliances, the cost will settle out upwards of $30,000.

Before you dive into the time and expense of a kitchen remodel, here are some important things to consider.

How to Know It’s Time for a Kitchen Remodel

Are you considering selling in the near future? As the most valuable room in your home, remodeling your kitchen is generally a worthwhile investment if you’re considering selling. A newly updated kitchen is sure to catch a buyer’s eye, even if you aren’t able to update other parts of the home, such as bathrooms.

How much storage do you have? Lack of storage in a kitchen can be a problem, especially for potential buyers. But whether or not you’re planning to sell in the future, be sure your kitchen remodel design makes room for your dishes, food storage containers, spices, pantry items and small appliances and kitchen gadgets. If storage space is an issue now, it’s time to consider a remodel that provides more space for storage so you can clear your counters of clutter.

Are your appliances outdated? One outdated appliance doesn’t necessarily warrant a kitchen overhaul. But, if your large appliances, such as fridge, stove, oven and dishwasher are out of date or not functioning properly, at the very least, updating appliances is a wise investment.

Questions to Ask Before Getting Started

What is the central purpose of your kitchen? Are you a big entertainer, often hosting parties and gatherings? If so, consider a kitchen design with plenty of counter space, a large refrigerator and double ovens. Other kitchen features such as custom cabinets and granite countertops are also important for entertainers. If you consider yourself a chef, you may lean toward a remodel that provides plenty of space for kitchen gadgets.

How much can you afford to spend on a kitchen makeover? Your budget will largely determine the scope of your kitchen reno. If you’re hoping to spend the low end of the national average ($4,000 according to HomeAdvisor), consider your bottom line and must haves. What absolutely needs to be fixed or replaced? If you are going for an updated look without the budget for a total overhaul, painting your kitchen cabinets (light colors like white and gray are in), changing out the hardware and replacing your sink — or even just the faucet — can go a long way in changing the look of your kitchen. If you have more to spend, there’s more room in the budget for needs and wants.

Should you hire a remodeling or renovation contractor? When you’re ready to start your project, there are some important steps to take to ensure you hire a contractor who will meet your standards and complete the work correctly. Be sure to check every contractor’s credentials. Research online to find contractors in your area with positive ratings. Ask friends, family and trustworthy neighbors for recommendations. We suggest you take such measures as asking if they’re licensed and to see their work and referrals to ensure the quality of work they will do in your home.

When is the best time for a remodel? Your kitchen renovation project will likely take anywhere between six and 12 weeks to complete. Consider this when deciding when to take on the project. If you’re a regular host for holiday parties and entertainment, opt for a remodel during the first part of the year, after the holiday season ends, or early summer at the latest. Depending on the scope of your project, you may not be able to use your kitchen during the renovation, so be sure you have a backup plan for cooking meals — a microwave, hot plate, slow cooker and toaster oven that you can set up in another part of your home, such as your dining room table, will come in handy.

Whether you’re opting for a simple, cost-effective kitchen update, or going for a total overhaul, be prepared for the project to take some time. But living with dust, disorganization and chaos will all be worth it in the end when you are able to move back into your beautiful, updated kitchen.

Are you planning a kitchen renovation soon? Prime Lending and the McMullen Group can give you a hand with a home renovation loan that fits your needs. Give us a call today to speak with a Loan Officer in your area to learn about your options.

blog.primelending.com


Is It Smart To Buy A Home With Less Than 20% Down Payment?

Joseph Coupal - Tuesday, April 17, 2018

Here are some items to consider before taking on one of the new, low-down-payment loans on the market.

McMullen Group, Hanover, Boston, MAThere’s a reason most people don’t purchase a home on a whim. From appraisals and inspections to closing costs and down payments, the upfront cash required can take years to save. However, thanks to low-down-payment loans now on the market, homeowners can have keys in hand to that home for sale Massachusetts, with significantly less cash out the door. But is purchasing a house with little to no money down a good financial move?

If you’re weighing your down payment options before diving into a home purchase, here are a few things to consider.

What are the types of no- or low-down-payment loans?

There are several no- or low-down-payment loan options available for a wide array of financial situations. We’ll highlight just a handful.

VA loans: Reserved for active-duty and honorably discharged service members, reserves, National Guard members with at least six years of service, and spouses of service members killed in the line of duty, VA loans require 0% down and no private mortgage insurance.

USDA loans: Also known as the “rural housing loan,” this 0%-down loan is meant to help low- to moderate-income households in eligible areas that are in need of housing but may be unable to qualify for other loans.

FHA loans: With more lenient approval requirements than conventional loans, FHA loans also require as little as 3.5% down. However, mortgage insurance premiums will have to be paid for the life of the loan.

Conventional loans: It’s possible to get a conventional loan with as little as 3% down, but just as with FHA loans, there’s an additional requirement of private mortgage insurance (PMI). However, once you reach 20% equity in the home, this additional cost can be dropped.

What are some of the reasons to put less than 20% down on a home?

You don’t have the cash upfront

Many people struggle to come up with a 20% down payment, but that doesn’t mean they can’t handle the monthly mortgage costs. For example, you may have recently paid off your student loans, leaving you free of debt but also leaving you without enough savings to afford a lump-sum payment at the beginning of your home-buying journey.

You aren’t planning on staying in the home for the long run

It’s a gamble to purchase a home you plan to sell within a shorter time frame (say, three to five years), but if that’s the plan, the cost of a 20% down payment could wash out the savings of a lower monthly payment. Plus, this practice puts your potential profit from the sale of the home at risk, since you’ll need time to build equity (and hope real estate prices rise).

You need the liquid funds

Whether you prefer a larger emergency fund, plan to invest liquid assets elsewhere, or need cash to put toward a home remodel, you may want to protect your liquidity by minimizing the amount of your down payment. It’s all about your personal comfort level when it comes to your finances.

What are the upsides to making a smaller down payment?

Your money might be more useful elsewhere

There’s a chance the money could offer a bigger savings or return if used elsewhere. For instance, if you have $20,000 in credit card debt at an interest rate of 16% and a minimum monthly payment of 2% of the balance, you would be paying $400 per month (plus interest). Now let’s say you want to buy a $200,000 house at 3.92%. A down payment of $40,000 would put your mortgage payment at $756.50 (plus the additional $400+ per month for the credit card). However, if you cut the down payment in half (to redirect the funds to pay down the credit card) and increase your home-loan interest rate to 4.02%, your total monthly mortgage payment would be $861.42. In this case, the greater monthly savings comes from paying off the card.

You can keep your cash liquid

Unless you plan to move out, pulling equity out as cash requires refinancing — a potentially costly endeavor. A lower down payment can keep more of your cash liquid in case life circumstances require a cash expenditure in the near future. Without this cushion, you could potentially put your home (and living situation) in jeopardy.

What are some downsides to a smaller down payment?

You may have to pay PMI or mortgage insurance premiums (MIP)

To mitigate the additional risk of lending to a borrower with a small down payment, lenders usually require private mortgage insurance for conventional loans until the homeowner has at least 20% equity in the home. All FHA loans require homeowners to pay mortgage insurance premiums for the life of the loan.

You’re likely to have a higher interest rate and closing costs

The best interest rates don’t automatically go to the borrowers with the best credit score — the size of the down payment makes a difference as well. This higher rate translates into higher monthly payments and more money spent over the life of the loan. In addition, since closing costs are a percentage of the total loan amount, borrowing more means higher costs.

You will have less equity upfront

The less money you put down, the less equity you will have once the home officially becomes yours. This could mean you can’t take advantage of home equity loans or lines of credit if your home needs repairs for which you can’t afford to pay cash. It could also increase your chances of being underwater in your home (owing more than what the home is worth) should the market crash.

So, what’s the bottom line?

Conventional wisdom might say 20% is always the way to go, but more options and different financial circumstances put this to the test. Make sure to fully explore the loan options available to you before deciding on the down payment amount that suits you and your situation best.

For more information on mortgages, contact Prime Lending at the McMullen Group.

trulia.com


Refinancing And Renovation Loans: What To Know As A Homeowner

Joseph Coupal - Monday, April 09, 2018

Discover A Loan That Will Help Create The Home You’ve Always Wanted

McMullen Group, Hanover, Boston, MAWhether you want to consolidate your debt, lower your interest rates or create your dream home, if you’re a homeowner, you have plenty of home loan options.

But you may be wondering, “Which loan should I choose?”

The simple answer is: It depends.

You have a variety of loans to choose from, and the “right” one is highly dependent on your situation and what your homeownership needs are. With that in mind, let’s go over the difference between refinancing and renovation loans, and which will help you reach your homeownership goals.

Refinancing

Are you interested in paying off your mortgage as soon as possible? Want to lower your interest rates? Need money for unplanned expenses? If the answer is YES to any of these, then refinancing could be the solution you’re looking for. Refinancing may sound like a scary word, but it’s essentially the process of replacing your old loan with a newer one.

By doing this, you’re able to reap benefits such as:

  • Lower monthly payments so you can save toward other expenses
  • A shorter home loan term to help you pay off your mortgage even sooner
  • Converting your home’s equity into much-needed cash to use however you like (including home repairs or renovations)

How do you know if refinancing is the best option for you?

To find out if you’re ready to take the next steps toward refinancing your home, check to see if your home meets any of the following conditions:

  • You’ve got a newer mortgage
  • Your home’s value has increased
  • You qualify for lower interest rates

If your home does meet one of these conditions, you’re in a great position to take advantage of your refinancing options. Overall, refinancing has some major benefits, but it’s important to understand the realities of refinancing. Keep in mind that whether you are refinancing to pay lower interest rates or to make lower monthly payments, you are still hitting the reset button and starting a brand-new loan.

Want to see how much you could save by refinancing your current home loan? Check out our handy Refinance Calculator to get a quick savings estimate and find out if it’s a good idea to refinance.

Renovation Loans

As you’ve probably noticed, home renovations have become quite popular in the past few years. In fact, there are countless reality TV shows completely devoted to showing you how to transform a home into an elegant dwelling fit for royalty. But even if you’re not trying to turn your house into a country-chic masterpiece, a home renovation can still help you create your ideal living space.

Here are a few key reasons you should consider a home renovation:

  1. You have some minor/major damage that needs to be repaired. Has your area recently experienced some inclement weather that has caused damage to your home? Need to replace old plumbing or electrical systems within your home? A home renovation loan can help you with both small and large repair projects.
  2. You want to redesign your kitchen/bathroom (etc.). Are you eager to install that timeless and functional farmhouse sink in your kitchen? Dreaming about taking a relaxing soak in your very own luxurious tub? You can design the kitchen or bathroom you’ve always wanted with the help of a home renovation loan.
  3. You’d like to add additional rooms/floors to your home. Are you planning on starting (or growing) your family? Need some extra space to build your very own home office? With a home renovation loan, remodeling and expanding your home has never been easier.

As you can see, a home renovation loan can help you achieve a great deal of your homeownership goals. If you happen to love the home you’re in, or you’re firmly planted in the perfect neighborhood, remodeling your home can give you the opportunity to stay in your current home while being a far less expensive alternative to purchasing a new home.

Final Thoughts

Whether you’re interested in lowering your monthly payments, or you’re looking to create the home of your dreams, you’ve got options. PrimeLending’s remodeling loans are a type of refinancing loan that can be rolled into the cost of a new mortgage. This type of loan is a great option because you can make necessary home repairs and upgrades while still only paying on a single mortgage payment.

On the other hand, a home renovation loan can help you repair, remodel and enhance your home just the way you’ve always envisioned it. The option you should choose depends on what your specific goals are and PrimeLending is here to help you sort out which solution will benefit you the most. Ready to take the next step toward achieving your homeownership goals? Contact a McMullen Group loan expert today to discover which option is right for you.

primelending.com


What to Expect From the Housing Market This Spring

Joseph Coupal - Monday, April 02, 2018

Prime Lending, The McMullen Group, Boston, MAThe economics of home buying are getting interesting, thanks to higher mortgage rates, tax changes and a supply-demand imbalance.

This spring’s home sales season is shaping up to be the most interesting one in years.

The housing market will depend on which opposing force proves more powerful: long-term fundamentals of supply and demand, or near-term ripples emanating from Washington and Wall Street.

Most evidence suggests that fundamentals will prevail over time and push sales and prices higher, especially at the lower and middle tiers of the market. But the opposing forces could mean a period of uncertain deal-making. Higher mortgage rates and a new tax law will affect several elements of home buying.

Mortgage Rates Are Higher

This is the simplest to calculate. In mid-September, according to Freddie Mac, the average rate on a 30-year, fixed-rate mortgage was 3.78 percent; in the most recent reading it hit 4.45 percent. It rose because global bond markets, which ultimately determine the rates on longer-term loans, judged that larger budget deficits and a faster-growing economy would result in higher inflation and more interest rate increases from the Federal Reserve.

For a family resolving to pay $2,000 a month for a home mortgage and not a penny more, the math works out that they can afford to borrow $397,000 today, down from $430,000 in September.

The math around affordability is a little more complicated than that — you must also consider the potential tax deductibility of mortgage interest and how much cash a buyer has available for a down payment.

The psychology around a rise in rates isn’t necessarily straightforward either. A survey for the online brokerage Redfin — involving 4,000 people who bought or sold a home last year or tried to do so — found that 25 percent of respondents said a mortgage rate rise to 5 percent would have “no impact” on their home-buying plans.

Twenty-one percent said they would search with more urgency, fearing that prices would rise faster, while 27 percent said they would slow their search and wait to see if rates came back down. Only 21 percent said they would seek to buy a less expensive house.

“If shortage of inventory is a headwind for housing, mortgage rates are a gentle breeze by comparison,” said Nela Richardson, chief economist at Redfin.

The Tax Law Is Messy

The United States tax code subsidizes homeownership in ways large and small. (Whether those subsidies encourage greater homeownership or just drive up prices is a different matter.) But the tax law enacted in December reins in several of those advantages.

Most directly, the law reduces how much mortgage debt will benefit from tax-deductible interest payments; that number was previously $1 million and is now $750,000. Also, property taxes previously had no limits in being deductible against federal income tax, but now the deduction of property and other state and local taxes is capped at $10,000.

Both provisions will most affect upper- and upper-middle-income families in states with relatively high housing prices and high state and local taxes: Think Massachusetts, Connecticut, New York, New Jersey, Maryland and California.

For example, a married couple in Connecticut with a $300,000 annual income aiming to borrow $1 million toward a $1.2 million house would be able to deduct about $33,000 in mortgage interest in the first year of their loan, compared with about $44,000 under the previous law. Because they would be in the 24 percent federal marginal tax bracket, buying that house would cost them about $2,650 more in the first year of the mortgage after taxes than under previous law.

Moreover, that family’s state income tax obligations would push them over the $10,000 deductibility limit on their own, meaning the family would effectively lose the ability to deduct property taxes of around $22,000 a year, depending on the jurisdiction. That represents another reduction of this family’s tax advantage from homeownership by about $5,000 a year.

(Our hypothetical family may not be losing out as much as those numbers suggest because they would have faced the alternative minimum tax under the old tax system — evidence of just how complex these calculations can be.)

Even people whose mortgages are well below $750,000, or who are in lower-tax states, may find the tax law could shift the incentives for buying compared with renting. The new law roughly doubles the standard deduction that all households can take, to $24,000 for a married couple, which means that more households will find that they get no net tax savings from taking on a mortgage. They are better off just taking the larger standard deduction whether they buy or rent.

Over all, Moody’s Analytics estimates that the tax law will reduce home transaction prices by 4 percent, a number that reflects both the direct impact of tax changes and higher interest rates caused by larger deficits.

But Mark Zandi, the company’s chief economist, emphasizes that this reduction should play out over a couple of years, and that it is more likely to slow the rate of price gains rather than cut prices outright. For example, if prices were on track to rise 5 percent a year in 2018 and 2019, they might instead rise 3 percent a year.

“The tax law change and higher mortgage rates should moderate the prices buyers are able to pay,” Mr. Zandi said. “I think the rate of house price growth will soften.”

Supply and Demand Are Mismatched

Those developments on interest rates and tax policy seem likely to be drags on home buying. But they come amid a housing boom rooted in a major imbalance between the number of people looking to buy, especially in cities with strong job growth, and the inventory available.

On the demand side, the peak year for births in the millennial generation was 1990, meaning they are turning 28 this year. Many members of that large generation are now in their 30s, marrying and having children.

In their 20s, this group was forming new households at lower rates than earlier generations because of a scarcity of jobs in the aftermath of the financial crisis, large student debts and perhaps a cultural shift in attitudes toward homeownership. That appears to be changing as they get older.

But the rising demand has not been accompanied by increase in supply.

Builders started work on 1.3 million new housing units in 2017, which is up a lot from the depressed levels of the 2008 recession but still below the 1.5 million average between 1959 and 2007.

There was overbuilding relative to demographic trends in the mid-2000s housing boom, but the opposite has been true for a while.

The home-building industry attributes this to the constraints it faces.

Many of the metropolitan areas with the strongest rates of job creation — and hence housing demand — have restrictive zoning laws that make finding suitable land a challenge. The housing bust drove some construction firms out of business and their workers out of the industry, meaning a shortage of building capacity years later. Tighter immigration enforcement has limited labor supply in some markets, and prices of many building materials have risen faster than overall inflation.

“Longer-term demographics are telling us that every year there are going to be more people entering the stage of life where they want to get married, have kids and buy a home, and they’re going to be looking for housing to accommodate that stage of life,” said Skylar Olsen, a senior economist at Zillow. “The fundamentals are pushing up against the reality of so much pent-up demand.”

In other words, as long as there are more families looking for a place to live than new homes in place to accommodate them, the pressure on prices and sales will be upward, no matter what happens as the market adjusts to higher mortgage rates and tax changes.

For more information on home mortgages, contact Prime Lending at the McMullen Group.

nytimes.com


Did You Think You Need 20% for a Down Payment? Think Again

Joseph Coupal - Monday, March 26, 2018

Prime Lending at the McMullen GroupSaving for a down payment often represents the biggest hurdle for first-time home buyers. In December, 25% of buyers on realtor.com® who were looking to purchase their first home said a key factor holding them back was lacking funds for a down payment. No matter how you cut it, it represents a big chunk of cash. But here's the thing: It doesn't always need to be quite so big as most think.

Many first-time buyers don't realize that it doesn’t necessarily take 20% down to purchase a home.

Indeed, the average down payment in the U.S. on mortgages used to purchase a home was 11%, according to our analysis of loan records from Optimal Blue, an enterprise lending software company.

As with many stats, that 11% average hides lots of variation across loan types and locations. And for some buyers, it may even take more than 20% to buy a home.

Borrowers with jumbo mortgages had to put the highest percentage down, with an average of 23%. Conforming mortgages averaged 18% in 2016. On the other hand, government-backed FHA, VA, and USDA mortgages featured average down payments of 4.8%, 2.2%, and 0.4%, respectively. These government programs are meant to open up more pathways to homeownership for first-time buyers, veterans, and heads of households in rural areas.

Where you live or are thinking of living can also dramatically affect what it takes to get a mortgage. Higher-cost markets don’t just have higher-priced homes; they also have buyers with higher down payments. Lower-cost markets are just the opposite.

Higher-cost markets tend to have higher down-payment percentages because those more expensive homes are less likely to be covered by low down-payment loans.

Cutting to the chase: Without a higher down payment, the monthly payment simply ends up being too high to afford in an expensive market. Got that? This is why borrowers in high-cost areas have little choice but to put a higher percentage down on top of paying a much higher price.

That’s why, regardless of income levels, it's so much harder for first-time buyers in high-cost areas. And homeownership rates, especially for younger households, take a hit.

Deciphering the financial differences

Let’s dive into some specifics so that it is easier to understand the financial differences.

The average purchase price of homes financed with a mortgage was just over $290,000 in 2016 across the U.S. The average down payment amount was $32,680, or 11%.

But in the District of Columbia, where the average purchase price was just over $630,000, the average down payment was almost $110,000, or more than 17%.

That $110,000 could fund more than two-thirds of the average purchase price of $165,000 in Mississippi. And in that low-cost state, the average down payment was under $9,000, or a little more than 5%.

The variances get more extreme as we get more local.

Buyers in San Francisco County put down an average of more than $326,000 on homes purchased in 2016, which represented an average down payment of 29.9%.

In Manhattan, buyers shelled out an average down payment of (gulp) 30.2%, but because the average purchase price was slightly less than San Francisco, the dollar amount of the down payment was a more modest $219,000.

In more rural counties in the South and Midwest, average down payments can be closer to 3% and often amount to $5,000 or less. For example, in Tennessee's Tipton County, an outer suburban county of Memphis, the average down payment was just over $3,500. The average price of a home purchased with a mortgage in 2016 was just under $138,000.

So the whole etched-in-stone notion of 20% down payment or bust? Well, it all depends on how you look at it. And where.

For more information, contact Prime Lending at the McMullen Group.

realtor.com


First-Time Buyers: Here's the Stuff You Don't Know About Mortgages

Joseph Coupal - Monday, March 19, 2018

McMullen Group, Hanover, Boston, MAWhen it comes to home mortgages, there's a big gap between what people think they need in order to get one and the reality of what buyers are successfully doing—especially young people.

It has been previously highlighted that putting 20% down isn't the norm.

But you know what? When it comes to what might be the biggest purchase of your life—one that can be incredibly intimidating for first-time buyers—it’s nice to know real facts. And in the mortgage market, reality is very often different from perception. Or, for that matter, myth.

Recently, the National Association of Realtors issued its 2017 Aspiring Home Buyers Profile report. The report cites data from surveys taken in the third quarter of 2016 about down payments.

The report summarized that 39% of non-owners believe they need more than 20% for a down payment on a home, 26% believe they need to put down 15% to 20%, and 22% believe a down payment of 10% to 14% would work.

So on average, those non-owners thought a down payment would need to be about 16%. The reality? The average down payment on purchase mortgages in 2016 was 11%.

In fact, when we drill into the purchase mortgages taken out by people under 35, who represent the majority of first-time buyers, we see the average down payment was even lower, at just under 8%. In other words, aspiring first-time buyers think it takes twice as much to buy a home than it really does.

Perception, meet reality

But averages can be misleading, right? Especially when there is a wide distribution, like we observe with down payments. When we dig into what actually happened in 2016 we find that most young people buy homes with ... less than 5% down. That's less than one-third of what the average nonowner had assumed!

As with many things in life, the most correct answer to the question of how much you need to put down is “it depends.” There are a slew of important factors like who you are, your financial circumstances, the home's location, and the price of the home.

It is possible to buy a home with a mortgage with no money down. VA and USDA loans are the most popular loans that offer the ability to put no money down. In 2016, 16% of buyers under 35 put no money down.

The largest share (36%) of loans for buyers under 35 in 2016 was for people putting down something less than 5%. The options there include loans offered through the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture, but also 3% down payment programs backed by Fannie Mae and Freddie Mac (aka conforming loans). And, of course, this includes the traditional 3.5% FHA mortgage that is primarily targeted to first-time buyers.

More than half of young people who successfully bought a home with a mortgage in 2016 put at most 5% down. The average dollar amount for these buyers was $3,500. That's right, if you have #FOMO from your friends buying homes, the majority of them are putting down just a few thousand dollars.

How are they doing it? The aforementioned mortgage products (conforming, FHA home loans, VA home loans, and USDA home loans) represent almost 99% of the mortgages to people under 35 in 2016. There is nothing exotic about this.

And it doesn't require perfect credit, just fair credit. The average FICO was 713, and the floor we observed in FICOs (below which very few mortgages were made) was 639.

Put that all together and you can see that for the millennial dreaming of buying a home this year, you need a FICO score of at least 639 and enough money that you could put down at most 5%. If you live in a typical American town, what you need could be as little as $3,500.

That sounds a lot more attainable than most people think. The truth is out there! Take advantage of it.

For more information on home mortgage loans, contact The McMullen Group at Prime Lending.

Realtor.com


Should You Invest in Real Estate?

Joseph Coupal - Monday, March 12, 2018

McMullen Group, Hanover, Boston, MABrick and mortar, there’s no better way to save your money. And for decades, the most solid investment you could make was in real estate. But is this still the case? If not, when will it be a good time to invest in real estate once again?

In fact, 5.1% of the world’s wealth is held in real estate. To be honest, we’re quite surprised at this figure; we thought it would be a lot higher than that. Could this low figure be somehow related to the most recent global recession? We’re not quite sure. But one thing is for certain, if investors have any sense, that figure should change in the next year or so.

Traditionally, there was this belief that if you bought property at a reasonable enough price, then you simply couldn’t lose money on it. But then came the slump in the economy and people who had invested their hard-earned cash in property found themselves stuck in a home that they couldn’t sell. Or worse, with an investment property they were losing money on each month.

So, if that’s the risk we run, why would we want to invest in real estate at all? Well, the benefits while simple to explain are quite significant.

First off though, we just have to say that you should never invest all your money into a property. Try to keep some of your savings in a separate and secure investment. Remember that advice about eggs in one basket? Heed it.

Investing in real estate is almost like making a double investment, and this is particularly true if you need to borrow very little or nothing at all to purchase your property. With a small mortgage repayment, you can charge rent that will cover the costs and then some. This extra cash can go back into the upkeep of the house or another investment. Add to that the fact that your property should increase in value over time and you have your self the perfect investment.

But what about the current climate? Is it wise to jump into the property market right now?

The answer to these questions depends on your location. The high prices in Seattle, New York, San Diego, Los Angeles, Denver, San Francisco and Boston mean that you need to have either a high income to secure the loan required or a lot of money in the bank to minimize the risks. Yet while property prices are sky high in those areas, this also means that rent prices are too and there are plenty of people willing to pay. However, if you already own a property in one of those areas, you might want to sell it and invest in several smaller properties in other affordable areas. Eggs in many baskets!

Areas such as Baltimore, Nashville, Minneapolis, Atlanta, Buffalo and Dallas offer buyers the perfect opportunity to invest in rental properties. In these areas, you buy property cheap (low mortgage payments) and charge higher rents. For some, the median rent for the area is double the average mortgage payment. If that’s not reason enough to invest, then we’re not sure what is.

Another reason to invest would be to take advantage of the low-interest rates. Although we’re not seeing the 125% mortgages we saw back in the early 2000s, the current rates make borrowing money (even when a 20% deposit is required) something you should probably do sooner rather than later.

While some realtors have a reputation for aggressively pushing people to buy regardless of the current climate, we’re happy to say that at this moment in time, they’d be correct. With low-interest rates and many affordable areas with high-rent income potential, buying realty as an investment opportunity is a great idea right now. Just be sure that you don’t put all those eggs in one basket.

Contact a mortgage professional from the McMullen Group today to find out more.

mpamag.com


From Fixer-Upper To Dream Home: How To Start Your Renovation Project

Joseph Coupal - Monday, March 05, 2018

Save Money And Personalize Your Home

McMullen Group, Hanover, MAIf you’re planning on creating and customizing your dream home, there are several benefits of purchasing a fixer-upper house. But before you make this major investment in time and money, it’s important to consider the reality of fixing up an existing home — it’s not always a simple process.

If you approach the project with preparation and strategy, however, you can convert an older house into a beautiful home for your family to grow in, or you can even turn a profit on the housing market. With that in mind, let’s go over some things you should know before you buy a fixer-upper home.

First, why should you consider purchasing a fixer-upper?

When it comes to buying any home, there are pros and cons. As such, you need to think about WHY you really want to buy your very own fixer-upper.

Here are a few reasons why buying a fixer-upper home is a good idea:

You want to create your dream home. Purchasing a new home can be costly. Not only that, but there’s little room for customization if you buy a pre-built home. With a fixer-upper, you have the freedom to incorporate your own style and add any features you want, allowing you to turn an older house into your ideal living space.

You’ve found a great deal. Whether it’s because of an eager seller, or structural and/or cosmetic defects, fixer-upper houses can sometimes be found well below market value. If you find an older home for an outstanding price, it may be worth the investment to purchase it and renovate it to your liking.

Some helpful tips before you purchase your fixer-upper:

Check for zoning restrictions. Ready to turn that run-down property into gold? Better hold your horses. Many properties have zoning requirements, which could limit how you can renovate your fixer-upper. To find out a home’s zoning requirements, you’ll need to do a little research by visiting the area’s municipality website, or you can contact an official who will help you navigate the zoning specifics.

Hire a home inspector. A home inspector is a must-have if you’re purchasing a fixer-upper home. They will walk through your property, help you detect structural damage, and root out common issues found in older homes, such as asbestos and termite infestations. A home inspector can even provide you with suggestions on things that should be replaced or renovated, like electrical wiring, plumbing and roofing.

Recruit an architect or contractor. If you can afford to do so, you should consider bringing on an architect or contractor to assess your fixer-upper. They will be able to detect load-bearing walls and find out if and how you are able to properly restructure and renovate your property.

Research tax incentives*. In addition to the standard property tax deductions homeowners are eligible for, you could be eligible for other home-related tax benefits, such as:

  • Home office tax deduction. Building a home office that is used regularly and exclusively for business could allow you to make rent and utilities partially deductible.
  • Solar power tax credits. Installing solar energy panels can not only boost your property’s value, it can also provide you with a significant tax credit. 
Get a building permit. To ensure compliance with building codes, you will need to acquire a permit before you begin renovating your property. Without a permit, you could face serious delays and fines for violating city regulations. States and cities have varying requirements for issuing permits, so you will need to contact your local permit service center, or hire a permit service to manage the building permit application process on your behalf.

Key Takeaways

Overall, renovating a fixer-upper is not for the faint of heart (or wallet). But if you’ve found a property that’s in a great location and simply needs a little TLC, it could be a worthwhile investment for you and your family. Ready to start your fixer-upper project? PrimeLending and the McMullen Group offers a wide range of renovation home loans that can assist you in creating your perfect home. Contact a mortgage professional from the McMullen Group today to find out more.

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How To Save For Your Down Payment In 1, 3 Or 5 Years

Joseph Coupal - Monday, February 26, 2018

McMullen Group, Hanover, Boston, MABuying a home is likely the biggest purchase you’ll make in your lifetime, and one that can seem overwhelming. If you’re considering purchasing a home in the not-too-distant future, now’s the time to start saving.

Whether you’re working with a timeline of 1, 3 or 5 years, here’s everything you need to know about saving for a down payment.

Set a Clear Savings Goal — Before you start saving, know your goal. While some mortgages do allow a smaller down payment – such as three or five percent – as a general rule of thumb, plan to make a down payment of at least 10 percent on your home loan, if not 20 percent. A down payment of 20 percent would reduce your overall costs by eliminating private mortgage insurance (PMI) that is required on anything less than 20 percent.

Not sure how much you can spend on a home? Getting prequalified for a home mortgage can give you an idea how much you can afford. From that number, you can determine how much you need to save for a down payment. Keep in mind that in addition to your down payment you’ll have additional expenses, including closing costs, which typically amount to about three percent of the price of the home. (Your mortgage lender can provide you a better estimate on closing costs and exactly how much cash you’ll need to bring at closing.)

For the purposes of this guide, let’s assume you are a first-time buyer looking to buy a home that costs $300,000. To put 20 percent down, you’ll need to save $60,000. While that number may seem insurmountable, with a clear goal in mind, it is possible to save what you’ll need for a down payment in one, three or five years. Here’s how.

Save for Down Payment in One Year

If you’re starting at zero and your goal is $60,000, that amounts to $5,000 per month for 12 months. This is not a challenge to take lightly. You’ll have to make some serious cuts in expenses if you want to achieve your goal in one year, but it is possible.

Move In With Friends or Family — Slash your rent payment by moving in with family or friends while you save for a down payment. Offer to do work around the house to further reduce costs. Mowing the lawn, cooking and cleaning, child care, pet sitting — any mutually beneficial arrangement you can work out to reduce or eliminate rent payments can help you put away a sizable chunk of change each month.

Sell Non-Essential Assets — If you want to save for a down payment and you’re currently paying a car payment, consider selling your vehicle and purchasing a basic ride to get around until you’ve purchased your dream home and can afford to pick up another car payment. Sort through other belongings such as clothing, housewares, books and electronics. Sell your stuff at a consignment sale, in a garage sale or online yard sale.

Cut the Nice-to-Haves — Cable, Internet, Netflix, etc. – while these little luxuries are nice to have, they’re just that. Not a necessity. Reduce your monthly expenses by cutting ties with your TV service, Internet provider and any other utilities you can live without. Doing so could net you anywhere from $50 to $300 a month, or more, depending on what you’re currently paying. Now’s also the time to talk to your cell phone provider about downgrading, to a basic, more affordable mobile plan.

For the next 12 months, ask yourself, “Do I need this?” If the answer is “no,” don’t buy it.

Pick Up a Side Gig — It’s time to add a new word to your vocabulary: Hustle! Look for ways boost your income with a second job or side gig. Start by thinking about the things you already enjoy doing. Pick up a job tutoring students, walk neighborhood dogs, referee youth sports leagues, substitute teach – these are just a few ways you can start earning extra income to help you reach your savings goal in a year.

Say “No” — During this year of hard core savings, you’ll need to learn how to say “no” to most social invitations. While you might miss that annual weekend getaway with the girls, or playing a round of golf with the guys after work, skipping out on these splurges can easily help you save several hundred, if not a few thousand bucks over the course of a year.

Save for a Down Payment in Three Years

Now you’re looking at pocketing about $1,700 a month in savings to reach your $60,000 goal in three years. It’s certainly still an ambitious goal, but with three years, the lifestyle changes necessary may not be quite so extreme, though the basic principles of saving stay the same.

Lower Your Bills — Cut your cable and switch to a streaming service, like Netflix, which costs anywhere from $10 to $14 per month. You’ll still be able to watch many of your favorite shows, without a monthly cable bill of $100 (or more!).

Pack Your Lunch — If you buy lunch out every day, you’re probably spending anywhere from $40 to $80 a month on lunch alone. Slash your meal costs in half by making your meals to go from home.

Cut Back on Entertainment — Remember that streaming service you signed up for? Plan date nights in, rather than forking over $35 to go on a date to the movies. Sell your season tickets and cancel your golf course membership.

Negotiate Your Bills — Contact your service providers, such as your home and auto insurance company and cell phone provider to discuss your options to lower your bills and trim your expenses. Ask about basic services and request discounts that can help you save on your monthly bills.

Save Your Windfalls — Your annual work bonus, commission checks, tax refund, gifts and any extra income should be put directly toward your down payment savings. These one-time infusions of cash can help you reach your savings goal and if you’re living on a budget, you won’t need it anyway.

Save for a Down Payment in Five Years

You’ll certainly have the most flexibility with this time frame, but you’ll still need to save $1,000 a month if you want to reach your savings goal in five years. Use the tips above to help put more away in savings. With the extra time, you also have a few other options to help build your savings.

Put Your Money in the Market — You won’t need the money for five years, so consider investing your savings, enabling your money to work for you. If this sounds too risky, consider building a CD ladder by purchasing CDs, or certificates of deposit, which yield a higher return in exchange for that money being locked up for a set amount of time. Building a CD ladder means you’ll always have access to at least a portion of your money. CDs are also a guaranteed investment, so you can’t lose when it’s time to take it out. Once you do pull it out, you can use that money toward a down payment, or re-invest it in a new CD for continued savings.

Set Up a Traditional Savings Account — If you aren’t sure about investing in the market, or tying your money up in a CD, a traditional savings account can still help you earn income on your savings. Shop around for a savings account that offers at least one percent in interest, and start stashing every extra penny into your savings. The biggest benefit to a traditional savings account is that you have zero risk of losing your money, and it’s always accessible, so the moment you find your dream home, you’ll be able to access the cash for your down payment.

Set Up Automatic Savings — Once you’ve established a dedicated savings account, arrange with the payroll department at your job to send a fixed amount to that savings account every payday via direct deposit and the remainder sent to your checking account as usual. You’ll never even notice the money going to savings because it was never in your checking account to begin with.

No doubt, saving for a down payment requires discipline and dedication. Spending less and saving more can be frustrating at times, but making temporary sacrifices and being intentional with how you spend your money can result in a big payoff.

If you’re in the market for a new home, get the ball rolling now. Contact a mortgage expert today to get details on your loan options and start the application process.

primelending.com


4 Ways The 2018 Tax Reform Could Affect Homeowners

Joseph Coupal - Monday, February 19, 2018

McMullen Group, Hanover, Boston, MA2018 is in full swing, along with a newly enacted tax policy referred to as The Tax Cuts and Jobs Act.

While many of the tax reform changes don’t have any immediate impact, the new act is predicted to affect countless businesses and tax payers down the line — it could even bring a whole new set of challenges for current and aspiring homeowners.

If you own a home, or plan to, how will this affect you, you may be wondering.

To help you out, we’ll go over a few of the notable 2018 tax reform changes and how they could potentially impact homeowners and homebuyers.

1. A Lower Cap on Deductible Mortgage Interest

The Tax Cuts and Jobs Act lowers the limit for the mortgage interest rate deduction for new loans (loans started after December 15, 2017) to $750,000. Any loans taken out prior to that date have been grandfathered into the previous tax policy, which offered homeowners a $1 million deduction limit.

Will this lower cap affect you as a homeowner/homebuyer?

The median home price across the country is sitting at around $250,000, so there’s a good chance you won’t be affected. While this new change makes it more challenging for buyers looking to purchase more expensive homes, only about 1.3% of all U.S mortgages will actually be impacted by this new deduction cap.

2. Increased Standard Deduction

Taxpayers are able to lower their taxable income with the help of larger standard deductions. Prior to the new tax reform bill, a single person could claim a $6,350 standard exemption and an additional $4,050 personal exemption.

How will this change affect you?

Under the new tax laws, the standard deduction has nearly doubled to $12,000 ($24,000 if filing jointly with a spouse), while the personal exemption deduction was completely removed. However, because tax payers choose between taking a standard deduction (now nearly doubled) or itemizing their deductions using a Schedule A Tax Form, taxpayers have more incentive to choose the standard deduction.

3. Eliminated Home Equity Interest Deduction

Home equity lines of credit (HELOC) have been a great way for homeowners to borrow money using their home’s equity. In addition, prior to the new tax reform changes, homeowners could deduct interest paid on home equity loans from their taxes. With the new tax act, homeowners may no longer be able to deduct the interest paid on home equity loans. The exception, however, is if the loans are used to improve your home or purchase another one.

How does this tax change affect you?

As a homeowner, this new tax change will give you one less deduction to itemize if the loan is used for personal expenses instead of re-investing it back into your home’s value. However, with the nearly doubled standard deduction, many homeowners will be less incentivized to itemize this deduction anyway.

Note: While the ability to deduct interest on home equity loans (not used for home improvement/purchase) has been eliminated, home equity is still an affordable and effective way to borrow money.

4. New Limit on State and Local Property Taxes

Prior to the signing of the Tax Cuts and Jobs Act, tax payers could deduct their state income, sales and property taxes without any limit. Under the new tax laws, state and local property tax deductions are capped at $10,000.

How will this new deduction limit affect you?

With this new cap limit, you will no longer be able to fully deduct state and local property taxes, as well as income or sales taxes. So, if you itemize deductions and reside in a state where local tax liability exceeds $10,000, you may end up receiving a smaller tax break.

The Bottom Line

Whether you’re a homeowner or potential homebuyer, we understand you probably have questions about how the new tax reform laws will affect you. While we aren’t tax advisors, as a mortgage lending company with over 30 years of experience, we do understand how the new tax system will affect our business partners and customers.

In the end, buying and owning a home has its own set of advantages and rewards that are unaffected by the recent tax reform changes. Each homeowner and homebuyer has their own unique situation, but we’re here to help evaluate your options so you can find a mortgage that fits your needs. If you have any questions regarding your personal situation, feel free to connect with a PrimeLending mortgage professional at the McMullen Group.

PrimeLending is not authorized to give tax advice. Please consult your tax adviser for tax advice for your specific situation.


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