The results of the latest Rent vs. Buy Report from Trulia show that home-ownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.47%. Rates have remained at or below 3.5% each of the last 16 weeks, marking a historic low.
The results of countless studies have shown that potential home buyers, and even current homeowners, have an inflated view of what is really required to qualify for a mortgage in today’s market.
Nobody in Central MA can escape the fact that we are now immersed in the full-bore
election year media onslaught. You would need to be living under a rock not to have noticed and the rock would have to be somewhere out of earshot of radio and tv.
Fortunately, since this is a space where we discuss buying and selling homes in Central MA, we try as best we can to steer clear of politics; so let’s enjoy this island of non-partisanship or perhaps that’s impossible, because of the topic, which is too interesting to ignore.
Recently, a study came out of Stanford that answered an interesting question: do higher taxes drive wealthy people out of state? If you ever plan on selling a high-end Central MA home, the answer would be more than theoretical. Whether our own state’s position on the tax rate hierarchy could measurably affect high-end property marketability, that is, if the well-heeled set are beginning to allow changes in state tax tables to determine their home base is very much at issue.
So this investigation (it was sponsored by the U.S. Treasury Department), which focused on millionaires, came up with the statistical answer to the question (as Forbes put it) of “Do High State Taxes Drive Away the Rich?
For any agent running million dollar listings or for any multi-million-dollar property owner considering selling their home in Central MA anytime soon, that’s one fewer factor to have to address. The study found that U.S. millionaires who earn over $1 million annually (certainly not me) are actually one of the groups least likely to relocate to a new
state. It could be because their seven figure incomes are tied to their current locale; or it could be because in the rarified atmosphere mega-incomes provide, marginal tax rates don’t matter (I doubt that high income folks usually have plenty to worry about, and taxes are certainly in there).
Also interesting: the lower your household income, the more likely you are to move. In a mobile society like ours, that seems to make good sense and is somewhat reassuring. People are still chasing opportunity; are still motivated to go where jobs can be found.
So what does this mean for those selling a home in Central MA? Or buying one?
That depends, as it almost always does, on your individual circumstances. What is definite is that if you are thinking of buying or selling a home in Central MA this fall or winter, success starts with a solid, localized market analysis. Call me anytime!…..Realty Ace, LLC
There are many potential homebuyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home, or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan).
In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.
There’s a reason the English language’s greatest playwright was called “The Bard of Avon”
and not “The Bard of Central MA.” In Hamlet, for instance, despite the fact that Shakespeare’s Polonius character is supposed to be a wise counselor, he gets at least one piece of advice wrong when he tells his son, “Neither a borrower nor a lender be.”
This is flat-out terrible advice—at least for many Central MA homeowners.
The thing about borrowing is that if done prudently, borrowing can free some of the value a given home-grown residence represents. There are two different ways that happens:
First off, there is the property’s stored value (the equity). As each monthly mortgage payment whittles down the amount owed to the lender that equity builds; more so if the value of real estate happens to be growing in general, which has been true lately. Unlike the other daily living expenses a family incurs, the dollars paid for your Central MA shelter aren’t entirely “spent”; that is, lost. Like a savings account, the portion of the money that isn’t apportioned to interest will be recapturable when the home is sold.
Better yet, you don’t have to sell the place in order to free some of the value of that equity. After all, if you had to move out of your house to make use of it, it would be highly inconvenient. But you can make use of the property’s value in the meantime by naming it as collateral for a loan; either a line of credit (HELOC) or a home loan (a second mortgage). Because both types are smiled upon by lenders since they are secured, the interest rate will be less than for other kinds of personal loans.
The second way that Polonius’ advice would have been wiser in Hamlet’s Denmark or Shakespeare’s England than it is here today involves a more contemporary character: Uncle Sam. Some or all of the interest paid on either a HELOC or a second mortgage may be taken as a personal income tax deduction, depending upon various factors. Polonius might foolishly offer some blanket advice about that but wiser counsel would be to consult your tax advisor.
When it comes to deciding which makes more sense for tapping into your home’s equity— opening a line of credit or second mortgage, the choice depends on the uses planned for the cash. If you know exactly how much you need (as when a major home repair is needed), the key advantage of an equity loan is that the interest rate and repayment schedule are fixed. With a HELOC, you have more flexibility: it works like a credit card. You can repay a borrowed amount and later tap into the line of credit again without reapplying. On the other hand, the interest rate and repayment requirements can change over time. And like a credit card, there is a built-in temptation to overuse it. Polonius wouldn’t approve…
The financial wisdom of owning your home was around long before Shakespeare’s time— it’s one thing that doesn’t change. Whenever you have a question about your own plans and Central MA real estate, I hope you’ll give me a call. As usual, the Bard had something wise to say about that, too: “Better three hours too soon than a minute too late!”…..Realty Ace, LLC
Owning a home has great financial benefits. Because of this, more and more experts are growing concerned about the ramifications of a falling homeownership rate. Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.