Month: August 2019

With mortgages still at historically low rates, many people consider refinancing to save money. But is it a good idea? Maybe, maybe not.
Refinancing involves a number of moving parts and some understanding of amortization, so make sure to do your homework. Lenders vary on how long you have to wait to refinance, but you can sometimes do so within a year of purchase.
First, remember that refinancing involves closing costs, which can run into the thousands. So before anything else, calculate how long it will take you to recoup that amount and whether you’ll stay in the house that long.
Do the long-term math. If you are 10 years into a mortgage and refinance for 30, you could very well wind up paying many thousands more over the lifetime of the loan. This is of course a personal decision; sometimes it’s worth it to free up the cash on a month-to-month basis. Just understand the numbers.
Some homeowners refinance and increase their monthly payments — on purpose. You might consider refinancing from a 30-year loan to a 15-year loan to pay off the balance sooner. It’s often surprising how little it takes per month to make this happen.
Another good reason to refinance is if you’re in an adjustable rate mortgage and want to refinance into a fixed rate. This often occurs when rates are rising and you want to avoid the higher costs; if rates are low, it might not be worth the trouble.
Other folks refinance in order to pay off other debt, like credit cards or student loans, or to pay for a renovation project. Again, it’s time to do the math and consider the scenario. Although credit cards usually involve high interest rates, there isn’t much to lose if you default; transferring that debt to your mortgage, however, puts your house on the line.

If you are debating on whether to sell or renovate, first ask yourself some questions and then do some math.
First the questions:

• Do you love or hate your home? If you hate it, will remodeling really make you love it or just hate it less? If you’ll just hate it less, sell.
• Do you love the neighborhood or hate it? If you hate it, remodeling won’t help. Sell.
• Do you want more improvements than are reasonable for the neighborhood? Carpet, kitchen, bath, and landscape all recoup costs. But if you want fixtures and amenities that will make your home cost way more than others in the neighborhood, consider moving. You probably won’t recoup the costs at your eventual sale.
  If you decide to remodel, calculate how much a renovation or rehab project will cost. Or should cost.
  Whether you’re debating on hiring vs DIY or deciding between competing contractors, it’s a good idea to understand what you get for the money as well as what constitutes a fair price.
  A few rules of thumb can help, so here are some tips on how to estimate your rehab costs:
  Be wary of finding overall estimates online and assuming they work for you. The cost of materials and labor vary by region of the country, so make sure you’re comparing like with like.
  Know the cost of materials. This is one of the easiest things you can do to prepare. Create a file and visit your local home stores to find the prices of lumber, windows, flooring, paint, and the like.
  Understand the time involved. Have a basic idea of how long it should take to replace a roof or install a window so you can better understand the contractor’s quote. (An entire roof can be done in a day or two, while an uncomplicated window install can be done in a half hour.)
  Accessories add up. Remember to budget for things like cabinet knobs, door hinges, trim, and the like.
  Think in terms of function, not space. If you’re undertaking a larger project and are the one drawing up a Scope of Work, it’s more accurate to calculate by category of professional. A plumber will take care of your kitchen sink as well as your bathtub, for example. This also helps with the flow of a project, as each of these contractors does their work at different stages.