The Blog Of TL Wall Accounting

Archive for May, 2013

3 Housing Upgrades That Could Save And Make You Money

Every year there are a lot of people selling their homes. Too many of them don’t end up getting what they feel their house is worth. Some have had significant upgrades done to their homes and yet those things don’t seem to matter when they go to sell their homes. Not only that but the money that was laid out doesn’t equate into much more than aesthetics for the homeowner; that’s nice but it’s not enough.

Homes that sell better offer things such as more space, a specialty item like a pool, or upgrades that have been performed that not only protects the house but helps to save money on either utilities or expensive repairs down the line. The suggestions made here will help with the latter; you’re on your own with the pool.

1. Roofing. Homes that have upgraded or repaired a roof within 5 years sell very well. Home buyers know that those are homes that won’t have to worry about leakage, which can damage so many things and can be hard to track. If a new homeowner has to worry about spending an extra $10,000 – $30,000 on a roof repair sometime soon, it encourages them to look elsewhere.

Not only will you get the same benefit while you’re living in the home but it’s possible that you can tie it in with upgrading your insulation while you’re at it. Some states like New York have arrangements with local organizations that will offer free inspections and give you a recommendation for upgraded insulation that will save you a lot of money and offer you a lot of comfort all year round. Imagine being able to tell a prospective buyer that their energy costs will be half of what their neighbors are paying.

2. Windows. A survey came out that had a surprising answer; windows are something many potential homeowners have at the top of their list. It’s not that they’re looking for pretty windows but energy efficient windows, windows that won’t leak air out and that offer protection from the sun’s heat during the day. Any home that heats up drastically in the evening sun also lets out a lot of heat if you have to keep your furnace running all the time.

With that said it has to be mentioned that it’s sometimes hard to find a windows installer you can trust. Estimates can sometimes range from a couple thousand to more than $40,000 for windows; ouch! When one of my clients moved into their new house they were offered a free evaluation that took 4 hours and received an estimate of $36,000. Two weeks later, after not jumping at the offer, the new price was $9,000. Even if that’s a great price would you trust someone who did that?

Still, it’s worth looking into, and the combination of better windows with the changes in roofing and insulation can offer dramatic savings in utility costs.

3. Basement. Many people believe that having a damp basement isn’t such a big deal, but it is. Basement flooding accounts for more damage than any other type of damage within a house outside of a disaster and some insurance won’t cover the costs of repairs or replacement of items down there. You can get mold in basements that will only cost a lot of money to get rid of, but you can be forced out of your house by the authorities and have to live in a hotel for awhile.

A well sealed basement can save both money and protect your health. It also gives you the option of furnishing your basement in some fashion or, when you sell it, offers the buyer the possibility of using the expanded space. That extra space can add thousands of dollars to the sale price of a home while offering you more options such as a media room or workout space.

3 Dangers Of Home Equity Loans

The idea of a home equity loan or line of credit seems like a great idea. After all, you get to tie the payments into your mortgage and since you’re already used to making monthly payments anyway, you feel that adding a little bit more to it wouldn’t be such a bad thing. Now you can take care of that roof or buy new windows and rugs for the house, getting more value out of your house than you presently have. Sounds great, right?

Unfortunately, for most people life isn’t quite that simple. Many find within a few years that the burden isn’t what they were expecting and it can be hard to get out of. Here are 3 things to worry about.

1. You could be approved for way too much money. Remember the first time you got a credit card that approved you for more than $5,000? Remember promising yourself that you would never max that out? How long did it take you to max it out?

The average home equity loan allows you to shoot for anywhere between 50% to 80% of the combined total of what your home is currently appraised for and how much you have left to pay on your home. So, if you owe $50,000 on your home but it’s appraised for $150,000, you could be approved for anywhere between $50,000 to $80,000.

That sounds good until you realize that you now have to pay whatever your normal mortgage is and a separate payment on the home equity as well. Even at a rate of 7% are you ready for large payments like that, especially if you didn’t refinance your home at the same time?

2. In many states, home equity loans are set up with variable interest rates. What this means is that you might start off with a low rate, but it’s always changing based on how the economy is. If you kept up with what caused the housing crisis and saw how many people lost their homes because they couldn’t afford to make payments on suddenly high interest rates then you know what this danger could be.

Suddenly making your regular mortgage payment seems like a great deal. If you’ve spent little on your home equity you’re probably fine, but what if you got one of those large loan amounts and spent a big chunk of it on home improvements, thinking you’d have more time to get the balance down?

3. You could get turned down. I know, you’re thinking so what, at least you don’t have big bills to worry about. Well, it seems credit agencies rank failure to be approved for a home equity loan very high, and it pretty much makes your credit rating and score take a hit. If you were hoping to get a store credit card it’s not happening for awhile, and you’ll have problems even getting a gas credit card.

Lenders have tightened up standards after the financial crises of the previous 4 years so you’d better ask a lot of questions before even considering it if you hope to be approved. However, you also need to know your spending patterns, your limits, and your tolerance for big liabilities.