Your Home and Your Retirement

Your Home and Your Retirement

Provided By Yahoo! Finance

Many retirees are planning to access home equity, hoping it may make the difference between a comfortable retirement and just getting by. This article considers some of the strategies for tapping home equity, such as moving to a more affordable residence or obtaining a reverse mortgage.

Before You Start:

•Talk with your spouse or partner about using your home to help finance retirement. Are you in agreement?

•Consider whether your plans are realistic. For example, ask yourself whether you could really downsize to a smaller home.

•Begin looking into the cost-of-living implications that would be associated with moving to a different part of the country.

•Check your most recent retirement account statement to determine whether you're already contributing the maximum amount.

Your Home and Your Retirement

Unlike earlier generations of retirees, who paid off first mortgages and retired at the family homestead, today's Baby Boomers are looking to capitalize on home equity to enhance their retirement savings. Popular strategies for tapping home equity include downsizing to a smaller house or condominium, relocating to an area where the cost of living is more affordable, and taking out a reverse mortgage.

Regardless of which strategy you choose, it's important to be realistic about what your house may be worth when you retire. Although housing prices have escalated considerably during the past few years, a variety of factors may cause them to level off or decline at some point in the future. Home equity may  value to a diversified portfolio, but relying too much on your house to fund your retirement could work against you if the real estate market in your area cools considerably.

Making a Move

Selling your existing home and relocating to a more affordable house or condominium may be a reasonable option if you have considerable home equity and the shift won't negatively affect your lifestyle. As part of your research, remember to investigate the overall housing costs in your desired area. For example, real estate values and property taxes typically vary considerably by locale, sometimes even within the same state. Additionally, before relocating to a new area, you might want to spend significant time there to make sure it is compatible with your lifestyle and interests.

When calculating your home's sale price as part of the retirement income equation, be sure to use realistic assumptions. Real estate prices have risen at above-average rates in recent years (see table on average annual rise in home prices, below), and there is always the potential that they may level off or even decline in the future. When planning your retirement income, remember the importance of diversification -- owning a portfolio of stocks, bonds, and cash investments in addition to home equity -- to help guard against market swings in any one area, including real estate. Of course, there are no guarantees that a diversified portfolio will protect against overall financial losses, but a diversified portfolio can position you to potentially take advantage of gains in several financial sectors.

Finally, when selling your home, consider that the first $250,000 in capital gains ($500,000 if you sell jointly with a spouse) is not subject to federal taxation if you lived in the house for two years or more.

A Reverse Mortgage: A Tool for Staying Put

Tapping home equity doesn't necessarily require relocating. A reverse mortgage may be a solution if you have significant home equity and a desire to stay in your existing home. With a reverse mortgage, you receive a source of income by borrowing against your home's equity. Payouts are tax free and may be taken as a lump sum, a line of credit, or an annuity-like payment schedule.

To qualify, you and other owners (such as a spouse or partner) must be at least 62 years of age. You must own your home outright or be able to retire an existing mortgage with the money you receive from the reverse mortgage. As long as the reverse mortgage is in effect, you are responsible for maintaining your home, and for paying taxes and insurance. The loan plus accrued interest is due when you die or sell the house.

When evaluating a reverse mortgage, be sure to consider the fees, which may be substantial. You may have to pay a loan origination fee of between 6% and 8% of the value of your home, in addition to servicing fees assessed over the term of the mortgage. Because of the relatively high fees, many experts recommend a reverse mortgage only if you plan to remain in your home for the long term. Also keep in mind that the amount you owe tends to grow over time, as interest (which is usually based on a variable, rather than fixed, rate) accrues on amounts that are gradually paid out. Over time, a reverse mortgage can completely exhaust the value of your home, leaving little if any assets left over for your heirs.


Payout Alternatives

Study payout options associated with a reverse mortgage carefully to determine whether one may work for you.
payout Option Advantages Drawbacks

Lump sum You receive a considerable sum. Interest accrues on the entire amount.

Line of credit You have the flexibility to draw only as much as you need. Fees may outweigh the benefit if you draw only a small amount.

Annuity-like schedule You may receive a source of income for as long as you remain in your home. Payments are not indexed to inflation.

The recent boom in the national housing market may have lulled many Baby Boomers into believing their home equity will be enough to see them through a comfortable retirement. If you're among those who intend to rely on a home's value -- either through downsizing, relocating, or obtaining a reverse mortgage -- make sure that your plans include realistic projections. And remember that maintaining a diversified portfolio of other types of investments can potentially help balance out your overall pool of financial assets.

Summary:

•Strategies for accessing home equity may include selling your house and moving to a smaller residence, relocating to a community where the cost of living is more affordable, or obtaining a reverse mortgage.

•Because real estate values may potentially level off or even decline, it's important not to rely too much on the value of your home to finance your later years. Consider using home equity to supplement a diversified portfolio that includes stocks, bonds, and cash investments.

•Accessing home equity by selling your house may have the greatest appeal if you are able to find alternate housing without significantly compromising your lifestyle.

•A reverse mortgage may work for homeowners who have considerable home equity and want to remain in their current residence. Payout options typically include a lump sum, a line of credit, or an annuity-type schedule of payments.

•When evaluating reverse mortgages, review the fees and overall cost of borrowing (total interest paid over time), which may be considerable.

Checklist:

•Read the fine print before signing any type of reverse mortgage, paying particular attention to details about fees and expenses.

•Reinvigorate your traditional retirement saving initiatives by maximizing contributions to your workplace plans and/or IRAs.

•If a reverse mortgage will make it impossible for you to pass along the full value of your home to an heir or heirs, consider revising your estate plan accordingly.

•Don't base long-term financial plans on the assumption that your home will maintain or surpass its current value.

Do you have more questions about your home and retirement? Give us a call at 972-214-417-4455 or email us at carlossalinas@kw.com "Real Estate Magician"
 
http://www.realestatemagician.net/

$8,000 First-time Home Buyer Tax Credit at a Glance

The $8,000 tax credit is for first-time home buyers. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

*The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

*The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

*The tax credit applies only to homes priced at $800,000 or less.

*The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

*For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.

*For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Carlos Salinas
"Real Estate Magician" and LOANS at REMagician.com

Pending Home Sales Index rises

Pending Home Sales Index rises

The Pending Home Sales Index from the National Association of Realtors rose in March for the second consecutive month and is up 1.6% higher than a year ago, with a 3.2% gain to 84.6 from February, when it was 82. According to Lawrence Yun, NAR's chief economist, it may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, because the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.

As usual, the consensus forecast of industry experts polled by Briefing.com was wrong - they had predicted no increase in the index. The economists at Briefing.com aren't doing too well in the predicting department these days, are they? It seems like every other day I'm digging up news of how this or that expectation was off by a mile.

www.TexasHomesAndLoans.com and www.RealEstateMagician.net

Carlos Salinas
"Real Estate Magician"

Finding the Best Home for Maximum Profit PART 2

Posting Continued....

3. Shop for a well-maintained home in a well-maintained neighborhood.

When you’re looking for a good home to retain resale value and realize a profit if you sale, you need to find a well-maintained home in a well-maintained neighborhood. Property values are dependent upon homes being well-cared-for, with modern amenities and a well-maintained structure and lot.

However, if you have an immaculate house surrounded by a bunch of slobs, your property values may actually decline because the neighborhood is in poor repair. Look for a well-maintained property in a well-maintained neighborhood to maximize your investment.

4. Look out for busy streets.

While being near transportation is valuable, being located directly on a busy street can actually hurt your property values and resale possibilities of your home. People with children or pets are less likely to buy homes directly on busy streets. Even people who value peace and quiet, or don’t want to have to fight to pull out of the driveway, avoid buying on busy streets. Therefore, if you want to maximize your resale possibilities – avoid busy streets.

One very real downside of living in a busy street is the potential for development. If a developer decides your location is desirable for a store or shop, it might buy out your neighbors. If you refuse to sell, you could end up living next to a convenience store; a proposition which could hurt your property values even further. You could also fall victim to a road expansion eating away at your lot size. Avoid buying homes directly on busy roads to avoid a potential decline in property values.

5. Consider the ready availability of homes in the area.

If you want to buy a home and maximize your profits, avoid buying in an area that is undergoing heavy residential development. The ready availability of homes in the area can actually hurt property values; especially for existing homes; due to the simple laws of supply and demand.

If a home buyer could buy a new home for the same price or less than an existing home, many home buyers would opt for the new home. Avoid buying in an area that is undergoing heavy residential development, unless commercial development is also likely to occur and render the location more desirable.

Put your new found knowledge into practice and find the perfect home to invest in your future! Contact Texas Homes and Loans to get an opportunity to get not only your dream home, but a home that could provide for your kids’ college educations, the upgrades you want to make to the home in ten years or even your retirement!

Visit out website for ALL your real estate needs at Texas Homes and Loans.

Carlos Salinas
Real Estate Magician

How to Find the Best Home for Maximum Profit PART 1

Most people don’t have a lot of requirements for finding a good home. They want a nice place, with the amenities and the space that they need, for a price they can afford. Ideally, this place will be reasonably located near work, or shopping, or other popular destinations.

There’s no reason you can’t get all that, and still find a home that will give you the maximum profit in the long run.

Buying a home is an investment. If you invest wisely, you get a good return on investment, because your home will appreciate in value. The more your home value appreciates, the more you earn on your investment if you ever sell your home, and the more flexible you can be in terms of getting home equity loans and refinancing. So how can you get the best home for maximum profit?

1. Buy a home near planned amenities.

Anyone can buy a home near shopping, and pay a high price because it’s a desirable location. However, if you keep an eye out for planned amenities, by searching for areas on the verge of development, you can realize a huge profit between buying the home and selling a few years later when the development is complete.

Before development occurs, home prices are typically affordable and even inexpensive. After development begins, though, prices increase. When an area is fully developed, property values can soar. The key is to get a home near planned amenities, but not too near – no-one wants to live next to a parking lot, but five minutes away can be a great location.

2. Find a home with easy access to highways or interstates.

Many people commute between 30-90 minutes every day between home and work. Living in the city isn’t always a desirable option; especially for families raising children; so many people choose to live in the suburbs and commute back and forth to work. If you find a home with easy access to highways or interstates, your property values will be higher than if the home is in the middle of nowhere, and people have to drive 40 minutes to the highway.

TOBE CONTINUED....

Come back or subscribe for Part 2 of this post.

Visit out website for ALL your realestate needs at Texas Homes and Loans.

Carlos Salinas
Real Estate Magician

WHY TEXAS IS DIFFERENT

Why Texas Is Different

Strong,diverse economy:
Texas is strong in industries that are still growing(such as professional & business services, education & healthservices, government) and has the second largest economy in the nationby GDP according to the U.S. Bureau of Economic Analysis.

Steady job growth:
According to the U.S. Bureau of Labor and Statistics, Texasadded 153,700 jobs (1.5% increase in employment) from December 2007 toDecember 2008, while during the same time the national unemploymentrate rose 2.3%.

Top state torelocate:
According to Allied Van Lines’ 41st Annual Magnet StatesReport, Texas is the No. 1 destination state for residentialrelocations for the 4th year in a row. New data from the U.S. CensusBureau confirms that Texas gained more residents (484,000) between July2007 and July 2008 than any other state.

Courtesy of DfwRealtors & Carlos Salinas Real Estate Magician

Carlos Salinas
"Real Estate Magican"

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