Carol Snider and Laura Snider Cooperman's Blog
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The equity in your home plays a major role in how much profit you'll make off the sale, but it's not always simple to determine just how much of the home you own (even if you haven't refinanced). Here are a few tips to understand equity and how you can use it to your advantage.
What Is Home Equity?
The simplest definition is that home equity is the difference between the market value and your current loan amount. When calculating, you should also take into account related financing (e.g., home improvement loans, second mortgages, etc.). If you owe more on the home than you owe, you have negative home equity.
Of course, the number you generate is just an estimate. Just because your market value is listed at a certain price, doesn't mean that a buyer will offer that amount. Overall though, it's a good place to start. Once you have a baseline, it can give you a better idea of how your home sale will go and what you can afford once you move out.
The Bottom Line
Let's say you bought a home for $150,000 and you've paid off $50,000 total. If your home was recently assessed at $400,000, then your home equity is now $300,000, even though you only owe $100,000. The longer you've owned your home, the more you'll pay toward equity as opposed to interest.
But home sale profits aren't the same as home equity. You also have to deduct any expenses associated with selling the home, including staging, listing and real estate agent fees. This can take as much as 10% off the total sale price. Some lenders will charge a penalty fee for paying off the loan early, so you'll need to check your contract to understand your responsibilities.
Equity and the Home Sale
Experts recommend having at least 10% equity in a home if they're making a lateral move. So if you need to relocate for your job and you're planning to move into a similar home, then you'll need less than someone who's upgrading their lifestyle. If you want a bigger and more luxurious home, it helps to have at least 15% — and preferably more. The less equity you have, the more likely you'll end up with negative equity.
Equity can be confusing because you ultimately own the home while you're paying the mortgage payments. Your lender is simply using the value of the property as a type of collateral in case of default. You can think of equity as a form of leverage you can use to give you a little more confidence during the sale.
Let's face it – the mere thought of informing family members about your decision to pursue a new home may cause your blood pressure to rise. However, there are many reasons why it often is beneficial to notify family members about your decision to kick off a search for a new residence. These reasons include:
1. You can identify and address potential homebuying hurdles.
Your family typically has your best interests in mind. As such, family members can help you plan ahead for the homebuying journey and resolve any potential conflicts.
For example, family members can help you analyze prospective home financing options. They may even be able to put you in touch with local banks and credit unions that can help you get pre-approved for a mortgage. Then, once you have home financing in hand, you can enter the real estate market with a homebuying budget at your disposal.
2. You can gain homebuying insights that you may struggle to obtain elsewhere.
Family members who previously bought homes may be able to provide you with property buying insights that you probably won't receive elsewhere. With these insights, you'll be better equipped than ever before to understand the housing market and make the best-possible homebuying decision based on your individual needs.
Of course, family members may be able to keep you informed about new houses that become available in your preferred cities and towns too. Because if family members know where you want to find a home, they can help you accelerate your property search.
3. You can receive plenty of support throughout the homebuying journey.
Your family is there for you during good times and bad. If you inform family members about your decision to pursue a new home, they can provide you with comprehensive support throughout the property buying journey. As a result, family members can work with you to help you achieve your desired homebuying results in no time at all.
When it comes to getting help in your quest to discover your dream house, you may want to hire a real estate agent as well. If you have a real estate agent at your side, you can receive expert assistance as you proceed along the homebuying journey.
A real estate agent is committed to helping you find a great home at a budget-friendly price. First, he or she will meet with you and learn about your homebuying criteria. A real estate agent next will craft a personalized homebuying strategy and notify you about new homes that become available that match your property buying criteria. And once you discover your dream residence, a real estate agent will help you put together a competitive offer to purchase this house. Lastly, if your homebuying proposal is accepted, a real estate agent will help you finalize your home purchase so you close on this residence and move into your new house.
Take the guesswork out of buying a house – hire a real estate agent today, and you can seamlessly navigate the homebuying journey.
Whether you’re bringing home a new puppy or adopting an adult dog, your new 4-legged friend is sure to be a part of the family. Just as you would when bringing home a new baby, you’ll want to make preparations to your space for both you and your dog’s safety. You don’t want to overlook anything and then have you or your pet get hurt. As a rule of thumb: Anything that you would protect a baby from you should protect a dog from. These dangers include:
- Prescription medications
- Small parts that can be ingested
- Cleaning supplies
- Hazardous houseplants
- Steep stairways
Keep your furry friend healthy and save yourself from costly vet bills by taking precautions. Simple measures can make a big difference. Safety items that you can use to help protect both you and your pet are:
- Power strip covers
- Locks for cabinets
- Keep pills, candy, and chemicals on high shelves that can’t be reached
- Cord wranglers
These little devices can prevent your dog from chewing or getting into hazardous things. It’s also a good idea to protect dogs from steep falls on stairways and decks by blocking certain areas off. Since many dogs don’t know what to keep out of their snouts, you want to think like a dog and know that if they can chew it, they will!
Keep Your Dog Out Of The Trash
Dogs tend to like to see what they can find in the trash. If you get a trashcan that can’t be accessed by dogs, you won’t need to worry. A hidden trashcan in a cabinet or island can help to alleviate this problem. You can also get a can with a lid that can’t be easily popped off.
Keep The Dog’s Access To A Minimum
If your dog is home alone all day while you’re at work you may want to close doors or put up gates in order to restrict the dog to a certain area of the house. This way, the dog will know his place and won’t be able to cause any kind of damage.
Keep Clutter To A Minimum
Clutter is dangerous to both humans and dogs alike. If you know a dog is bound to chew things, put it away! Keeping floors and pathways clean also protects both you and your pet from tripping. Staying organized is also a positive for everyone in the house.
If you always think with safety in mind when you have a dog, you’ll keep both you and your pet safe in your home the whole year through.
Have you received your 401K packet? It probably had some selections to make, such as a list of investment options to choose from. A small choice like this makes a big difference down the road. Whether you own a 401K, need to fund your own retirement, are putting a down payment on a home, or have some money left to you by a relative, there are some basic investment principles.
Stocks Are Still Your Best Bet
Every decade or two, the stock market tanks, everyone panics and some people say stocks are just a gamble. And if you get excited and buy in heavily while the Dow is nearing its peak, you will have a problem when the inevitable downturn comes. But consider this: since 1957, when the S&P 500 (an index of the top 500 stocks, a more accurate all-around market measure than the Dow) was established, its issues have returned around 9 percent a year. That’s despite a decade-long slump in the 70’s, the dot.com bust of 2000, and the “Great Recession” that started in 2008. If you’re in the market for another 20, 30 or 40 years, these setbacks are merely a dip in your long-term, upward progression.
Some other pointers:
Dollar cost average by buying small amounts regularly over time. If you’re in a 401K, this is automatically done for you. Don’t “buy high” by jumping on board when the market’s hot.
If you have a 401K, try to make the maximum contribution. If your employer matches, you’re turning down free money if you don’t.
Don’t get excited about what’s hot today. When stocks are low, some people say gold is a no-lose choice. It’s not. It will come down. In the late 90s, day traders were bragging constantly about their latest coup, investing in startups that had never made money and never would. It came to a screaming halt in 2000.
Be careful of picking individual stocks. Few people beat the market average. Even professionals who manage funds don’t do well. Favor index funds. An S&P 500 index fund buys every stock in the S&P 500. It doesn't try to outguess the market.
Financial advisers may come to you suggesting their favored investment. Be leery of anyone who presents a solution before understanding your situation.
Stick to a sound, steady plan and don’t get rattled by the noise around you, and you can build a comfortable nest egg over a lifetime.