David Bailey

David and Erika Bailey Mortgage Professionals

The Benefits Of Adding An In-Law Apartment To A Home

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The Benefits Of Adding An In-Law Apartment To A HomeOne renovation that may add value to a home is an in-law apartment. Even if a homeowner does not have any relatives, an in-law apartment makes wonderful guest accommodations. It is possible to rent it when unoccupied to earn some money.

Homeowners who rent out part of a home need to check with their insurance agent to upgrade insurance to accommodate commercial use of a part of the home.

Additionally, a person staying in an in-law apartment, who is not a member of the owner’s household, may need to get renter’s insurance to cover any personal property kept in the in-law apartment.

Renovation Plans

An in-law apartment may be in a basement or attic. Creating one is possible as a home addition, a garage makeover, or as a tiny house in the backyard.

Check the building regulations for the area where the home is. It is wise to get the proper building permits needed for the construction. Work done without permits usually does not add value when reselling because it creates a liability.

Some people make an in-law without having to do major renovations if partitioning the house is possible. It may be possible to separate an area to create an in-law apartment if the house has an extra bedroom with a connected bathroom.

If no existing part of the home is suitable for remodeling, then adding an addition is an option. A better choice for a backyard that usually increases the resale value is building an in-law cottage rather than investing in installing a swimming pool. Some people may prefer having in-law accommodations when compared to the cost of maintaining a swimming pool.

Multiple Uses For An In-Law Apartment

Almost everyone has a use for an in-law apartment. This is why they are attractive to potential home buyers. Children can stay with parents as they become adults. Elderly parents can live with their children. Couples without children can use the room as a home office. Single people can rent out the space to help pay the bills.

Use of the space may change over time, so be sure to think creatively about the space. The value-added for having this space is the privacy it allows. Living together is normally easier when the parties also have some privacy.

Having a private bathroom, a separate entrance, and a kitchenette in the in-law apartment covers all the needs. This allows the space to be self-contained.

Summary

Consider adding an in-law apartment for the convenience, potential improvements in the resale value of the home, and to reduce the expense of supporting family members who live elsewhere and pay rent for an apartment to others.

If adding additional space for in-laws or guests sounds like a good fit for your family, you may want to consider accessing some of your home equity funds to cover the cost of renovation. Be sure to contact your trusted home mortgage professional for current financing options.

What’s Ahead For Mortgage Rates This Week – June 17th, 2019

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What’s Ahead For Mortgage Rates This Week – June 17th, 2019Last week’s economic reports included readings on inflation, retail sales and consumer sentiment. Weekly readings on mortgage rates and first-time jobless claims were also released.

Consumer Price Index Lower in May as Retail Sales Hold Steady

Last month’s Consumer Price Index, which is a widely-used gauge of inflation, dropped to 0.10 percent in May and matched expectations. April posted month-to-month growth of 0.30 percent. Core inflation, which excludes volatile food and fuel sectors, rose 0.10 percent in May and fell short of expectations of 0.20 percent growth.

April’s Core Consumer Price Index grew by 0.10 percent. Analysts reported a likely slowdown in economic expansion last week. Consumers, vendors and financial analysts said trade wars and global economic uncertainty were factors in concerns over economic conditions.

Retail sales rose from April’s reading of 0.30 percent to 0.50 percent in May; retail sales without automotive sales held steady with 0.50 percent growth. April retail sales also had 0.50 percent growth.

Mortgage Rates Stay Near Two Year Low

Freddie Mac reported average mortgage rates were little changed last week. 30-year mortgage rates averaged 3.52 percent and were unchanged from the prior week. 15-year fixed mortgage rates averaged 3.26 percent and were two basis points lower.

5/1 adjustable rate mortgages dropped one basis point to 3.51 percent on average. Discount points averaged 0.60 percent for 30-year fixed rate mortgages, 0.50 percent for 15-year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

First-time jobless claims rose to 222,000 claims filed last week, which exceeded expectations of 218,000 new claims based on the prior week’s reading of 219,000 initial jobless claims. Analysts said that labor markets remained solid, but layoffs in California and Pennsylvania caused new jobless claims to rise last week.

The University of Michigan reported lower consumer sentiment in June with an index reading of 97.90 as compared to May’s reading of 100.00; 40 percent of consumers surveyed cited concerns over pending tariffs against Mexico for falling confidence in economic conditions.

The tariffs against Mexico were sidelined, which may boost consumer confidence readings in July. When tariffs were set against imports from China, only 21 percent of survey participants identified tariffs as cause for concern.

What‘s Ahead

This week’s scheduled economic releases include reports from the National Association of Home Builders on housing markets conditions, the Federal Reserve’s FOMC meeting statement and a press conference from Fed Chair Jerome Powell. Data on sales of pre-owned homes will be released along with weekly readings on mortgage rates and new jobless claims.

Five Things to Do With a Windfall Other Than Spend it Right Away

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Five Things to Do with a Windfall Other Than Spend it Right Away

Perhaps you have won the lottery, received an inheritance, or cashed in one of your investments, and now you have a large sum of money you don’t know what to do with.

Although it is tempting to cruise around town in a brand new sports car it is important to think carefully about how to spend your newfound cash.

To give you some ideas on the smartest way to use your new wealth, here are five things to do with a windfall other than spend it right away:

1. Erase Your Debt

Your new found money will allow you to clear up all of your debts, which will lift a huge financial burden off your back and give you a lot of freedom. Start with the debts with the highest interest first, such as your credit card debts.

2. Create an Emergency Fund

Calculate how much money you would need to cover your living expenses for 6 months. Take this amount off your windfall and place it into a savings account. This money will be your fail safe. In case of an emergency, such as you hurt yourself, become ill, or lose your job, you will have enough money to live comfortably until times get better, without having to go into debt.

3. Invest in Your Home

If you spend your windfall on a renovation for your home, there is a good chance that you can increase your property value enough to make it more than worth it. Talk to estate agents in your area to determine which type of home improvement will increase your home’s value the most, but usually kitchens and bathrooms are the best rooms to update.

4. Buy a Vacation Property

Consider putting your newfound wealth into a holiday home overseas in a popular destination. You will be able to enjoy lounging on the beach there, and when you are not using it you can rent out the home to tourists to cover the costs. Later on in life when you want to retire, you will always have the option of moving there!

5. Live Off the Interest

If you won a million dollars in the lottery, you could spend it right away on a huge house and a car and then have nothing left. Or, you place it in an investment account and have it earn 6% annually. At this rate you would have approximately $5,000 per month or $60,000 per year without ever touching your initial sum. You could easily live off this amount and never have to work again.

These are a few ideas of what you could do with your money if you are lucky enough to receive an unexpected windfall.

Do you have any other ideas of how you could use your windfall?

How To Buy A Bargain Home As A Short Sale

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How To Buy A Bargain Home As A Short SaleA short sale is when the mortgage lender(s) agrees to sell the property for a lower amount than the loan-balance remaining.

During the worst moments of the 2006 to 2008 real estate crisis, homes sold as short sales for a fraction of their value. Lenders had so many properties with loans in default that they could not manage the ones that they had in foreclosure.

Foreclosure is an expensive legal process that causes a lender to lose more money on a property. This is one of the motivators that encourages lenders to accept a short sale because sometimes through a short sale the foreclosure process is avoided.

Are Short Sales Still Available?

The number of short sales peaked in 2012. The inventory of homes available for a short sale transaction is much lower than the massive numbers caused by the 2006 to 2008 real estate crisis; however, they still do exist.

Short sales are still worth exploring as long as a qualified buyer has enough cash on hand or is pre-qualified with home-purchase financing that is acceptable for a short sale transaction.

A short sale may be a bargain; however, the buyer must be careful because there are some pitfalls to avoid in short-sales transactions.

The Challenging Dynamics Of A Short Sale

There are three (or more) parties in a short-sale transaction. They are the seller, the buyer, and the lender(s). All must agree to the closing sales price of the home and the terms and conditions of the sale in order for the transaction to succeed. The lender(s) forgives part or all of the mortgage loan that is secured by a lien on the property and agrees to take a loss on the sale.

A short sale only occurs when the home cannot sell for the amount of the mortgage loan(s) on the property. The home is considered to be “underwater,” which is a colloquial term for a home, with a loan(s) that is more than the home is worth.

Short sales do not close quickly because the paperwork is complicated. If there is more than one lender on the property, the process is even slower. Buyers in short sale transactions need to be patient. They must be approved for financing and also approved by the existing lien-holder(s) on the property that is for sale by making a successful short-sale application.

A buyer may need to make a “good faith” security deposit to initiate the short sale application process. The deposit, which is refundable, may sit in a trust account for quite some time before the deal is approved.

Even with proper planning, a short sale deal can still fall apart. Buyers must also take on the risk that the property may need significant repairs and buy the property “as-is.” Homeowners who cannot pay their mortgages usually are not very diligent at taking care of their properties.

Summary

Short sales are an important strategy to consider when searching for a bargain property. Buyers must have cash or significant financial strength and be willing to complete the complex process for the transaction.

To reduce risk, a buyer needs to get careful inspections of the home and have a very clear idea of the costs to bring it up to a nicely-repaired condition, in order to profit from this strategy.

Be sure to get your financing pre-approved before starting any negotiations. Your trusted home mortgage professional is ready to assist with this process and discuss all available financing options. 

What Is A Reverse Mortgage?

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What Is A Reverse MortgageA reverse mortgage is a way to use the equity value that built up in a home to improve the quality of life for those who have appropriate circumstances when they reach the retirement age of 62 or older. With a reverse mortgage, a person continues to live in their own home and retains the title to it but does not have to make any monthly reverse mortgage payments.

A reverse mortgage may be helpful; however, not everyone qualifies for one. The benefits come with disadvantages as well. Here is a list of the advantages and the disadvantages for reverse mortgages.

Be sure to discuss this option with a qualified professional when thinking about a reverse mortgage before making any commitment.

Reverse Mortgage Advantages

  • Reverse mortgage funds may be used to pay off an existing home loan balance. The funds may be taken out in a lump sum or paid in monthly installments for a certain period.
  • The reverse mortgage creates a lien on the home but does not require any monthly loan principal or interest payments. This continues as long as the person lives in the home and takes care of it (paying the property taxes, home insurance, HOA fees, etc.)
  • Usually, a reverse mortgage has no effect on social security payments or Medicare benefits. It does not usually cause any tax consequences because it is a loan structure, not income.
  • If repayment of the loan happens at some point, any equity remaining is still available to the homeowner for any purpose, such as giving something to heirs.
  • It is a non-recourse obligation. There is no personal liability to repay the reverse mortgage loan if the equity value in the home is not sufficient to pay it off.

Reverse Mortgage Considerations

  • Since a reverse mortgage has no payments, the loan balance increases and the interest accumulates over time.
  • A reverse mortgage reduces the equity in the home that would otherwise be available to heirs. If the remaining equity exceeds the loan, the home can be sold off to repay the loan and the balance can then go to the heirs.
  • Medicaid eligibility or disability payments (SSI) may be affected.
  • A reverse mortgage loan becomes immediately due if certain things happen, such as the death of the homeowner, the homeowner vacates the house for six months or more for a non-medial reason and 12 months or more for a medical reason. It becomes due if the home is no longer the principal residence of the reverse mortgage borrower.
  • The loan is immediately due if the homeowner does not pay the property taxes, home insurance premiums, HOA fees, and other things necessary to maintain the home.

Summary

A reverse mortgage is a special financial tool that needs to be used only when appropriate. Typical rates for these loans may be higher than standard home equity lines of credit and other traditional home-refinancing options. Consider all the details very carefully before and as always, consult with your trusted home finance professional to get the best advice for your unique situation.

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The Mortgage Outlet, NMLS # 36861 is a registered mortgage broker with the NYSDFS. All loans are arranged through third party providers. Office located at 280 West Main Street Sayville New York 11782

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