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What Happens If I Skip a Mortgage Payment?

by Kathy and Michael Rain - The Rain Team

By: Daniel Bortz

"What happens if I skip a mortgage payment?" is one of those questions we hope you never have to ask, but life is unpredictable: Sometimes no matter how carefully you plan, you may find yourself short on the funds you need to pay this crucial monthly bill. So what happens if you skip a mortgage payment for just one month?

Don’t worry—there's no need to panic quite yet. But there are consequences to missing a mortgage payment, so you'll want to know what's in store.

What if you're late on your mortgage payment?
Every home loan agreement offers borrowers a grace period for late payments. (Most mortgage payments are due the first day of the month but policies can vary, says Guy Cecala, chief executive and publisher of Inside Mortgage Finance.) Typically, there’s a 15-day grace period, in which case you would have 14 days after your payment is due to pay your bill without incurring a late fee. However, “I’ve seen some late fees kick in after seven days,” Cecala says, who recommends checking your policy carefully to see how long your grace period is.

Late fees are based on your mortgage agreement, loan type, and state regulations, but generally the average is 4% to 5% of the overdue payment. So, for a $1,000 monthly mortgage with a 5% late penalty, the fee would be $50. That might seem like a drop in the bucket, but “late fees are a good source of income for mortgage lenders,” Cecala points out.

How a missed mortgage payment affects your credit
Mortgage lenders typically report late payments to credit bureaus after they become 60 days past due—meaning you usually have two months to make up for a missed payment. After the 60-day mark though, your credit score (a reflection of how you've managed past debts) might take a big hit.

According to data from credit analysis firm FICO, someone with an excellent credit score—780 or above—could see it drop 90 to 110 points if the person has never missed a payment on any credit account. In comparison, someone with a 680 credit score and two pre-existing late payments on his credit report may see a 60- to 80-point drop for a mortgage payment delinquency.

Will my bank start foreclosure proceedings if I miss one payment?
The short answer is no.

“The foreclosure process takes a lot longer these days because of the foreclosure crisis [of 2008],” Cecala says. “Mortgage lenders don’t want to foreclose on your home because it results in a loss or a cost to them."

Nonetheless, your mortgage is technically in default if you’re more than 90 days late on your mortgage payments—even just one. At that point, you’ll receive a letter from your mortgage servicer notifying you that you’ve defaulted on your loan; you then typically have 90 days to pay off your most recent bill before your mortgage lender can begin foreclosure proceedings.

I don't think I can make next month’s payment. What are my options?
Your first step is to contact your mortgage servicer and explain your financial situation. “People often feel like they don’t want to turn themselves in, but you don’t know what your options are until you talk to your lender,” Cecala says. Plus, mortgage lenders tend be more accommodating if you notify them in advance that you can’t make an upcoming payment.

You might qualify for a special forbearance, a process where your servicer gives you a temporary break from your mortgage payments.

“It’s essentially an extended grace period,” says Cecala. Alternatively, you may be able to work out a repayment plan with your lender where you agree to pay down past-due amounts on your mortgage over a set period of time.

If you can’t afford to make your mortgage payments (say, due to a layoff or emergency medical expenses), Cecala also recommends looking at the federal government’s Home Affordable Modification Program.

“Through HAMP, homeowners who are not unemployed but struggling to make their monthly mortgage payments may lower their monthly payments and make them more affordable and sustainable for the long-term,” says the Federal Housing Finance Agency’s website. You’ll have to meet certain requirements to qualify. For example, you must have obtained your mortgage before Jan. 2, 2009, and “in general you can’t qualify if you have a jumbo loan,” Cecala says. (Call 1-888-995-4673 for free to speak with a HUD-approved housing counselor to see if you can take advantage of the program.)

How can I avoid a missed payment in the future?
The best way to ensure you won’t miss a mortgage payment, says Cecala, is to set up automatic bill pay so that the money is automatically withdrawn from your bank account each month. (You can do this easily through your bank either online or by phone.) You may even want to set up a dedicated checking account for your mortgage payments, and make arrangements with your employer to have a percentage of your income automatically deposited into the account each month.

Cecala offers one more tip: “If you run into problems making your mortgage payments, you probably want to avoid debt consolidation services. There are costs attached to them,” he says. “You’re generally always better off working with your loan servicer or a nonprofit that offers counseling and mortgage relief services.”


Photo By Tierra Mallorca on Unsplash

Moving From the City to the Suburbs? Ask These 8 Questions First

by Kathy and Michael Rain - The Rain Team

By: Cathie Ericson

Sometimes the breaking point comes when you’ve circled the block for hours looking for a parking spot. Or when your baby is woken up yet again by the constant wail of sirens invading your street. Or when you start thinking of your nearby urban park as your "country space." That's it, you say—we're outta here.

A move to the suburbs can seem like an idyllic alternative to many of the hassles of city living. But inevitably you'll wind up wondering: Will the burbs really be all they’re cracked up to be? Will you be homesick for your former jampacked, hectic lives? Will you lose your minds completely out there in the sticks?

To help you suss out the pros and cons, we've spoken with real estate agents and culled the most important questions to consider before making the big leap from the city to the suburbs.

1. What will my commute be like?

Long, you might be assuming—especially if you have to commute to the city from your new home in the suburbs. But that's not always the case, says REALTOR® Roh Habibi with the Habibi Group in San Francisco.

“The reality is that commuting in the city may be a shorter distance and fewer miles, but traffic and congestion can create longer and more stressful commutes than most people realize,” he points out.

He cites a commute between neighborhoods in San Francisco (Marina District to Potrero Hill, for example) that can take the same amount of time as someone commuting into San Francisco from Oakland.

You’ll also want to figure out your public transportation options: Can you take a bus or train, or will you need to drive each day (which can really rack up expenses and stress levels)?

Check out the logistics of the transportation, including the convenience of the schedules, says Alison Bernstein, founder of Suburban Jungle Realty, which specializes in families who are moving to suburbs from the city.

2. What should I know about the schools?

Everyone wants great schools (the added resale value is enough to make even childless home buyers crave an A-plus district). But what makes a school “great” could be different for each family, Bernstein says. For instance, a highly touted school might not be the right fit if it’s a total pressure cooker that focuses exclusively on test scores or piles on the homework.

Make sure the school offers the services and educational opportunities that meet your family's needs, whether it’s a robust arts program or special ed, says Rob Nelson, a real estate broker for Center Coast Realty in Chicago.

You’ll also want to find out if it offers before- and after-school care, which is important for working parents, and whether it provides bus transportation and how much it costs.

3. Is there anything to do?

Urbanites are used to walking out the front door and having a world of possibilities within close proximity. Unfortunately, it might require a little more work to find something to do in suburbia—but don’t worry, it’s there.

Check with your local chamber of commerce or township website to see what’s going on, recommends Victoria Shtainer, residential real estate specialist at Compass real estate agency.

“For example, many think of the Hamptons as a summer destination—however, there are great events going on all year such as food and wine festivals, fall events, and a film festival," she says.

4. What are the town’s child care offerings?

Will you be wanting to use a day care center? Is there an active community of stay-at-home moms or dads? Consider these factors, because they'll have an impact not only on the logistics of your childcare, but also on your socializing and lifestyle.

Bernstein suggests that you check out a school drop-off and pickup, and bounce around town to check out who’s around during the day. You should also peruse the school calendar to see if most events and meetings are scheduled for the day or the evening.

5. Can I get a meal at 9 p.m.?

Most city dwellers are used to options being available 24/7, but in many burbs, it might feel like the streets are being rolled up at 9 p.m. Even more of a potential shock: Not everything is a quick app order or short walk away.

Shtainer recommends suburban newbies consider places that have a town center, with a cluster of shops and restaurants to bridge the gaps between the two lifestyles.

6. Who is going to fix my leaky toilet and maintain my yard?

The short answer: you. (Or at least someone you hire.)

If you're considering a move to a single-family home, be prepared to master some basic maintenance and repair skills. Try using a monthly maintenance calendar to keep things manageable; if your home isn't properly maintained, it could lead to hefty repair costs down the line.

7. What's the tax bite going to be?

Depending on the town, taxes can be higher than what a homeowner could be used to paying in their current city, Nelson says.

He advises finding out the property taxes and sales tax differences, since they can have a big impact on the cost of living and could make one neighborhood more affordable than another. It’s also smart to find out if there are plans for significant property tax increases in the near future.

8. What does everyone do in the summer?

Schools are important, but what people do in the summer is also critical to assessing the town’s personality, Bernstein notes.

Were you were envisioning block party barbecues and lemonade stands—when in fact the neighborhood clears out as everyone heads to Nantucket or sleep-away camp? Does everyone belong to a private club?

Do a little recon by asking potential neighbors or checking online events calendars. These days, there are lots of smartphone apps and websites that can lay out the neighborhood vibe without your actually being there.

We won't promise that moving to the suburbs will be an easy transition, but doing your homework ahead of time can help manage your expectations. And who knows? You might love it so much you'll wonder why you ever lived in the city.

 

Photo by Sylvie Tittel on Unsplash

 

Keeping Your House Clean with Dogs While It’s on the Market

by Kathy and Michael Rain - The Rain Team

By: Leanne Potts

Oof. Houses that smell or look like pets have lived in them are just harder to sell.

Here’s how to de-dog your house before putting it on the market — and how to keep it that way while you sell.

#1 Steam Clean Everything Fabric
“Job number one is to take care of [the soft surfaces in your house],” says Melissa Maker, star of an eponymous YouTube channel and owner of a Toronto cleaning service. “They hold odors and hair like nothing else.”

This includes carpets, rugs, upholstered furniture, and even the drapes, she says. Pets rub against drapes, getting oils, odors, and fur on the fabric. Send curtains out for a professional cleaning.

#2 Groom Your Pet
Get your pet groomed by a pro before you list your house. You can do it yourself, but a pro can get more hair and dander off than you can — plus, all that gunk is better off in the groomer’s drain than yours.

Brush your furry friend regularly (outside, preferably) while your house is on the market. Any hair you get off on a brush is hair that won’t end up on your sofa or in your rugs.

#3 Clean Tile-Floor Grout
Tile resists dog stains, but grout is porous and sucks them up like a sponge. “I had a cat who had an accident on a tile floor, and the pee seeped into the grout,” Maker says. Steam clean grout to lift old smells and stains. If your grout is really cruddy, hire a pro to chip out the old grout and put in new — or DIY it if you have the skills.

#4 Get an Air Purifier Tower
To you, it smells like home. But your HVAC has been circulating the same hair and dander again and again (especially in hot and cold weather when the windows are closed).

Add an air purifier tower with a HEPA filter; it pulls hair and dander out of the air before they even reach your HVAC.

Most air ducts don’t need to be cleaned, especially if you change filters regularly. But if dander and fur seem to be taking over, hire a duct-cleaning company before putting your home on the market.

#5 Use Enzymatic Cleaners
They’re the special forces of odor busters. Enzymatic cleaners are made of beneficial bacteria that eat stains and odors. They’re formulated to stamp out a specific type of stain, so a cleanser that targets urine won’t be the same as one for vomit.

“They’re cultivated for a specific mess,” Maker says. Apply them liberally to stains regardless of how old they are, before listing your house.

#6 Get Rid of Scratch Marks
Pet toenails leave telltale marks on doors and walls. For walls and doors made of synthetic materials, you’ll just need to paint over the marks. For a wooden door, use wood-filler pen can fill in the scratches. For hardwood floors, rub out small scratches with steel wool or fine sandpaper followed by mineral spirits, wood filler, and polyurethane. For major damage, refinishing the hardwood is a good investment with a stellar 100% ROI.

#7 Absorb Odors With Charcoal
Charcoal pulls moisture and odors out of the air. You can get inconspicuous little bags of it to hang in places your pets love most. Or, just strategically stash some charcoal briquettes around the house.

Just be sure to get the ones that aren’t presoaked with lighter fluid.

#8 Spot Clean Furniture Daily
If you’re like many pet owners, trying to keep your dog off the couch completely isn’t worth the effort. Instead, cover your freshly-cleaned furniture with throws or pet covers, and wash them at least once a week. Vacuum rugs and carpets every day. Pet smells sink in fast.

For quick hair removal before a showing, wipe down the couch with rubber gloves. The hair comes right off.

#9 Get a Sniff Test
You’ve scrubbed everything, and you think your house smells like a dog has never set foot in the door. Get a second opinion as to whether the odors are gone, Maker says. “You may be noseblind. Ask your agent to walk through and give you an honest opinion.”

 

Photo by Oscar Sutton on Unsplash

 

Don’t Fall Short! 6 Home Maintenance Tasks You Should Tackle This Autumn!

by Kathy and Michael Rain - The Rain Team

Autumn brings pumpkins and—love 'em or hate 'em—pumpkin spice lattes, sweater weather, and spooky skeletons. But most importantly, fall brings an end to a summer of outdoor adventures—and tedious yard tasks like weeding, mowing, and watering the lawn.

But just because the weather's cooling off doesn't mean your to-do list will, too. Before busting out the cinnamon spice and mulled wine, take on a few home maintenance tasks that will put you in good standing once temperatures dip.

"It's easier to prepare for a winter emergency in the fall," says Jericho McClellan, who works in construction management.

But fear not: We've got you covered with our checklist of home maintenance chores to tackle this season. Read on for details about where to start, and whom to call if you need backup.

1. Properly store your yard equipment

One of the best parts about fall: You can usually put your lawn mower into hibernation mode until spring.

But before you forget about that pesky piece of machinery entirely, remember this: Spring will suck if you don't prep your equipment this fall. That's because gasoline reacts with the air in the tank if left long enough, causing oxidation, which creates small deposits that can affect the performance of your mower.

And it's not just gas-powered equipment that needs a fall refresh.

Lester Poole, Lowe's live-nursery specialist, recommends running pressurized air through your pressure washers to remove any remaining water in the system, which will prevent freeze damage to the pumping mechanisms.

If your winter is particularly snowy and gritty, you'll be glad to have your pressure washer on high alert.

DIY: This project is easy to do yourself—just get rid of any spare gasoline. Many cities and counties have hazardous-waste programs, or your local auto parts store might take the old gas for you, too.

2. Protect your pipes

When temps dip below freezing, unprotected pipes can burst from exposure. Guard against burst pipes by wrapping them in foam insulation, closing foundation vents (more on that below), and opening cabinet doors under sinks to allow warm air to flow around supply lines. And make sure to keep your thermostat at 60 degrees or higher overnight.

If you haven't tracked down your home's water shut-offs yet, now's the time. They might be located outside your house or in your crawl space. Once you've found them, give them a test.

"The winter is not a fun time to try to figure that out, especially should a pipe burst," McClellan says. (More on that, too, in a minute.)

Now's also a good time to drain all of your exterior water hoses to prevent an icy emergency.

DIY: If your pipes do freeze, leave the affected faucets on and turn off your water supply, says Jenny Popis, a Lowe's Home Improvement spokeswoman. Then locate the freeze point by feeling the length of frozen pipes to determine which area is coldest. You can attempt to thaw it by wrapping the frozen section in washcloths soaked in hot water—then thaw until you have full water pressure.

Call in the pros: If you can't locate the freeze point or your pipes have burst, call in a licensed plumber, which will run $150 to $600 on average (depending on the severity of the leak).

3. Clear out your crawl space

While you're winterizing your pipes, peek around your crawl space. Is your HVAC system blocked by boxes of 50-year-old Mason jars? Can you get to any leaking pipes quickly?

DIY: While it's still warm, clear out any debris from your crawl space to ensure clear passage when winter's worst happens.

Call in the pros: Creeped out by the idea of crawling around under your house? Professional crawl space cleaners charge about $500 to $4,500, depending on the size of your house and the state of the space.

4. Close your crawl space vents

During your crawl space expedition, this is a must-do: Close the vents that circle your home's perimeter.

"The vents were placed there for a functional reason, not just aesthetics," says real estate agent, broker, and construction expert Ron Humes. "The problem is that most homeowners have no idea why they are there."

Here's why: In warm, wet seasons, crawl space vents allow airflow, which prevents moisture buildup. But if you leave them open during cold, dry weather, that chilly air will cool down your floorboards—making mornings uncomfortable.

DIY: "When the temperatures drop, slide those crawl space vents closed," Humes says. "Just remember to open them again in the spring."

If one of your vents is broken, replacements range from $20 to $50.

Call in the pros: If your crawl space stays damp through the fall and winter, you might want to consider waterproofing, dehumidifying, and sealing off your crawl space to prevent wet air. This can cost $1,500 to $15,000.

5. Kick-start your composting efforts                

Now's the perfect time, with all those leaves and dead plants, to start a compost pile. You don't even need a fancy compost spinner; sectioning off a corner of your yard is enough.

"Put yard waste to work by piling green leaves and clippings into a pile near your garden," Poole says. Next, layer with brown materials such as soil, dead leaves, and coffee grounds. Next up: kitchen scraps.

"Through the season, turn your mound using a pitchfork to expose oxygen to all ingredients and use it in the spring for fertilizer," Poole says.

Next year's tomatoes will thank you.

DIY: If your yard lacks space for a compost corner—or you have no interest in regular pitchforking—consider a tumbling composter. This well-reviewed model from Amazon costs about $100.

6. Protect your trees

Not all species of trees are winter-hardy—especially thin-barked ones like beech, aspens, or cherry trees. For these varietals, "sun-warmed sap quickly freezes at night and causes bark to split," Poole says.

He recommends wrapping your tree trunks with paper tree wrap, covering the entire bark from an inch above the soil to the lowest branches. Adhere the wrapping to the tree using duct tape to keep your trees in tiptop condition.

DIY: You can find 150 feet of paper tree wrap on Amazon for $18, although you may need a few rolls depending on how many trees need winter protection.

Call in the pros: Are your trees already looking the worse for wear? A tree service can help you sort out what's wrong. Pruning costs anywhere from $75 to $1,000.

 

Photo by Chris Lawton on Unsplash.com

3 Top Return-On-Investment Projects

by Kathy and Michael Rain - The Rain Team

What Does Homeowners Insurance Cover?

by Kathy and Michael Rain - The Rain Team

You’d be surprised at what your home insurance policy doesn’t cover. Here’s what is and isn’t covered by your insurance.

What does your homeowners insurance cover? The short answer is: “A basic homeowners insurance policy (called HO-1 in insurance lingo) covers your home and possessions if they’re damaged or destroyed by these things:

    Fire
    Lightning
    Windstorm (unless you live in a hurricane zone)
    Hail (not available everywhere)
    Explosion
    Riots
    Civil commotion
    Aircraft  (and things falling from aircraft)
    Vehicles (and things thrown from vehicles)
    Smoke
    Vandalism (although some policies exclude this)
    Malicious mischief
    Theft
    Volcanic eruption

But many states don’t allow this basic policy to be sold. Instead, you have to buy an upgraded policy that Upgraded Homeowners Insurance

That upgraded policy (called HO-2) adds protection to your home and possessions from even more perils. You get protection from everything on the HO-1 list (above) plus: covers more perils.

    Falling objects
    The weight of ice, snow, or sleet
    Flooding from your appliances, plumbing, HVAC, or fire-protection sprinkler system
    Damage to electrical parts caused by artificially generated electrical currents (such as a power surge not caused by lightning). But damaged electronics such as computers aren't covered.
    Glass breakage
    Abrupt collapse (say from termite damage)

That same list applies to the homeowners insurance you buy for a condominium or co-op (except then it’s called HO-6 instead of HO-2).

With HO-1, HO-2, and HO-6, what you see is what you get. So if zombies attacked your home, your HO-1 or HO-2 wouldn’t cover the damage because zombies aren’t on the list of specific things those policies cover.

The Most Complete Homeowners Insurance

The most complete and protective form of homeowners insurance (called HO-3) covers you for all perils except some specific ones like:

    Floods
    Earthquakes
    Wars
    Nuclear accidents
    Landslides
    Mudslides
    Sinkholes

With this policy, if zombies attacked, you’d be covered because zombies weren’t specifically excluded by your HO-3 policy.

What Homeowners Insurance Doesn’t Cover

No matter which basic policy you get, it’s not going to cover everything than can damage or destroy your home. Typical homeowners policies don’t cover:

    Bad things that happen because you failed to maintain your home (like mold)
    Hurricanes
    Floods
    Earthquakes
    Mudslides
    Landslides
    Sinkholes
    War
    Nuclear accidents
    Sewer backups
    Sump pump failure
    Ground movement and holes caused by mining (known as mine subsidence insurance)
    Pollution

You can buy additional policies to cover some but not all of those perils (a quick Google search didn’t turn up any nuclear accident coverage).

And even if insurance is available for the most common natural disaster in your area, you may not be able to buy it if your home has features that make it vulnerable. For example, a home with unrated wood shake roof shingles may be tough to insure in an area where wildfires are common.

Other Things Homeowners Insurance Covers

In addition to covering your home, homeowners insurance also covers four more things:

1. Your outbuildings, landscaping, and hardscaping. If you have outbuildings (like a barn), landscaping, or hardscaping (like fences), your homeowners policy most likely covers those for up to 10% of your policy amount (5% for plants).

For example, if you have $100,000 in homeowners insurance and someone drives into your fence, the policy would cover 10%, or $10,000 in repairs.

Sometimes policies exclude damage to outbuildings, landscaping, or hardscaping caused by a particular peril (like wind).

2. Damage or loss of your personal belongings. Your homeowners policy covers your family’s belongings, even when you take them out of the house. If your child heads to college with a laptop and it’s stolen, that’s probably covered by your homeowners insurance policy.

A home insurance policy covers a lot of your personal belongings, but not necessarily everything.

You’ll need additional insurance if you have many expensive items like jewelry, furs, or antiques.

Policies will either state that your personal belongings are insured for replacement cost or cash value.

Replacement cost means that the insurance company will pay the full cost of replacing an item (such as the laptop mentioned above, or a sofa damaged in a fire) once you show a receipt. Cash value means the insurance company will issue you a check for the amount that the laptop or sofa would have been worth when it was stolen or destroyed.

3. Temporary living expenses if your home is so damaged you can’t live in it. When you can’t live in your home, your homeowners insurance covers your living expenses, including hotel bills and meals. But, you can’t live in the hotel forever and eat lobster every night on the insurance company’s tab. Your policy will have limits on how long you stay and how much you can spend.

4. Injuries or accidents at your house. Homeowners insurance coverage includes liability – meaning it covers you when you or your family members cause injuries or damage. This coverage also pays when your dog bites someone (medical payments) or someone falls and injures themselves.

Add an umbrella policy to boost your liability coverage into the millions.

Homeowners Insurance for Older Homes

There’s another kind of homeowners insurance (HO-8) used when your home is so old it would be impossible to replace. It couldn't be built like the original -- that is, new electrical code wouldn't permit the same electrical, etc.

An HO-8 policy covers the same perils as the basic HO-1, but will only pay you the repair cost or market value instead of the replacement value.

If your home is old, but not so old that it’s historic, you might want another homeowners insurance coverage. A “law and ordinance” policy covers the cost of rebuilding using today’s building codes. It’s good to have if the building codes have changed a lot (for example, in Florida) since your home was built.

No Place Like Home

by Kathy and Michael Rain - The Rain Team

How Soon Can You Sell A House After Buying?

by Kathy and Michael Rain - The Rain Team
By: Larissa Runkle

They don't call it a forever home for nothing. Most of us buy with the intent of staying a long time—sometimes indefinitely. But here's the rub: Things change. Life takes us in a different direction, or the house you fell in love with only a few short months ago somehow becomes your biggest regret. Maybe the neighborhood is changing, or financial difficulties are making it impossible to enjoy your new home.

Whatever the reason, you just might find yourself asking, “How soon can I sell this house?”—mere months after you moved in.

But then there's that pesky five-year rule that everyone cites. Basically, it says you should never even consider selling until you’ve lived in the home for at least five years. And it's not arbitrary—there’s good reason for it.

“Unless it's a superhot market, a seller likely won't even recoup their transaction costs if they sell within a few years of buying,” says James McGrath, real estate broker and co-founder of Yoreevo.

McGrath, like many real estate professionals, even advises clients to avoid buying a house unless they plan on staying for at least five years, which is the typical amount of time it takes to break even on your initial investment.

But rules are meant to be broken as needed, and sometimes your situation actually requires you to break them. Here are three times you should say to heck with it all and get out of that house.

Exception No. 1: Your property value goes way up

Sometimes the market is so white-hot that it seems like property values jump overnight. This would definitely qualify as one of those times you can get away with ignoring the five-year rule and selling your home, even if you haven’t been in it for long.

But a lot depends on where you plan to go next. Moving to a lower-cost metro? You’re golden. Staying in the same area? You might not be able to get into a nicer place, or end up paying more money for a home much like the one you currently own. Look around and run the numbers carefully.

Also, keep in mind this tactic works only if the profit you make from the sale is really significant—otherwise you might see it eaten up by closing costs and a little thing called capital gains tax.

“Selling a home after owning it for less than a year generates a short-term capital gains tax,” says Denver real estate agent Alex Kishinevsky. “In this scenario, any equity you have accumulated from the sale is subject to taxation as ordinary income, according to the IRS.”

Exception No. 2: The neighborhood is going downhill

A bad neighborhood is bad news, and if there's a clear downward trend, you'd best get ahead of it. A declining neighborhood could ruin your chances of a profitable sale in the future.

Neighborhoods can start spiraling downward for a number of reasons, not the least of which is when something new gets built—or destroyed—and disrupts the quality of life. We’re talking about malls, prisons, factories, and more.

“How far away are you from the lights and noise it produces? Are citizens concerned about possible pollutants?" asks Benjamin Ross, a Realtor® with Mission Real Estate Group. "Are town hall meetings getting volatile? If the answers to these questions are yes, it may be smart to sell early and take a small loss, versus stay and lose your shirt.”

Whatever is changing your neighborhood’s landscape, ask yourself if it devalues your home. If the answer is yes, break the five-year rule and get out.

Exception No. 3: You really hate living there

Although we keep harping on it, making a profitable sale isn’t the only important thing when it comes to deciding where to live and for how long. Your happiness is also significant. If you really, really hate where you live, then you might just need to get out—regardless of the cost.

Depending on your mortgage and home insurance policy, you might even consider turning the house into an investment property. A lot of homeowners choose to rent out their homes when the market is less than stellar but they want to stop living there.

“Allow someone else to pay your mortgage and grow your net worth,” says Seattle real estate agent Tyler Kirages.

No matter why you’re considering breaking the five-year rule, always keep in mind that listing isn’t the same thing as selling.

"Put it up and see what you can get,” Ross says. “Just because you list doesn't mean you have to sell. Explore your options by finding real values in a possible deal, and do it if it makes sense."

Can You Afford That House?

by Kathy and Michael Rain - The Rain Team

By: Mary Beth Storjohann, Workable Wealth

If you’re considering purchasing a home, you’ve likely already considered how much you have available for a down payment, what an ideal mortgage payment would be, and how much home you can actually afford based on your monthly income. But what about your lifestyle?

Have you considered how much wiggle room you need to leave in your home budget to enjoy life? Here are six life factors to consider when buying a home:

#1 Travel
Travel is an important goal for many people. Think about the travel goals you have for yourself:

  • Where do you want to go?
  • What do you want to see?
  • How long are your ideal trips?
  • How much money would you need on an annual basis to make your travel goals possible?
  • Is this already factored into your budget or will you need to cut back on travel to fund your monthly mortgage payment and home expenses?

There are no right or wrong answers, but it’s important to reflect on your priorities.

#2 Green Thumb?
Do you love gardening, being outside, and all things landscaping? If you purchase a home with a lawn and don’t enjoy the upkeep, you could be looking at an extra $100 or more a month for professional landscape maintenance. Are you willing to skip the lawn in favor of hardscaping to reduce costs?

Bottom line: Factor hobbies and services into your monthly budget to see if the numbers still work out in the black.

#3 Pool Time
How dreamy would it be to buy a home with a pool!? Before the dream becomes reality, add up the costs of pool maintenance and servicing, energy, and insurance (along with liability if you have small children) and you may be better off heading to the neighborhood swimming hole.

Pools can be a lot of fun, but they come with a lot of work. Factor time and money into your future plans when buying a home with this special feature and, once again, ask yourself if the numbers add up to support your other financial goals.

#4 Children
If you’re buying a home and plan to start a family in the next few years, don’t just consider the amount of mortgage you can afford under your current expenses. Factor in daycare costs and then determine what your cash flow will look like. You may have to adjust the amount of home you’re looking to purchase.

#5 Entertainment
Chances are you enjoy dining out, going to concerts and sporting events, and seeing movies. If you need to rein in these activities to make room for your mortgage, home expenses, and savings, aim to strike a balance that won’t leave you feeling restless.

After all, you’re likely choosing a 30-year mortgage, and three decades is a long time to feel deprived. If necessary, reduce the amount of home you purchase so you can enjoy yourself in the ways that are important to you.

#6 Retirement
If you’re in your 20s, you should try to save 10% of your income; in your 30s, you should be saving 15%. If you need to cut back on your retirement savings to make a home purchase work, think hard about when you’ll be able to get back to your ideal contribution levels and how much you may be losing out on during that time.

Although home ownership can help build long-term wealth, it’s important to also maintain retirement savings for future security.

 

Photo by Tierra Mallorca on Unsplash.com

5 Times It Doesn't Pay to File a Homeowners Insurance Claim

by Kathy and Michael Rain - The Rain Team

Great insurance policies help homeowners sleep better at night. If something bad happens, at least you can call your insurance company, right?

Unfortunately, not being careful with your homeowners insurance claims could turn a real-life disaster into a financial catastrophe. Submit too many claims? Your premiums might rise. Submit the wrong claim? Again, your premiums might rise—and you'll still have to cover the cost of the damage.

Truth be told, homeowners insurance isn't as simple as "Submit claim, get paid." To save money in the long run, you need to think carefully about whether you want to file that claim. Here are five scenarios that might end up costing you.

1. When the cost is within 20% of your deductible

Don't treat your homeowners insurance deductible like your medical insurance deductible. Just because your insurance company will cover part of the cost doesn't mean you want it to do so.

"I would never recommend that one of our customers turn in a claim that, after the deductible, is only going to pay out a couple hundred dollars," says Will Tucker, who owns an independent insurance agency, Tucker Agency. "We advise our customers to pay cash until it becomes painful."

Submitting multiple small claims may ultimately make you "uninsurable," Tucker says. Soon, you'll see higher premiums, and you might even struggle to switch insurance providers.

Financial planner R.J. Weiss advises homeowners to "avoid filing a claim within 20% of your deductible." So if your deductible is $2,000, don't submit anything to your insurance if it costs less than $2,400.

2. When it was avoidable

We're going to use a very, very broad definition of "avoidable," here. Avoidable doesn't mean "your fault," or even anyone's fault, per se. Think about it from the insurer's perspective: Would better locks or a different property location have thwarted the thief who stole your television? Would a newer stove or frequent maintenance have prevented that kitchen fire?

"Not all losses are created equal," Tucker says. Take hail, for instance: There's nothing you can do to keep a freak storm from battering your roof.

"A theft or fire claim is always going to be worse," Tucker continues. That means your post-claim insurance premium increase will be proportionately worse, too.

While this shouldn't keep you from filing a claim if your losses were severe, consider paying cash if you can afford to do so.

3. When you are responsible

If you're filing a claim because of homeowner negligence, consider carefully whether you can afford to fix the problem yourself first.

"If the damage is due to your lack of maintenance, your claim may be denied," says Katie Tu, an insurance specialist with QuoteWizard. Even if your claim is denied, it's still noted on the Comprehensive Loss Underwriting Exchange—or CLUE—which means that it can affect your premiums.

If your insurance company believes you're not capable or interested in maintaining a safe home, that can affect your insurance, too. Immediately maintaining or repairing any issues when they show up "can prevent you from filing frivolous claims," Tu says.

4. When your local agent tells you not to file

Having a local insurance agent can be a lifesaver, especially if you're trying to avoid premium increases.

"I take pride in advising my clients and helping them decide the best course of action regarding the claims," says Julian Conner, a private insurer with Mints Insurance Agency. "If you call the carrier directly, they'll often funnel you right to the claims department. Even if you're only looking for the answer to a couple of questions, this often triggers the start of the claims process."

Talking to a local or independent agent first can save you the trouble of filing a claim you really shouldn't have—and which also might increase your premiums.

"Most agents have seen a lot," Weiss says. "In addition, many agents can call your insurance company—without giving your name and policy number—to inquire about the chances of your claim being denied."

5. When there aren't long-term home repercussions

Here's a tricky homeowners insurance claim scenario: water damage. Let's say a pipe burst in your second-floor laundry room, soaking the first floor. Your deductible is $3,000, and repairing the pipes and cleaning the water costs about $3,500. You shouldn't put in an insurance claim ... right?

Maybe you should. If damage might worsen over time, filing a claim now is the right course of action.

"You may be able to dry your floor and call it a day," Conner says. "But did the moisture seep into the subfloor, starting the beginning of a mold problem? If you report this claim right away, the loss will likely be covered. However, if you wait two years until you discover the mold, the carrier will likely deny it."

Figuring out which insurance claims are worth making can be a tricky business. Knowing how best to evaluate a problem—and understanding whom to call if you can't make a decision—will prevent you from paying more in homeowners insurance costs over the long run.

 

Photo by Le Creuset on Unsplash

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The Rain Team
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Michael: 650-888-6361
Kathy: 650-888-6903
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Kathy and Michael Rain of Coldwell Banker provides real estate services in the San Mateo County, California area including the surrounding communities: El Granda, Half Moon Bay, Montara, Moss Beach, Pacifica and San Mateo. Search for homes in San Mateo County. We list and sell residential real estate, investment properties, vacant land, lots for sale in the San Mateo County, California area.

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Kathy Rain - CA BRE# 01169588 | Michael Rain - CA BRE# 01125976 | Coldwell Banker - CA BRE# 01908304  

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Cell Phone: (650) 888-6903 * Direct Phone: (650) 712-0411
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