Retirement Planning: Will Owning a Home Help You Retire?

Retirement Planning: Will Owning a Home Help You Retire?

There was a time when nobody had doubts about the value of owning a home. It was considered an incredible long-term investment and ideal for retirement. Today we know that real estate isn't as safe as we once thought it was, at least as a short-term investment, and Americans, young and old, are leery of sinking their life savings into a home as an investment. Knowing this, will owning a home help you retire? That depends on a number of factors, including when you purchase the home.

If you buy the home in advance of retirement, when you have the time to build equity, then yes, the home may help you retire. If you are thinking of buying your first home in retirement, there could be problems.

Timing

Ideally, a home purchased to help you financially during retirement is one that will be paid off by the time you bring in the shingle. Unfortunately, that doesn't happen for many homeowners. Forbes.com claims that although almost half of Americans aged 50 to 70 say they plan on using their home's equity to fund their retirement, 37 percent of them are not anywhere near having their mortgages paid off.

That's OK, though, according to Sydney Lagier, former certified public accountant. "With interest rates so low right now," she says, "a mortgage can be an excellenthedge against inflation."

Lagier claims that inflation is expected to soar in the near future, eroding the worth of today's dollar. While this hurts those with savings and investments, it does the opposite with debt.

"A mortgage enables you to lock in today's home price, but pay for it with tomorrow's inflated dollars," Lagier claims.

If inflation is a concern, Lagier suggests taking the money that you would have used to pay off the mortgage prior to retirement and investing it in Treasury Inflation-Protected Securities.

Reverse Mortgage

If you have paid off the mortgage, or at least a significant chunk of it, pre-retirement, there's always the reverse mortgage to fall back on should you need to tap your equity. Of course, you won't realize as much as you would were you to sell the home, but it's "money you get to use while you are alive and pay back when you're dead," according to Lagier.

Offered to Americans 62 years of age or older, the reverse mortgage doesn't come without risks. Although you won't be making house payments, you'll still be required to keep up the property tax payments, HOA fees, and homeowners insurance. Default on any of those and you risk foreclosure. Which is why, according to Lagier, the reverse mortgage is considered a "loan of last resort."

Income Property

Many experts claim that the purchase of income property is a far better retirement investment than depending on being able to tap into your primary home's equity. This investment property could even be your retirement home, rented out until you stop working.

The best time to buy this home is at least five to 10 years before you retire, according to Michele Lerner in an Associated Press article. She also cautions about the risks you take in losing liquidity when you tie up your money in a second home.

The ideal candidate for this scenario is one who has built up an emergency cushion of at least one year's worth of expenses – both current expenses and those they'll take on with a second property.

Don't disregard other risks, such as the maintenance costs for two homes. Appliance and major system failures can be costly to remedy, and if you lack liquidity, they could be catastrophic.

Rent or Buy?

Whether to purchase or rent a home is a common question when folks near retirement. Since rents are rising 5 to 6 percent a year on average, and interest rates are still incredibly low, it appears on the surface that buying is a better option. Dig a little deeper, and it is even more apparent.

With a fixed-rate mortgage your monthly house payment won't change over the life of the loan. Rent? At least once a year or whenever the lease is up for renewal, you'll face a possible rent hike.

Whether or not owning a home will help you retire depends on variables such as your current financial situation, your investment portfolio, and how many years you plan on working. A good financial planner is your best source of information.

Source:Market Leader Insider Tips

DIY Toolkit: Essential Tools For Minor House Repairs

DIY Toolkit: Essential Tools For Minor House Repairs

It takes time to build a complete DIY toolkit. Start with the essentials, and build on your collection as you take on new projects. Eventually, you will become proficient at a wide range of DIY home projects - and your toolkit will reflect this (as will your wallet, considering the money you will save on hiring someone to do it for you!).

A Basic DIY Tool Collection

Hammer: From hanging a picture to replacing wall molding and millions of DIY projects in between, a hammer is probably the most-used tool there is. Don't choose just any hammer. Select a claw hammer – a hammer with a claw on one end for pulling nails and prying material – with a flat peen (the surface which drives nails) rather than rounded.

Tape Measure: Many home repair and improvement tasks require a tape measure. Get a retractable tape measure, which is made of a rigid metal and snaps back into the case when you push a button. For most jobs, a 25-foot tape measure is sufficient.

Carpenter's Level: With a good level you have a straightedge for cut lines and a tool to tell you if an item is flush (straight up and down) or level (perfectly flat). Don't let the store's selection overwhelm you – a basic 4-foot bubble level, which uses air bubbles inside a liquid-filled cavity, is basic but dependable.

Carpenter's Square: Get both a speed square, which is hand-held, and a largerframing square when possible. Squares are great straightedges, tape measures and right-angle testers.

Utility Knife: Whether you call it a box cutter, razor knife, or any of several common terms, a utility knife is a DIY tool essential. Your utility knife makes quick work of slicing through drywall, carpet, linoleum, rigid foam insulation and many other materials. Keep a supply of razor blades in the knife's hollow body.

Flashlight: From peering underneath your foundation to working in the dark to restore power to your breaker box, your flashlight will shed some light on various tasks.

Screwdrivers: If you plan to limit your DIY ventures to basic carpentry and fixture installation, a handful of screwdrivers will get you started. Choose both Phillips-head screwdrivers (which have a cross-shaped tip) and flat-head screwdrivers (with a knife-shaped tip). More advanced repairs may require different heads. To save money, consider a multi-bit screwdriver with interchangeable tips.

Pliers: If you need to pull staples, cut wire, or loosen tight connections, pliers will help. Look for three basic types: needle-nose pliers (which have a pointed end),side-cutting pliers (which look much like scissors) and adjustable flat-nose pliers(aka flat-head pliers).

Wrenches: When pliers won't get the job done, look for your wrench. Grip or remove pipes, nuts, bolts and other stubborn household items. Start with a set of adjustable crescent wrenches for all-around usefulness.

Staple Gun: A staple gun comes in handy for installing faced fiberglass batt insulation, hanging plastic sheeting and other projects around the home. Manual staple guns require a little more muscle but eliminate the need for electricity.

Drill: Once you have a drill, you'll wonder how you ever got along without one. From simple tasks such as hanging curtains to more complex jobs like replacing wood flooring, a drill – cordless or not – makes it easier. A cordless drill is more convenient but has a limited battery life.

Saws: Two basic saws will see you through most general DIY home projects. First, select a handsaw for places where you don't have power or for situations where a power saw just isn't practical. Next, decide on either a table saw or a circular saw. A table saw is sturdy and makes cutting boards and other material easy. However, a circular saw is portable and hand-held, making it more convenient. When you're ready for a new saw, consider a jigsaw or reciprocating saw.

Stud Finder: A stud finder will help you quickly find the framing members in your walls, ceiling and floor.

Orbital Sander: Small enough to easily control with one hand, an orbital sander is perfect for basic work. Keep a supply of sandpaper, of various grits, on hand.

Ladder: Depending on the jobs you anticipate tackling, you might prefer astepladder instead of an extension ladder. Extension ladders are useful outdoors and reach higher, but stepladders work inside or outside.

All of the tools in the world won't help you if you don't have accompanying supplies. Keep wood glue, superglue and caulk in your supplies. Add an assortment of nails, screws, bolts and nuts to your tool collection as well. Don't forget tape: masking tape, electrical tape and duct tape in particular. A heavy-duty extension cord is essential. Your collection will continue to grow over the course of your DIY adventures.

Source: Market Leader Insider Tips

The Advantages of Getting a Mortgage Preapproval

The Advantages of Getting a Mortgage Preapproval The homebuying process can be exciting, but also stressful. When there are a large number of buyers in the market for real estate, the odds of being able to purchase your desired home can be low. However, getting a mortgage preapproval prior to home shopping can dramatically increase the odds of success.

Make Mortgage Preapproval Your First Step A mortgage preapproval should be a homebuyer's first step when purchasing a home. A borrower can choose to meet with a lender or get an initial preapproval via the Internet. The preapproval process is similar to the actual mortgage process and will, in fact, eliminate a lot of time after a home has been chosen. When obtaining a mortgage preapproval, the borrower will complete a mortgage application and submit the necessary documentation to the lender. The lender will pull a credit report and examine the borrower's credit. Based on all of this information, the lender will determine the amount of funds that the borrower qualifies for. The borrower will receive a Conditional Commitment, which states the amount of funds that the lender agrees to lend provided that the conditions are met. While a preapproval is an important first step, it is not the final mortgage approval.

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 Source: Market Leader Insider Tips

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