Is the monthly payment more important than the total price of a home? from CNBC.

Is the monthly payment more important than the total price of a home?
Mark Fleming of First American says rising mortgage rates, home price appreciation and lack of new homes may be combining to put the squeeze on affordability.
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For many who enjoy semi-maintenance-free living and prefer living closer to city centers, (apart from having fewer windows) townhome-living feels no different than living a single family home. From the outside, however, one thing is very obvious: one or more shared walls.

 

This begs the question: who is responsible for issues that arise out of that common (or party) wall experience? What if you have leaks, pests, or mold growing inside? Unlike a condo, where you only own the airspace and none of the structure itself, townhome owners are liable for their common walls.

 

The owners of each lot are jointly responsible for maintenance and repair of these walls unless damage is caused by one owner’s negligence, in which case the negligible owner is responsible for repairs, according to real estate lawyer Gary M. Singer, writing for the Sun-Sentinel. He advises you not to consider your neighbors recognized authorities on matters like these, even saying the board of your association can be working under a misunderstanding of what your governing documents actually say.

 

“I have lost count of the times an association was trying to enforce a restriction that only exists in their ‘understanding’ of the rules,” says Singer. “To get to the bottom of this, you will need to review the documents to see what they actually say. Association rules are, in reality, nothing more than a contract between you and your neighbors, and the only way to know what is in a contract is to read it.”

 

He goes on to say that attached housing that shares a wall or fixture is governed by either the community documents or a private “party wall agreement” between direct neighbors. “If, for some reason, your community documents are silent on this sort of maintenance issue, and there is no party wall agreement in place, the general provisions of law — what lawyers call ‘common law’ — will give you the answer,” he says.

 

Under common law (as the word implies) problems with shared walls are split equally between the landowners that share the problem. “This means that unless your community’s governing documents state the association is responsible, you and your next-door neighbor are on the hook. If your neighbor is not cooperative in resolving the issue, you will need to take care of it and look to your neighbor for reimbursement of half the cost.”

 

Source: Sun-Sentinel, TBWS

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Another wave of trade disputes ignited by a somewhat unusual situation unsettled the stock and currency markets late in the week.  In a dispute with Turkey over that country’s jailing of an American pastor, President Trump announced the U.S. would be doubling its tariffs on steel and aluminum imports from Turkey.  This led to a significant currency decline in the Turkish lira which spilled over into other emerging market currencies.  This in turn led to lower equity markets in the U.S. and elsewhere globally.  Furthermore, the trade “war” between the U.S. and China continued to escalate with China announcing new tariffs on $16 billion worth of U.S. imported goods.  These geopolitical trade events promoted a modest “flight to safety” in U.S. Treasuries on Friday to push the yield on the 10-year Treasury note down to its lowest level in almost a month.

 

Meanwhile, second-quarter corporate earnings reports continue to be mostly better than expected among analysts.  According to the latest data from FactSet Research Systems, a financial data and software company catering to investment professionals, earnings for S&P 500 Index companies have grown 24.6% over the same quarter a year ago while keeping pace with the first quarter’s results which were the best earnings growth in nearly eight years.

 

In housing, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey revealed last Wednesday showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 3.0% during the week ended August 3, 2018.  The seasonally adjusted Purchase Index decreased 2.0% from the week prior while the Refinance Index decreased by 5.0% from a week earlier to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity decreased to 36.6% from 37.1% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.3% from 6.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance remained unchanged at 4.84% with points remaining unchanged at 0.45.

 

For the week, the FNMA 4.0% coupon bond gained 14.1 basis points to close at $101.813 while the 10-year Treasury yield decreased 7.95 basis points to end at 2.873%.  The Dow Jones Industrial Average lost 149.44 points to close at 25,313.14.  The NASDAQ Composite Index added 27.09 points to close at 7,839.11.  The S&P 500 Index fell 7.07 points to close at 2,833.28.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.40%, the NASDAQ Composite Index has advanced 13.55%, and the S&P 500 Index has added 5.97%.

 

This past week, the national average 30-year mortgage rate declined to 4.64% from 4.72%; the 15-year mortgage rate fell to 4.13% from 4.18%; the 5/1 ARM mortgage rate dropped to 3.95% from 4.00% while the FHA 30-year rate fell to 4.37% from 4.42%.  Jumbo 30-year rates eased to 4.40% from 4.48%.

 

Economic Calendar – for the Week of August 13, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.813, +14.1 bp) traded within a narrow 39.0 basis point range between a weekly intraday low of 101.516 on Wednesday and a weekly intraday high of $101.906 on Friday before closing the week at $101.813 on Friday.  Mortgage bond prices dipped slightly lower mid-week before turning higher toward resistance levels to end the week.  While the bond is no longer “oversold,” there is room for prices to run higher before becoming “overbought.”  So, we could likely see prices push higher this coming week to challenge resistance levels at the 25-day, 50-day and 100-day moving averages which are in close proximity to one another.  Bottom line, the technical chart continues to suggest there will be stable to slightly improved mortgage rates this coming week.

 

 

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Is there ever a question you CAN’T ask a Realtor? Never. When it’s your future and your money at stake, you owe it to yourself to pose any questions that eat at your gut, so ask away. With the help of ImagineYourHouse.com’s Lynna Pineda, we’ll answer a few common ones for you, but we think you’ll get the idea.

 

Do I really need to replace my carpeting before the first open house?

 

If it’s worn, smelly, discolored or worn out and YOU were a potential buyer walking through your house for the first time, how would you react? Buyers think about two things when they tour a property that has not been updated or repaired: time and money.

 

We are smokers. Do we really have to worry about what our home smells like?

 

Looking at online photos of your home show one thing. Walking through the front door and smelling the smoke that has permeated your flooring, drapery, cabinets and even furniture are an entirely different experience. Many a buyer will turn on their heels right there in your entryway and head for the next listing. So yes. Be concerned. Be very concerned.

 

Is it okay to decorate my home for the holidays while it’s on the market?

 

Absolutely. ’Tis the season. But if you are prone to filling every nook and cranny with happy Santas, hanging stars and extra Christmas trees, this is the time to scale back. You’ll obscure spaces that might otherwise be considered spacious.

 

Does having a dog make my house harder to sell?

 

Not if you’ve already dealt with and remediated (1) doggie odors (2) doggie damage and (3) your furry friend’s tendency to bark or scare homebuyers.

 

Can I keep my displays of vintage guns, religious paintings, and my grandmother’s doll collection while my house is on the market?

 

If you hope to get the highest prices and sell your home in the shortest length of time, remove as many of these things as possible so the widest range of buyers walking through there will not be distracted. It’s a great idea to pack them up early and have them waiting to grace the interior of your next home.

 

 

Source: Imagineyourhouse.com, , TBWS

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The National Association of Realtors reported gains in home prices holding steady in May, while a lack of inventory helped prevent an uptick in growth.

 

According to the S&P CoreLogic Case-Shiller National Home Price Index, average home prices in major metropolitan areas rose 6.4% in May, identical to the year-over-year increase reported in April. An index of 10 cities gained 6.1% over the year, down from 6.4% the prior month. The 20-city index gained 6.5%, down from 6.7% the previous month.

 

Since August 2016 the annual increase in the Case-Shiller national index has topped 5% each month. Pricing is one of the few strong spots in the housing market due to a low volume of homes being offered, arming sellers with continued pricing power despite slowing sales.

 

According to the S & P’s David Blitzer, rising prices are contributing to a slowdown in virtually every other housing-market indicator—from existing home sales to housing starts to pending home sales, which have lagged behind for six straight months.

 

“The combination of rising home prices and rising mortgage rates are beginning to affect the housing market,” Mr. Blitzer said in the article.

 

The West is still the price leader. with Seattle reporting a 13.6% annual gain in prices in May compared with a year earlier. Las Vegas followed closely behind with 12.6% and San Francisco saw a 10.9% increase.

 

Experts are saying that rising mortgage rates are no small factor in the slowed pace of home sales in recent months, potentially having put a slight downward pressure on prices. “Existing home sales have now declined on an annual basis in five of the first six months this year, as rising prices and mortgage rates and a lack of inventory have made it more difficult for would-be buyers to find and afford homes,” according to the report.

 

Source: Realtor Mag, NAHB,TBWS

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Trivia question of the day: what was the microwave oven originally called when it was introduced in the 1960s? Answer: the “Radarange.” It wasn’t until the ‘70s, however, that Sharp introduced low-cost microwave ovens for residential use.

 

When homeowners began buying countertop microwaves in droves, it wasn’t long before builders began integrating them into the cabinetry (often over the cooktop), almost as a feature of the newer kitchen. Now? They get hidden in lower cabinet drawers, nearly incognito in appearance.

 

While microwave remain popular no matter how you cut it, according to a report in Remodeling Magazine and reiterated by Builder Magazine’s Vincent Salandro, higher-end homeowners are opting for something different.

 

“For some high-income homeowners, microwaves are one of the first things they look to replace in their kitchens,” says Salandro. “Steam and speed ovens are two alternatives that provide many of the same functions as microwaves at a higher quality.”

 

More than 344.7 million microwave ovens were sold in 2017, included in 92% of homes. While the elite speed and steam ovens range from $1,700 to $8,000, microwave units cost in the hundreds, with smaller units available for as little as $70 at Target. Even the more stylish microwave-in-a-drawer can be had for less than $1,200.

 

Modifications like the microwave drawer (Sharp owns the patent, even though other product manufacturers put their names on them) are one of many options for homeowners who prefer to lessen the look of their microwaves as a stand-alone appliance. “The drawer microwave can be integrated into open floor plans, which typically don’t have much wall space in their designs,” says Salandro, although he admits that some homeowners see them as an accessible danger for children and a pain in the back for some homeowners.

 

The west coast seems to lead the way in “new stuff,” and alternatives to the microwave oven are no exception. The speed oven, a smaller appliance with convection cooking and microwaving capabilities, seamlessly fits into open design plans and kitchen islands. Homeowners are beginning to prefer them to traditional microwaves, citing how, especially when children leave the home, the quality of food preparation can become more important than speed.

 

Health-conscious homeowners are also opting for steam ovens rather than microwaves. However, for most remodelers across the country, the majority of kitchen jobs still include microwaves, especially important for families with smaller children because of the convenience of reheating and food preparation.

 

“Additionally, in order for substitutes like the steam oven or speed oven to become more reasonable for a broader range of consumers, manufacturers would need to invest in more cost-effective production to drive down the cost of the appliances,” says Salandro.

 

Today’s microwaves may now have a smaller role than envisioned 20 years ago when many expected the appliance to displace the range and oven and frozen food was more popular.

 

 

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The stock market posted modest gains this past week, as did mortgage bonds, while the 10-year Treasury yield pulled back on Thursday and Friday after hitting the 3% mark intraday on Wednesday.  This resulted in relatively stable equity, bond, and mortgage markets for the week.

 

There were a significant number of economic reports released during the week headlined by the Federal Reserve’s monetary policy decision on Wednesday and the Labor Department’s latest Employment Situation Summary on Friday.

 

As widely expected, Fed officials left interest rates unchanged to keep their target range from 1.75% to 2.00%.  The Fed’s policy statement characterized the economy as “strong,” suggesting the Fed remains on course to raise interest rates two additional times this year.  The Fed Funds Futures market is projecting the next rate hike will likely arrive at September’s policy meeting with a current probability of 93.6%.

 

On the job creation front, the Labor Department released a “not too hot, not too cold Goldilocks” jobs report revealing a below-forecast increase in nonfarm payrolls of 157,000 new jobs vs. a consensus forecast of 190,000 jobs.  However, June’s jobs number was upwardly revised to 248,000 from 213,000 while the three-month average of new job formation is trending noticeably higher.  Average Hourly Earnings increased 0.3% matching expectations, and the year-over-year increase in Earnings held steady at 2.7%.  The Unemployment Rate fell to 3.9%.  Overall, the financial markets were pleased with this report.

 

In housing, the National Association of Realtors reported Monday a week ago that Pending Home Sales edged higher for the month of June by 0.9%.  This was a slightly better number than analyst expectations of 0.5%, but was 2.5% lower year-over-year.  However, home inventory levels increased by 0.5% year-over-year, the first increase in three years, suggesting greater opportunities for future sales as many potential buyers are “waiting in the wings” to purchase a home.

 

 

The latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.6% during the week ended July 27, 2018.  The seasonally adjusted Purchase Index decreased 3.0% from the week prior while the Refinance Index decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 37.1% from 36.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.4% from 6.3% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.84% from 4.77% with points remaining unchanged at 0.45.

 

For the week, the FNMA 4.0% coupon bond gained 10.9 basis points to close at $101.672 while the 10-year Treasury yield decreased 0.55 basis points to end at 2.9525%.  The Dow Jones Industrial Average gained 11.52 points to close at 25,462.58.  The NASDAQ Composite Index added 74.60 points to close at 7,812.02.  The S&P 500 Index advanced 21.53 points to close at 2,840.35.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 3.01%, the NASDAQ Composite Index has advanced 13.16%, and the S&P 500 Index has added 6.24%.

 

This past week, the national average 30-year mortgage rate remained unchanged at 4.72%; the 15-year mortgage rate fell to 4.18% from 4.19%; the 5/1 ARM mortgage rate remained unchanged at 4.00% while the FHA 30-year rate was also unchanged at 4.42%.  Jumbo 30-year rates eased to 4.48% from 4.50%.

 

Economic Calendar – for the Week of August 6, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.672, +10.9 bp) traded within a narrow 37.5 basis point range between a weekly intraday low of 101.313 on Tuesday and a weekly intraday high of $101.688 on Friday before closing the week at $101.672 on Friday.  Mortgage bonds remain “oversold” while trading in a familiar sideways pattern between resistance and support.  The chart continues to suggest there will be stable to slightly improved mortgage rates this coming week.

 

 

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So you’ve found the house of your dreams, made an offer, and finally, both you and the seller have agreed on a price. This is when your agent has you sign the sales contract, and you pop the bubbly, right? Perhaps you shouldn’t pop that cork so fast. You may have more negotiating to do.

 

Unless you are buying a new construction home where most buyers opt out of doing an inspection, you are only at the beginning of the negotiating process, because negotiations still occur during the escrow period — mostly notably over what is revealed during a home inspection. Zillow’s Brendon DeSimone offers these tips for this step along your home purchase journey:

 

Don’t expect the seller to get the work done for you, even if they agree to pay for it. Instead, ask for a credit for the work to be done. Why? Because the seller’s focus is on moving out. “If the property is moving toward closing, they’re likely packing and dreaming of their life post-sale. The last thing they want to do is repair work on their old home. They may not approach the work with the same conscientiousness that you, as the new owner, would. They may not even treat the work as a high priority,” says DeSimone.

 

Even if you got a quote from a contractor or tow for the repairs, taking a cash-back credit at close of escrow means you can even use the money to complete the project yourself (if it’s simple enough) and pocket the difference.

 

If you got inspired watching a slew of HGTV shows and are already planning to remodel a bathroom the minute escrow closes, then it’s unlikely that you would care about a bit of floor damage, a leaky faucet, or that the tiles need caulking because they’ll get taken care of during your renovation. But the repairs are still up for negotiation and asking the seller for a credit to fix these issues will help offset some of your closing costs.

 

Don’t share your plans with the seller or the seller’s agent. “Revealing your comfort level with the home or your intentions, in the presence of the listing agent, could come back to haunt you in further discussions or negotiations,” says DeSmone. “If they sense you are uneasy with the inspection, they’ll be more willing to relay that to the seller. Conversely, if you spend two hours measuring the spaces and picking paint colors, you lose negotiation power.”

 

This is especially important if you mention gutting the kitchen, according to DeSimone. “If you mention you’re planning a gut renovation of the kitchen, the sellers will certainly hear about it. And they’re going to be less likely to offer you a credit back to repair some of the kitchen cabinets.” It’s wise to resist the urge to share your giddiness regarding plans for the house.

 

He warns buyers about completing the original contract assuming with the expectation that they can and will negotiate the price down more after the inspection, as it may backfire on you — particularly in a competitive seller’s market where sellers tend to call all the shots.

 

DeSimone ends his cautionary advice with, “A real estate transaction is never a done deal until the money changes hands and the deed is transferred. Stay on your toes. Otherwise, you may risk losing out on further viable negotiation opportunities, which could lead to buyer’s remorse.”

 

 

Source: TBWS

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Mortgage bond prices slipped lower and the 10-year Treasury yield moved modestly higher this past week while the major stock market indices put in a mixed performance.  While the Dow Jones Industrial Average and the S&P 500 saw some decent gains, the technology-heavy NASDAQ Composite Index took it on the chin following social media giant Facebook’s 19% plunge on Thursday.  Facebook’s dive marked the largest-ever one-day drop in market value for a U.S.-listed company to the tune of -$119.1 billion.

 

In economic news, the preliminary reading for 2nd Quarter GDP showed an annualized increase of 4.1%.  This matched most analyst forecasts although there were those hoping for a more robust number closer to 5%.  This was the best GDP reading since the third quarter of 2014, driven mostly by consumer spending which increased 4.0% and contributed 2.69 percentage points to the GDP total.

 

In political news, President Trump scored a promising trade deal with European Commission President Jean-Claude Juncker on Wednesday.  President Trump procured trade concessions from the European Union (EU) whereby the EU would import more soybeans and natural gas from the U.S. and improve market access for U.S. medical devices.  Future negotiations will be taking place on auto tariffs.

 

In housing, the National Association of Realtors reported sales of Existing Homes edged 0.6% lower in June to a seasonally adjusted annual rate of 5.38 million.  This was slightly below the consensus forecast of 5.45 million and also below a downwardly revised 5.41 million in May.  Compared with a year earlier, sales in June fell 2.2% and have now fallen year-over-year for four straight months.

 

The median existing home price for all housing types increased 5.2% to an all-time high of $276,900 – the 76th straight month of year-over-year gains.  The median existing single-family home price was 5.2% higher from a year ago reaching $279,300.  The inventory of existing homes for sale at the end of June increased 4.3% to 1.95 million while unsold inventory is at a 4.3-month supply at the current sales rate.  Overall, low housing supply continues to act as a burden on overall sales in addition to high prices on available inventory hindering affordability, especially for first-time buyers seeing home prices rise faster than income.

 

 

Last Wednesday, the Commerce Department reported sales of New Homes declined 5.3% from May through June to a seasonally adjusted annual rate of 631,000, the weakest rate in eight months possibly indicating the housing market is cooling off.  This was the slowest pace for new-home sales since October.  Plus, the three-month average for new home sales was 646,000 for the three months ending in June, the lowest average since the period that ended in February.

 

The median sales price decreased 4.2% year-over-year to $302,100 while the average sales price decreased 2.0% to $363,300.  With the current sales rate, the inventory of new homes for sale increased to a 5.7-months’ supply compared to 5.3 months in May and 5.3 months in the year-ago period.  One thing to worry about is the June swoon took place despite a decline in median and average selling prices.

 

The latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.2% during the week ended July 20, 2018.  The seasonally adjusted Purchase Index decreased 1.0% from the week prior while the Refinance Index increased by 1.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 36.8% from 36.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.3% from 6.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.77% with points decreasing to 0.45 from 0.46.

 

For the week, the FNMA 4.0% coupon bond lost 25.0 basis points to close at $101.563 while the 10-year Treasury yield increased 6.49 basis points to end at 2.9580%.  The Dow Jones Industrial Average gained 392.94 points to close at 25,451.06.  The NASDAQ Composite Index fell 82.78 points to close at 7,737.42.  The S&P 500 Index advanced 16.99 points to close at 2,818.82.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.96%, the NASDAQ Composite Index has advanced 12.08%, and the S&P 500 Index has added 5.43%.

 

This past week, the national average 30-year mortgage rate climbed to 4.72% from 4.63%; the 15-year mortgage rate rose to 4.19% from 4.13%; the 5/1 ARM mortgage rate increased to 4.00% from 3.96% while the FHA 30-year rate rose to 4.42% from 4.37%.  Jumbo 30-year rates remained unchanged at 4.50%.

 

Economic Calendar – for the Week of July 30, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.563, -25.0 bp) traded within a narrow 37.5 basis point range between a weekly intraday high of 101.84 on Monday and a weekly intraday low of $101.47 on Friday before closing the week at $101.563 on Friday.  After taking a step lower below technical support last Monday, mortgage bonds continued to trade mostly in a sideways direction.  They are now deeply “oversold” and could take a turn higher this coming week on either disappointing economic news or a faltering stock market.  If mortgage bonds do turn higher they will face a stiff, multiple layer of overhead resistance as shown on the chart below.  The chart suggests there will be stable to slightly improved mortgage rates this coming week

 

 

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Those of us who live in places where we believe flooding, hurricanes, fires or tornadoes seem unlikely to occur, watch our TV screens, horrified over the devastation elsewhere in the country. We can’t imagine experiencing something like that first hand, seeing our homes destroyed or living in temporary shelters.

 

This inability to fathom the horrors of natural disasters can often make us more complacent regarding our homeowner’s insurance coverage, perhaps blissfully ignoring what is included in its many clauses and paragraphs. After something happens, however, is not the time to address what’s there. Taking inventory of the coverage you already have is something to put on your to-do list now. Forbes financial writer Mark Dennis offers some common errors many homeowners make regarding their policies.

 

The first is confusing replacement cost with cash value. If you still owe a considerable amount on your mortgage, chances are your lender already requires you to carry a homeowner’s policy that includes replacement cost coverage. This is defined as the amount needed to cover demolition, construction, and other related rebuilding costs needed to replace your home if it were destroyed. A less expensive form of coverage is cash value coverage. Your insurance agent should make it a point to explain, however, that cash value coverage may not include the added rebuilding costs that could find you unable to stay in your home after disaster strikes.

 

And what about those coverage limits? If you’ve lived in your home a long time, confident that the value of your home has significantly increased, isn’t it wise to invite your insurance agent over for coffee to discuss making your policy coverage limits sufficiently high to account for replacement costs that covers its value today rather than when you bought the place? If your policy does not include guaranteed or extended replacement cost coverage to protect against unexpected cost increases, it’s time to regroup. Read the policy and know what you own.

 

How sizable a check would you have to write to a construction contractor to cover your insurance deductible repairs? When you took out the insurance, you may have opted for a high deductible to offset a higher monthly insurance payment. According to Dennis, who experienced hurricane damage to his own home, he experienced what the world of behavioral finance refers to as loss aversion. “Under this behavioral bias, we tend to experience losses (e.g., paying a large deductible for an insurance claim) much more deeply and painfully than we appreciate the joy of gains (such as saving money by paying less in monthly insurance premiums because we agreed to pay a larger deductible if we file a claim). Becoming more aware of our built-in psychological biases is one way to help ourselves make better financial decisions.”

 

If you are cash-strapped, however, and can’t seem to set aside emergency funds for a larger deductible, it may be more comfortable to go for a smaller insurance deductible with a higher premium for a while. If this is the case, ask yourself what you could trim in order to steer more money toward emergency savings. “Better yet, take the money you save in reduced premiums and redirect it to your emergency fund savings account as well. You were paying that “extra” money to the insurance company anyway. Why not pay it back to yourself now and have a larger emergency fund in the future?” says Dennis.

 

What about your own safety? Homeowners policies include a provision for personal liability coverage for instances where the owner is sued for injuries or damage caused on or by his property, but many homeowners carry only the minimum amount of personal liability coverage. This exposes their assets to potential forfeiture if they are ever served with a lawsuit. A separate umbrella policy or rider might be needed to provide the maximum amount of liability coverage.

 

It rains everywhere, but many of us are in denial, pretending we live on higher ground where flooding would never reach us. “A standard homeowner’s insurance policy protects against many catastrophes – fire, theft, wind damage – but not rising water,” says Dennis, who said many homeowners where he lives did not carry flood insurance. Whether it’s heavy rains, melting snow, or hurricanes, flood insurance is the only thing that can cover these damages. The National Flood Insurance Program (NFIP) provides consumer information regarding flood insurance, along with details of what flood insurance will and will not cover.

 

It’s important to remember that insurance is there to cover the “what ifs” in life. Even the most unlikely things continue to happen to someone, somewhere. It’s much more likely to be hit by a devastating tornado than to win the lottery, even many of us still feed dollar bills into those machines, grab, our tickets, and hope for a miracle.

 

 

Source: Forbes, TBWS

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