BY LISA LEE
The start of the new year signals a time when many people take stock, set goals and make a plan of action.
This year, when it comes to home ownership, the new year has brought with it a dynamic, growing real estate market.
Today’s interest rates are at all-time lows – the lowest in more than 40 years. Factors that affect the real estate market, including sales prices, home appreciation, bids over asking, inventory and days on market, signal a returning strength in the market, according to Prudential Locations’ Oahu Real Estate Year-End Recap.
So, whether you are a renter, homeowner or investor, there’s no time like the present to evaluate your current position and make a plan for 2013. What would you like to do this year?
Move from Renting to Owning
People have often rented because it was cheaper than having a mortgage. At today’s interest rates, however, a mortgage may actually save you money compared to renting something comparable.
At a typical rate today of 3.32 percent, a mortgage costs 20 percent less than it would have three years ago when rates were 2 points higher.
“This two-point drop puts real estate on sale for more than 20 percent off,” says Carl Worthy, who presents the Home Buyer seminars at Prudential Locations.
“Owning your home is a great wealth-building strategy. Historically, as property prices go up, rents tend to rise as well. A mortgage, on the other hand, fixes the amount of your monthly housing dollars for the life of your loan. As a homeowner, your monthly dollars go into your long-term investment: you pay yourself instead of a landlord.”
The Home Buyer seminars that Worthy presents are free to the public. For more information, call Prudential Locations at 377-4646.
Refinance Your Home
If you haven’t refinanced your home in the past year or two, now is the time to consider it, says D.J. Dole, a private mortgage banker at Wells Fargo Home Mortgage.
“Depending on the size of your mortgage, refinancing from a higher interest rate to a lower one can save you money each month, even if it is just by one percentage point. I advise people to look at the cost of their current mortgage versus what they can save, consider how long they plan to stay in their home and see if it makes sense to refinance.”
For example, the monthly payment for a 30-year loan of $400,000 at 3.32 percent interest is $1,760. Three years ago at 5.06 percent interest, it was $2,160. That difference of $400 per month adds up to $4,800 per year.
To prepare for refinancing, Dole recommends finding a loan officer with whom you have a good rapport, then gathering the required paperwork: two years of W2 forms, two months of bank statements and one month of pay stubs.
Dole also recommends checking with your lender to see if they have any special programs for refinancing, and “don’t do anything that will pull a credit report. Don’t open new lines of credit or buy anything big.”
Move Up, Down or Around
Have you wanted to move up, downsize or relocate to a new neighborhood? Inventory is low and prices are climbing, so it is a great time to sell, plus low interest rates make buying more affordable than it has been in decades.
With this unique dynamic,
it is possible to maximize the value from your current home and get a bargain on the payments for your new home.
“One great reason to move up in this market is because more expensive homes appreciate a higher amount than less expensive homes,” says Worthy. “As a rule of thumb, you want to be in the most expensive property you can afford before a price run. This maximizes the amount of appreciation. Once prices start moving, the move-up homes will increase more than the home you will be selling”
Fine-Tune Your Real Estate Investment
In a changing market like today’s, it is important to stay on top of the value and accumulated equity of your real estate investments, to ensure that you are maximizing their potential.
Now is the time to re-evaluate your real estate portfolio for your short-term and long-term goals. Are you focused on long-term growth in value or current cash flow? Do you have estate planning or tax issues to address?
Anton Rowe, a software engineer in Aina Haina, is considering investing in residential real estate. He says “We’ve talked about buying an investment property for a few years now [but have been] waiting to see what the market was going to do. We’re clear now that this is the year to do it – and probably sooner rather than later. Our next steps are to determine our budget and the type of property that we want.”