Category: Home Buying

Using Real Estate to Fund Your Retirement: Yes You Can

Using Real Estate to Fund Your Retirement: Yes You Can
Using Real Estate to Fund Your Retirement: Yes You Can

 

With the current economic climate what it is, it’s understandable that you’d be worried about the viability of your retirement fund. There are a lot of great ways to beef up your retirement fund through side gigs, but if you want reliable income, real estate is going to be your best bet. Here are a few of the different ways in which you can utilize real estate value to help keep you in the black throughout your retirement.

Reverse Mortgages

First, it is important to understand that a reverse mortgage is not income. It’s more like a loan program for retirees. Much like a second mortgage, a reverse mortgage is based on the amount of equity you’ve built up in your home. Most people use it to either offset whatever payments they’re still making on the home or to beef up a retirement fund. How you use the money is up to you.

You can repay whenever you’re able–as long as you keep living in that home. If you move, you have to start paying back the loan. If you pass away before the loan is paid off, your heirs will inherit that loan. Current reverse mortgage statistics say that when this happens, the most popular option for heirs is to allow the lender to sell the home and send them a check for however much is left over after the loan has been repaid. Either way, you don’t have to worry about it.

Downsizing

If you no longer need the larger home you purchased to accommodate your growing family (who has long since moved out), sell your home and use the proceeds to either buy a new home or to pay for a rental. Smaller homes are cheaper and easier to maintain. You can also earn extra money buy selling off the stuff you won’t be moving to your new place.

In addition to the monetary benefits, small homes are better at maintaining their temperatures, which is good during the months with severe weather. They also usually stay cleaner because there is less space in which a mess can build up. Finally, they give you an excuse to get out of hosting every single holiday because you simply won’t have the space to accommodate everyone!

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Is Becoming a Landlord Right for You?

Is Becoming a Landlord Right for You?
Is Becoming a Landlord Right for You?

It’s no secret that the cost of renting a home is on the rise all over the country. When you hear news like this, the thought of becoming a landlord yourself can seem like an easy way to make a consistent income on the side. Here are some of the pros and cons of the situation, so you can figure out if this is the right business venture for you.

Can You Spare the Time

While being a landlord may seem like a great way to make passive income on the side, it’s not without its share of downsides. Not only can the additional tax issues take their toll, simply finding a property in a suitable location can also be extremely time-consuming. Likewise, it’s worth spending the extra time necessary to properly vet any potential tenants. You need to ensure you find people who’ll treat the property as they would their own home.

Of course, in the vast majority of cases, you’ll be able to hire a third-party to take care of any issues. This could end up eating a significant portion of your profits, though, so you should consider early on how much time you’ll be able to devote to this new project. You may even enjoy the extra responsibilities the job demands, whether it’s fixing a leaking faucet or putting the finishing touches on any outstanding contracts.
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Alternative Mortgage Lender

Alternative mortgage lender

How do you feel about getting milk, bread, grapes, and a mortgage all under one roof? This is the case for some Costco members who can now take advantage of the financial services to buy or refinance a home. This is not your typical mortgage lender, in fact I would place them as an alternative mortgage lender category. When I saw this ad in the Costco connection magazine I immediately thought I might use them to see how good they really are for providing a lending experience. Just to let you know I have never used Costco to book a vacation, buy a car, or any other service above grocery shopping so I am a bit skeptical. Costco has a great customer service reputation for in store members, but will this really translate well towards getting a mortgage done the right way. I have heard great things about their travel booking experience, but I am not sure that this great service will branch over to mortgage lending.

The picture that came with the ad shows a young couple with a huge smile standing next to a sold sign in front of a beautiful house. What a perfect picture scenario did they paint right there for all the club members to see, that you too can be a happy homeowner one day if you get a mortgage from Costco. Do you want to know what we really see in the ad? How much money will Costco really save me with fees? One thing that is synonymous with Costco is getting a lot for a bargain. After reading the ad I did see a great plug for the program on the side of the flier it basically stated, Costco set caps on fees and margins and the participating lenders will adhere to this policy. The lender fees cannot exceed $600 for executive members and $750 for all other members.

The whole process is done online, beginning with an initial application, and then from that point on you will deal with the lenders by email or telephone.  The next step as per the flier is selecting the preferred lender you will desire to work with based on the variables important for you. Examples for the selection process can be the lowest interest rate, lender / point fees, program term, and who is actually licensed in the state you want to buy in. I wonder how much of a cut Costco will get after each closing has been completed.

After filling out a small Quote Request form on the Costco Finance site, I selected two lenders with the least amount of fees, as you can see the rate offered is for a 30 year mortgage. Below you will see the disclosure information about the fees given after a quote request is submitted.

 

LenderProgramInterest RateAPRLoan Details
Conf 30 yr Fixed Full Doc

3.500%

3.529%

Mon. Payment: $988
Est. Total Cost: $825**
Conf 30 Yr Fixed Full Doc

3.500%

3.535%

Mon. Payment: $988
Est. Total Cost: $950**

** Estimated Total Cost is a combination of lender fees and third party fees. Lender fees include application, commitment and processing fees and are not to exceed $600 per transaction for Costco Executive Members, and $750 for Gold Star and Business Members. Third party fees are expenses for services which are required and are provided by someone other than the lender. Third party fees include items such as appraisal, flood certification, credit report, etc. Additionally, due to the complexity of state by state charges, Estimated Total Cost provided above does not include title, escrow, transfer tax, or recording fees.

After placing a quote request I would not mind getting a mortgage for 3.5% with fees totaling less than a thousand bucks.

Comment if you can see yourself applying for a mortgage loan through Costco?

 

Rich Uncle EL