Paying off your mortgage could be a good idea The feeling of security is great, but you have to actually do the math first

With foreclosures on the rise and mortgage companies swamped with calls from distressed borrowers, who wouldn’t want to be out from under the biggest loan of their lifetime if they afford to? It’s hard to put a value on the feeling of being mortgage-free. But before you scrape together every nickel you’ve got to get the mortgage monkey off your back, you’ve got to do some math. First step: Pay off higher-cost debts first.  It makes no sense to divert your savings to a mortgage costing you 6 percent if you’ve got a significant credit card balance at 18 percent. The next question is whether the money you’ve got set aside is earning more than your mortgage is costing you — after taxes. Here comes some math: Let’s say you’ve got a $50,000 mortgage balance that’s costing you 6 percent interest. If you’ve got $50,000 stashed in low-risk savings like CDs or Treasury bonds, you’re probably earning about half that at best — let’s say 3 percent.  So far, you’re better off paying off the loan. Now factor in the tax impact. If you’re in the 25 percent tax bracket, the after-tax return on your savings drops to 2.25 percent. Your after-tax mortgage cost is also cut because you can deduct the interest expense from your tax bill — if you itemize your deductions. For homeowners, mortgage interest and state and local taxes are usually the biggest deductions. But only about a third of taxpayers itemize, according to the IRS. So if your total deductions aren’t more than the standard deduction ($11,400 for married couples filing jointly;  $5,700 for singles and married people filing separately, and $8,350 for heads of household), your mortgage isn’t creating any tax savings. Even if you do itemize, if you’re in the latter years of paying off your mortgage, your deduction is shrinking. That’s because, early on, mortgages are almost pure interest, gradually shifting to pure principal by the end of the loan. Only the interest portion of your mortgage is deductible. That means to beat your 6 percent mortgage cost, you’ll have to generate an 8 percent return on your investments, year-in, year-out. Even if you put everything you have in stocks, the average historical return is closer to 7 percent. And there’s no guarantee that the financial markets are going back to that historic norm anytime soon. For retirees — or near retirees — putting everything is stocks is a pretty risky strategy. So when you add it all up, it usually makes sense for older homeowners to pay off their mortgage, according to a recent paper from the Center for Retirement Research.  This assumes you have enough left over to retire on; if not, you’ll be right back to borrowing against your house to pay expenses. If you don’t have a big enough nest egg, you maybe better off selling the house, buying a smaller one with cash, and retiring on the difference. Paying off a mortgage may make less sense for younger homeowners, for several reasons. First, they should have as much of their savings as they can in tax-advantaged accounts like an IRA or 401(k) — and raiding those to pay down a mortgage comes with hefty penalties.  Younger homeowners are also more likely to be in the early years of their payment schedule when the interest deduction is bigger. And they may be better-suited to riskier investments. But the only way to decide is to do the math.

GET A HOME INSPECTION

This is most likely one of the largest investments of your life, therefor, you should know as much as possible about what you are buying.  Most real estate purchase contracts contain provisions for a home inspection to be performed within a certain timeframe, & sometimes they specify what action the buyer and seller may take if problems are uncovered.  I will explain the procedure in detail to ease your concerns in this area. It is very important that you choose a qualified inspector who has plenty of experience with residential homes.  You may want to ask your real estate agent for a list of reputable companies.  As with most businesses, home inspectors begin to build a reputation in the industry.  Choose wisely.... At a minimum, the inspector should examine the following: Exterior structural components, including the foundation, roof, siding and chimney. Interior structural components, including the basement or crawlspace, attic, flooring and ceilings. Major systems, including heating, cooling, plumbing and electrical. You should make every effort to be present during the inspection so that you will have an opportunity to ask questions and see first-hand what the inspector looks at.  You should receive an inspection report with descriptions of any problems with the home.

Close the Deal You've found your home, agreed on a price with the seller, had the home inspected, and now you are ready for the closing.  This is where you will officially take ownership of the property.  Welcome to the end of the home buying process - and the beginning of your home ownership journey. When to schedule your closing The closing date will depend on when the seller is ready to move out, when you are ready to move in, and when all of the mortgage details have been finalized. Who should be there Attendees may include the following: Buyer and Seller   Real estate agents for the buyer and seller         Closing agent Title Company Representative Mortgage company representative Closing Fees Making yourself at home in your new surroundings is about more than unpacking.  Try to explore the neighborhood and get acquainted with neighbors right away.  Ask about stores, playgrounds, and places of worship, so you don't have to put your life on hold while you familiarize yourself with the area.   There are plenty of fees that you'll have to make during the closing.  Depending on Prior negotiations, the buyer or the seller could be responsible for these costs, although typically most of it is paid by the Buyer All closing costs are itemized out in the lender's Good Faith Estimate.  If you want to make sure you are paying the lease amount possible in closing cost fees, you should get at least three Good Faith Estimates from mortgage lenders.  This is only an estimate and the actual charges may differ. What happens at closing Despite the fact that we are in such a technological age, the closing phase remains very paper-intensive.  You will have to review and sign a large stack of documents, some of them in duplicate and triplicate.  You will also have to pay for any closing costs, including: LENDER FEES, such as an appraisal fee, credit report fee, origination points, and discount points THIRD-PARTY FEES for services not provided by your lender, which may include a settlement fee, title insurance, and attorney's fees PREPAID ITEMS that must be paid to your lender in advance, such as prepaid interest, hazard insurance, and deposits to set up an escrow account

Move Into your New Home So you're ready to start life in your new home?  Congratulation! Now all you have to do is get yourself, your family, and your belongings there intact.  You can save time and energy by hiring a moving company, or save money by doing it yourself - it all depends on how much stuff you have, how far you're moving, and how much you can afford to spend. Preparations should start well before the moving day.  Here are some tips to keep in mind: 1.)  Get the right moving supplies, and plenty of them.  High quality boxes, padding, and other packing materials are a good investment. 2.)  Take a room-by-room inventory of everything you will take with you, and get rid of the rest either in a garage sale or by donating it to charity.  3. ) Label each box you pack, and keep a list of its contents to make unpacking easier.  4.)  Set aside a box of items you will need immediately after you arrive, such as cleaning supplies, kitchen utensils, dinnerware, bath items, tools and a telephone.  5.)  Have kids pack a box of their favorite things to unload right away at the new house.

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