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It’s still a ruthless market for homebuyers — especially first-timers. But if you’re looking for small-town charm, there still might be some affordable options.
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BestLife spoke to real estate professionals to find the top nine places in the U.S. with small-town charm and affordable housing.
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Madeline Garfinkle
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You’ve spent months — years even — saving up for a down payment for a house. You’ve budgeted meticulously, banking savings whenever you could to make homeownership possible.
After reaching that goal, you may feel like the pressure to budget and save is gone. But don’t get too comfortable.
When you purchase a home, it’s not just the monthly mortgage payment or down payment you need to think about. Here are 17 additional expenses to consider — ranging from property taxes to homeowners insurance to maintenance and repair costs.
Property tax information is a public record, so you can look up how much previous owners were taxed in the past. However, keep in mind taxes can fluctuate from year to year as home values and millage rates change.
Homeowners insurance generally protects against losses or damages to your home and belongings, plus liability coverage for accidents that may occur on your property. What your homeowners insurance covers will differ based on your policy — as will the cost.
Like taxes, homeowners insurance is often folded in your mortgage and held in an escrow account. If not, you’ll want to divide your annual insurance bill by 12 and put that amount aside monthly.
If you’re getting a conventional mortgage – as in not an FHA loan or VA loan – you’ll have to pay private mortgage insurance (PMI) if your down payment is less than 20% of the purchase price. This insurance is to protect the lender in case you stop making payments.
PMI usually costs 0.22% – 2.25% of your mortgage. You don’t have to pay it for the life of your mortgage, in most cases, though. Once you’ve made enough mortgage payments to build at least 20% equity in the home, PMI can be removed.
Payments are due monthly and are factored into your mortgage payments.
If you have an FHA loan, you won’t pay PMI, but you will have to pay mortgage insurance premiums. There are two types of premiums:
The UFMIP is 1.75% of your loan amount, and has to be paid upfront. You can do this in one of two ways. The first is to just pay it as a closing cost if you’ve got the cash on hand. The other is to add it to the cost of your loan, which will cause your monthly payments to rise.
MIPs can cost 0.45% – 1.05% of your total loan amount for the year, and you’ll pay them every single month. You’ll pay these monthly premiums for at least 11 years of your loan. If your original down payment was less than 10%, you’ll have to pay MIP on a monthly basis throughout the life of your loan.
When someone sells you a house, they have to legally have the right to sell it. Otherwise you could have legal issues down the road.
Title insurance companies research the ownership of the house, looking for things like liens, levies, undisclosed heirs, and any other potential problems with the title. If their search turns up nothing, they’ll issue an insurance policy to protect your financial interests in case there was something they didn’t catch.
Whether or not you’re required to get title insurance varies by state. Some states require you to have it in all circumstances, others waive it if you pay in cash, and still others don’t require the owners to purchase this insurance at all.
Title insurance costs – on average – $1,000 per policy. But that number’s going to change dramatically depending on the state and the purchase price.
Tired of hearing about insurance policies?
We’re not done yet! Believe it or not, after all those insurance policies, not one of them protects your home against flooding. Technically, there’s no law requiring you to purchase flood insurance. You’re technically allowed to cross your fingers and hope you’ll never need it.
But if you live in a flood plain, odds are pretty high that your lender will require you to purchase a policy. You can check if a property is located in a flood plain here.
Flood insurance premiums are $82/month on average, but it’s going to vary depending on the risk of your particular property.
Though you may not have to save as aggressively as when you were trying to come up with a down payment, personal finance experts suggest homeowners save about 1% to 2% of their home value each year for maintenance and repairs. Think about things like the:
If your home is worth $300,000, for example, you should be saving about $3,000 to $6,000 a year for future expenses — which breaks down to $250 to $500 a month.
A good place to keep these funds is in a high-yield savings account or money market account. You may not dip into these savings every year, but you’ll want to easily access this money when something needs fixing.
Alternatively, you could purchase a home warranty, which covers repairs to certain systems and appliances, like your HVAC system or your fridge. Weigh the costs of the warranty (plus any related service fees) against how much you would save on your own for future repairs
You’ve probably been used to paying utilities as a renter, but you may find your expenses are greater once you move into your new home — especially if your square footage is significantly larger.
If any utility costs were previously folded into your rent payment, be prepared for separate bills. For example, a lot of rentals include water and sewage bills rolled into the rent. Your landlord pays them, so you don’t have to worry about them.
As a homeowner, those costs will fall on you every month.
If you live in a condo or neighborhood with a homeowners association, budget for the cost of HOA or condo fees. These fees are collected to cover expenses related to shared amenities, common space, neighborhood aesthetics and security.
These fees vary, but they can tack on a couple hundred dollars to your monthly housing expenses.
If you pay your fees once a year, set up a sinking fund and save up each month.
Gone are the days when you’d just call your rental office if you found ants invading your kitchen. Now that lovely task is on your plate.
You could go the do-it-yourself route and purchase pesticides, barrier treatments or traps from a home improvement store. But if there’s a family of rodents in your attic, you may want to call in the professionals. Pest control companies have expertise and more effective extermination solutions than what you can buy at the store.
Shop around for quotes from different companies to get the best deal. Many offer contracts for preventative maintenance if you want your home treated regularly.
Mold is not one of those issues you’ll want to put off until later. It’s one of those problems that can cause major health issues.
Mold can be an extremely expensive problem to fix, depending on how long it takes you to catch it. It can spread easily through your home’s HVAC system, which means the difference between needing to clean and repair one part of your home, and needing to clean and repair the entire home.
Landscaping is a task you’ll want to decide whether to do yourself or outsource. If you’re hiring a lawn care company, be sure to shop around for the best prices.
Get recommendations on lawn care, pest control and home repair services from websites like Angi, HomeAdvisor or Nextdoor.
If you go the DIY route, factor the cost of equipment and supplies in your budget. Some equipment may also include ongoing costs, like buying gas for your mower.
While lawn care may seem like an aesthetic thing, your city— or HOA — likely has rules and regulations regarding maintenance. You could get fined for letting your grass grow too high.
Yes, you had to clean your rental. But odds are your square footage has gone up. The more square footage, the more time you need to dedicate to scrubbing, dusting, and vacuuming.
It’s OK to outsource cleaning services if you need them, the same way it’s okay to outsource landscaping costs. Services are cheaper than you may imagine, but they’re still going to be an additional expense in your monthly budget.
If you fall in love with your soon-to-be home’s fridge because it’s got a built-in ice maker, be sure to ask if the appliance is actually included in the home purchase.
Things like a fridge, oven, dishwasher, and washer and dryer are high-ticket items, and the current owner may plan to take them with them. If that’s the case, you’ll want to make sure to budget in money to buy your own.
You should always be setting aside a little money to save up for maintenance and repairs on these items, too.
If you’re buying a fixer-upper, you’re going to need a budget for renovations. There are fixer-upper loans which give you more money than you need for the mortgage, paying you the excess cash based on your renovation schedule.
If you don’t get one of these loans, you’re going to need to float the renovation costs yourself or put them off. Putting it off might be an okay solution if you want to tear down a wall to let more light into your living space.
But it might not make sense if the glass in every window pane is broken, or the electrical system is hazardous in its current state.
A security system is optional, but it’s an expense you may consider once you move into your own home. Your house is a major asset and you’ll want to protect it — along with your family and belongings.
When considering security systems, budget for the initial cost of buying and installing the system, plus the monthly cost for monitoring.
At the bare minimum, when you move into a new house, you’ll want to pay to get all the locks changed.
We like to think our home value will only ever go up, but that’s not always the case. Think 2008. There is a housing market correction currently happening that’s expected to continue throughout 2023, but that correction isn’t likely to put people upside down on their home loans like it did in 2008.
Another way you can experience a significant reduction in home value is if you buy your place for the view, but then future construction builds up between you and your scenic surroundings, blocking that view. Situations like this can lower your home value, which can ultimately lower your net worth.
What are monthly house expenses?
Monthly housing expenses can include a range of products in addition to your mortgage. Things like insurance premiums, utilities, home maintenance expenses, and property taxes all contribute to your monthly housing expenses.
What are typical expenses while owning a home?
After you purchase a home, recurring monthly expenses can include:
What is the largest expense for a homeowner?
According to Fannie Mae, the largest homeowner expenses are:
What expenses should I budget for when buying a house?
When you budget for buying a house, keep in mind that you’ll need more than a 20% downpayment. You’ll also need money for closing costs, various insurance policies, home maintenance and repairs, HOA fees or condo fees, and property taxes.
How much does it cost to own a home?
Ideally, you’ll have a 20% down payment when you purchase a home. You’ll also want to save 3% – 6% of the loan amount for closing costs. As you pay off the mortgage, you’ll want to save 1% – 2% of the home’s value each year for maintenance expenses and repairs. Don’t forget to factor in the costs of various insurance policies when you own a home, too!
What are the benefits of homeownership?
When you own your own home, there are little things that feel big – like being able to choose your own paint colors, or not being subject to a landlord’s pet policies.
But there are big things, too. Most Americans’ wealth is tied primarily to home ownership. If you pay off your mortgage, you can dramatically lower your monthly housing expenses. Or, if you need a huge infusion of cash in the future, you can borrow against the equity in your home.
How much should you save for home repairs?
It’s generally recommended to save at least 1% – 2% of your home’s value for home repairs and maintenance costs every year.
Former senior writer Nicole Dow contributed to this report.
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femmefrugality@gmail.com (Brynne Conroy)
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For many of us, there’s nothing quite like spending lots of time at home to start noticing the literal (or metaphorical) cracks in the foundation. Maybe your kitchen could use some remodeling TLC, or perhaps you have appliances that desperately need to be replaced (or even some combination of both).
Whatever it is, the home maintenance and remodel industry has been on a huge upward trajectory for years now, and while the experts predict it might start to slow down in 2023 (by about 7.4% according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University) — ‘slow’ isn’t quite the word we’d choose for this $400 billion industry.
In fact, Angie’s List (now called Angi) found that the average household spending on home-related projects in 2022 was $12,904, with a whopping $8,484 of that going towards home improvement, and $2,467 towards home maintenance.
So if you’re one of the many people trying to map out your home project plans for 2023, keep reading. We’ve got seven of our best penny-hoarding tips right here to help you make the most of your remodeling and home maintenance budget.
Your house can’t talk but it can send you messages. If it’s crying for help, ignoring the message could cost you money later.
Don’t ignore home repairs, and you’ll save in the long run. Here are seven you can’t afford to put off.
Maintenance is usually cheaper than repairs, so keeping up with checkups around your home can help you avoid a bigger repair bill later. It’s smart to figure out how much to budget for home maintenance. Here are the things you should consider:
Financial experts recommend putting away about $200 a month for home maintenance. That way, you’ll have $2,400 a year, which can hopefully cover the maintenance and possible repairs.
Sometimes it’s necessary to call in the pros when tackling home maintenance or home improvement projects.
Do you really want to DIY and regret it?
When deciding to DIY or hire a pro, ask yourself how much experience you really have. Things often look easier to do on TV or in a YouTube video than they really are.
Experts say to avoid DIY-ing anything involving electricity (especially 220 circuits) or water unless you have experience. Things can go bad very quickly.
If you need professional help for your home, getting bids on home projects can save you lots of money and time.
A professional handyperson can handle a wide variety of jobs like caulking, painting, gutter cleaning, patching drywall, installing tile, hanging objects, and installing fixtures. Making a list of what you want done can be helpful so you can prioritize if you only have a handyperson hired for a few hours.
When looking for the right expert for your home project:
Don’t be afraid to ask questions and discuss exactly what the estimate includes and what the payment terms are. It’s your home, and your budget
Some simple things can help you get a lower electric bill each month.
You can save on other utility bills, too, with attention to your consumption habits. For instance, some simple reductions in water use could mean saving money on water bills.
Disasters or repairs can ruin your budget. Homeowners insurance can help protect your property and belongings from damage and losses. It also provides liability coverage.
But it isn’t always easy to know what is covered and what isn’t. And when is it worthwhile to file a claim?
All homeowners policies are not created equal, and they can also vary widely based on where you live and in what kind of dwelling. It’s important to understand when it can help you out — and when it can’t. Here’s an article that will help you learn what home insurance covers.
If you’re ready to dive into the world of home ownership or move into a new home, don’t get so caught up in the excitement that you make a big mistake.
Following this eight-point home inspection checklist could end up throwing cold water on your plans, but it will also prevent buyer’s remorse if you’ve fallen in love with a money pit.
Inspectors look at more than 1,000 things throughout a house. In general, those things are:
In today’s real estate market, forgoing the inspection could make your offer more attractive to the seller, but the average inspection cost of $350 could save you thousands of dollars down the line.
Tiffani Sherman is a Florida-based freelance reporter with more than 25 years of experience writing about finance, health, travel and other topics. Freelancer Larissa Runkle contributed to this report.
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Is now a good time to buy a house?
It’s an evergreen question — always relevant — and it’s a highly personal question. Only you can answer whether or not it makes sense for you to buy a home at any given time.
That said, the realities of unpredictable interest rates and the ever changing housing market will play a role in your decision. And, right now, those indicators are blinking red.
As of December 2022, consumer confidence is quite low according to Fannie Mae’s Home Purchase Sentiment Index. Only 16% of consumers believe it’s currently a good time to buy a house. So who’s right?
As we approach 2023, the dramatic increase in housing prices we were seeing in 2021 has stalled. In fact, home prices have decreased for nine consecutive months, according to the National Association of Realtors. Not only that, but some experts believe the steady leak may become a stream and a collapse in prices is coming.
On top of that, fixed 30-year mortgage interest rates are hovering around 6.5% — as high as they’ve been in 20 years — though they did slightly decrease in November 2022.
When asked about the outlook for mortgage rates in 2023, eight industry insiders told Mortgage Reports they expected interest rates to run anywhere from 5% to 9% next year — quite a range that doesn’t necessarily make a future homebuyer brim with excitement.
Inflation could continue to push rates up, while a looming recession would likely cause them to drop. Ongoing inflation, Federal Reserve policies and impending recession fears make the near future of interest rates difficult to predict.
That said, if you’re set on buying a home soon, you have options. You just need to be prepared to take on that financial burden.
Ultimately, whether or not you should buy a home right now depends largely on how ready you are and your financial situation more so than market conditions.
Before buying a home — the single largest purchase most people will make — you need to have a solid financial plan in place. Here are some things to consider before making that purchase.
The future isn’t always predictable — life happens after all — but you should have an idea of any major decisions that are in your near future.
Do you expect to get married? Do you plan on having kids in the next five to 10 years? How permanent is your current job situation? Do you want to be in that location long term?
If any of those situations are in flux, you might want to pause buying a home right now. That two-bedroom condo might get a little tight once you start having kids. Or the house you thought was a dream could become a financial weight around your neck when your company asks you to transfer to another city.
The best time to buy a house is when your life is fairly stable, both personally and professionally. That doesn’t mean you need to have everything perfectly set. But you should carefully consider the pros of buying the home versus the cons of possibly moving in the short term — and figuring out what to do with your house — because of life changes.
Traditional wisdom has always said to make a 20% down payment in order to avoid private mortgage insurance. PMI covers the lender in case you stop making payments.
The current median sales price for a home in the U.S. is $379,100. That means to avoid PMI, a buyer would need to make a $75,820 down payment. For most buyers, that will require planning and some aggressive savings before making the purchase.
The more you put down, the less your mortgage will be — meaning lower monthly payments. So you would borrow $303,280 instead of a higher amount. Most lenders require a minimum down payment of around 3% to 5%, so you have that option if your budget allows for larger monthly payments (more on that later).
First-time home buyers typically have more options — with lower down payments and credit score minimums. These include:
Remember, the more you can manage to put down on the front end, the less debt you’ll carry over the course of your mortgage.
Make sure you know your credit score well before you begin the process of buying a home. That one little number will greatly affect your loan options when it comes time to sign the mortgage.
The standard magic number required for conventional loans is 620. Anything between 670-739 is considered “good.” Between 740-799 is considered “very good.” And anything above 800 means you have “excellent” credit. The better your credit score, the better your loan options and interest rates will be.
Non-conventional loans will require higher credit scores. One example is a jumbo loan, which typically requires a credit score of around 700. There are ways to buy a house with a lower credit score though.
If you’re looking at buying a home in the near future, it’s incredibly important to make sure you understand where your credit score is and how you can improve it over time.
There are plenty of ways you can actively work on improving your credit score — everything from making on time payments, applying for credit selectively and even asking for a credit limit increase but not using it.
The median mortgage payment is $1,100, according to American Housing Survey data. That number can vary, of course, based on where you live, how long your mortgage is, your down payment and interest rate.
But if only that was all you were expected to pay. It’s easy to forget all the other fees that get tacked on to mortgage payments. You’ve got taxes, insurance and maybe HOA fees and mortgage insurance — and then there’s all the ongoing maintenance and other monthly expenses that come with owning a home.
Let’s use an example. We’ll say you live in Nashville, Tennessee — a prospering real estate market, but not out of control. As of now, the average cost of a home in Nashville is $461,000.
We’ll also say you live in a homeowner’s association — and, fortunately enough for you, Tennessee has the fifth lowest HOA with a median of $150 per month.
We’ll assume you have good credit and can get the average interest rate right now at 6.5%.
And we’ll finally assume you can manage a 10% down payment on a 30-year mortgage.
Last, that credit score is also good enough to get a decent PMI rate of about 0.99%.
Let’s run the numbers.
So, all said, you’re actually paying $3,468 a month for your $400,000 mortgage — $846 of which is simply added on after principal and interest.
The question is, prospective Nashville homeowner, do you have $3,468 of flexibility in your current budget? (Keep in mind that you’ll have to pay for maintenance and repairs too on top of that.)
If not, right now is probably not the best time to buy a house.
It goes without saying, although we are now saying it, that your numbers could vary greatly where you live. A home in New York or San Francisco will cost much more than one in Nashville, while a home in the rural Midwest would cost much less. (A Midwest state might even pay you to move there.) Property taxes and HOA fees can also vary greatly based on where you live.
The point of this exercise is to show how you need to know exactly what you are getting into before jumping into a massive purchase like a home.
All that to say what is true now might not be true five years from now, or even next year. As we approach the end of 2022, interest rates on a 30-year mortgage are pushing 7%. In 2015, they hovered between 3% and 4%. And at the beginning of 2021, they were as low as 2.7%.
If you’re set on buying a house right now, even with the higher interest rates, you can always refinance once rates drop – and history tells us they most certainly will drop.
For our $400,000 example, you would pay around $800 more per month with a 6.8% interest rate over a 3.8% rate. That’s a huge difference, and it’s something to keep in mind as you’re determining if now’s the right time.
Based on what many experts are saying, as well as how the general public feels about the housing market, it’s probably not the best time to buy. We’re definitely in a seller’s market right now.
But as you’ve seen, a lot of variables are at play in how you can make that decision. Most buyers right now aren’t comfortable as home values and interest rates are so high. But your situation may be different.
Home prices are always changing. Interest rates are always adjusting. What we’ll see this time next year could be drastically different from what we’re seeing now.
Know your budget. Know your credit score. Understand how much of a down payment you can make, and the impact it will have on your monthly payment. And simply be realistic about your current life situation and how that could impact where you live in the near future.
Robert Bruce is a senior writer for The Penny Hoarder.
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robert.bruce@thepennyhoarder.com (Robert Bruce)
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My boyfriend’s mother passed away in April 2022. In 2000, she refinanced her deceased mother’s brownstone. She had her name and her two adult sons’ names on the deed. At some point, the house went into pre-foreclosure. She refinanced again, but this time, she had to remove her sons’ names from the deed.
In 2022, his mom was in and out of the hospital. At one point, she was released from the hospital and doing well. I created a list of financial questions my boyfriend needed to ask his mother while she was in recovery. I was unaware of the above information regarding the deed at the time.
Later on, I realized he hadn’t approached his mother about her finances. It’s been eight months since his mother’s passing, and the mortgage lender has proceeded with foreclosure. He signed an agreement with the lender saying he will refinance the home. He has worked in construction on occasion but has no pay stubs to show. He asked me to refinance the home in my name and connected me to a lender.
The monthly mortgage would be $5,000. He doesn’t make enough to pay for the electricity bill, water, etc. I do not make that much. The lender was saying that I have a great credit score, which made my boyfriend happy. I decided not to sign off on any paperwork and told my boyfriend that I don’t make that kind of money.
Although I have my own apartment, I’ve been staying with him from the time leading up to his mother’s passing. I recently found out my landlord will not renew my lease. At the same time, I got a job offer that will be three hours from where I live. I had a conversation with him last week about us finding an apartment upstate and having a fresh start elsewhere. He refused to hear me and became upset, saying that I am going to make him homeless because I won’t refinance his home.
I asked him whether there are other options. He said the options are to refinance or sell, and he has made it clear since the beginning that he will not sell the home under any circumstance. Prior to all of this, when I found out his name was no longer on the deed, I researched a probate lawyer for him and made a partial payment for the retainer fee. He agreed to pay the other half but has yet to do so.
Although my boyfriend has not contacted me since then, I feel I made the right choice. To what extent could I have been financially ruined?
-D.
Dear D.,
When you take out a mortgage you can’t make payments on, the bank eventually forecloses on the home. A foreclosure judgment stays on your credit report for seven years. During that time, you face an uphill battle whenever you need financing or want to rent a home. Because a foreclosure often tanks your credit score by 100 points or more, you’ll often have to pay a security deposit for things like utility bills that are typically waived for those with healthy credit.
Got a Burning Money Question?
Get practical advice for your money challenges from Robin Hartill, a Certified Financial Planner and the voice of Dear Penny.
DISCLAIMER: Select questions will appear in The Penny Hoarder’s “Dear Penny” column. We are unable to answer every letter. We reserve the right to edit and publish your questions. But don’t worry — your identity will remain anonymous. Dear Penny columns are for general informational purposes only, but we promise to provide sound advice based on our own research and insights.
But none of these things are going to happen to you. That’s because you trusted your gut, not your boyfriend or a sketchy lender pressuring you to take on a $5,000-a-month mortgage you know you can’t afford.
I’m assuming your boyfriend has been staying in the brownstone since the time of his mother’s death. Ignore his whining about how your decision will leave him homeless. He needs to take responsibility for building his credit and work history. It’s unfortunate that he’ll have to move, but that’s not your problem — especially now that it sounds like this relationship is over.
Had you refinanced a mortgage in your name that you couldn’t afford, you’d both ultimately wind up without a place to live. You’d simply be putting off the inevitable.
Since you have a new job offer, this sounds like the perfect time for a fresh start. If you have the credit and income to get approved for a $5,000 monthly mortgage, you shouldn’t have a problem renting a new place upstate on your own.
Putting your name on any financial document can have lasting consequences. If you’re ever faced with signing a mortgage or any other financing contract with a partner, make sure you’re doing so because you want to build a life together, not because you’re being pressured.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
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robin@thepennyhoarder.com (Robin Hartill, CFP®)
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The Central Business District of Pittsburgh
J. Altdorfer Photography | Getty Images
After bidding wars during the pandemic, demand for home purchases has fallen amid higher mortgage interest rates. That dynamic has made some markets are more attractive for first-time home buyers for 2023, according to a Zillow report released this week.
The real estate site found the “best opportunity” for first-time buyers in metros areas with more affordable rent, less competition and a higher inventory of homes for sale.
“The affordability hurdle is very tough,” said Matt Hackett, manager of operations at Equity Now, a mortgage lender in Mamaroneck, New York, that operates in five states.
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One of the biggest challenges has been a sharp increase in interest rates within a short amount of time, explained Erica Davis, producing branch manager at Guild Mortgage in Myrtle Beach, South Carolina.
Mortgage interest rates have more than doubled from early January after a series of hikes from the Federal Reserve to curb inflation in 2022. These rates have recently softened, reaching 6.41% last week.
Meanwhile, median home sales prices are higher year-over-year, reaching $454,900 during the third quarter of 2022, according to the Federal Reserve Bank of St. Louis.
Still, some markets may be more affordable for buyers on a budget, Zillow’s report shows.
These are the best metros for first-time home buyers in 2023 based on mortgage and rent affordability, housing supply and the share of listings with a price cut, according to Zillow.
While affordability may be a concern, experts say first-time home buyers may have more options than they expect.
“First-time homebuyers almost always have that knowledge gap,” said Hackett. “They’re not really sure how much they can afford, and they’re not really sure how much they need for a down payment.”
For example, many first-time home buyers don’t know about mortgages for veterans, which don’t require a down payment, or Federal Housing Administration loans with 3.5% down, he said.
You may also qualify for so-called conventional mortgages, backed by Fannie Mae or Freddie Mac, with down payments as low as 3%.
However, loans with a smaller down payment come with mortgage insurance and higher interest rates, which may be reduced later, experts say. You’ll also have a bigger monthly payment with a larger mortgage.
First-time homebuyers almost always have that knowledge gap.
Matt Hackett
manager of operations at Equity Now
Davis said lower down payment mortgages may also preserve savings for future home expenses. “There’s less stress if they’re able to close and still have some money in their pocket,” she said.
Depending on your income and location, you may also qualify for first-time home buyer grants or programs run by state and local governments to help cover your down payment and closing costs. “It’s definitely a good option,” Hackett said, urging buyers to speak with a local mortgage expert familiar with programs in their area.
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When you reach a certain age, home appliance shopping is something to be excited about. It’s easy to drop a significant chunk of money on that new fridge with french doors, and it’s really rather odd how delighted you can be over a standard household appliance.
As you finalize the purchase and arrange delivery, the store will likely ask if you want to pony up some extra cash for an appliance extended warranty to supplement the manufacturer’s warranty.
But should you spring for the extended warranty or go with a home appliance warranty? And which warranty provider is best?
If you do your research beforehand (i.e., read this article because we did the research for you), you can go to the store armed with an answer.
We discovered the differences between a manufacturer’s warranty, a retailer appliance extended warranty and home appliance warranties. Here’s what we learned.
The main differences between a manufacturer’s warranty and a retailer’s extended warranty are who provides the coverage and what the warranties cover.
A manufacturer’s warranty generally will only cover replacement or repair if the issues existed prior to the purchase. These warranties are also included in the price of the appliance and are usually valid for one year to cover the costs associated with functional parts and labor.
An appliance extended warranty is issued by the store selling the item and offers a wide range of benefits over several years. So, when the original manufacturer’s warranty expires, you have an extended appliance warranty to fall back on.
In addition to 24/7 online support or covering the cost of parts and labor, some appliance extended warranty plans will even reimburse the cost of food spoilage or laundry services if your refrigerator or washing machine goes on the fritz.
Some extended appliance warranties also partially repay customers who don’t use the plan or allow customers to transfer coverage to a new owner if they sell an appliance covered under a protection plan.
Home warranties cover partial service costs for normal wear and tear on appliances — things like repair of mechanical components that might break down over time. Think of it like insurance (even though it’s not). You pay a monthly fee or annual premium and if (when) your fridge breaks down, you get discounted repair service on covered appliances.
Which warranty provider has the best comprehensive appliance coverage? To see what extended warranties have to offer and which stores might have the best deal, we crunched some numbers to see if they’re worth it.
Here’s a look at the extended warranty option from four nationwide stores that sell major appliances, and what they have to offer.
(Note: Since some stores base the cost of extended warranties on the price of the appliance, we used a $1,000-$2,000 price range for all four examples.)
Not only does this extended warranty protect your appliances after the manufacturer’s warranty ends, but it also enhances the coverage while the manufacturer’s warranty is still in place.
3-year: $159.99; 5-year: $349.99
Benefits:
Read here for more details on Best Buy’s extended warranty.
Home Depot’s extended warranty even covers 50% reimbursement for the replacement costs of some cosmetic parts and features a two-day service guarantee for some metro areas.
For appliances between $1,000 and $1,499.99: 3-year: $130; 5-year: $195
For appliances between $1,500 and $1,999.99: 3-year: $155; 5-year: $235
Benefits:
Read more about Home Depot’s appliance warranty.
Lowe’s offers an appliance warranty that helps you pay the cost of reinstallation when you need to hook your appliance back up. The extended warranty also provides replacement coverage if you end up with a lemon.
2-year: $90; 4-year: $150
Benefits:
Read more about Lowe’s extended warranties.
Appliance extended warranties are built into the purchase price of home appliances for Costco members. Various levels of membership alter the warranty’s terms, but basic coverage details for appliance extended warranties include home delivery, installation, fast replacements and haul-away services.
3-year: $119.99; 5-year: $229.97
Benefits:
Read more about Costco’s extended warranties.
A home appliance warranty is similar to an insurance plan, and just like retailer extended warranties, it will vary depending on the coverage details of the different home warranty providers. We’ve rounded up a list of some of the best home warranty companies.
Rated in the top five home warranty companies by thisoldhouse.com and consumer advocate.org, American Home Shield was founded way back in 1971, so the company offers customers reliable coverage.
Consumer Affairs accredited home warranty provider Select Home Warranty works with an impressive network of authorized service technicians and assigns you a local professional. It offers three levels of warranty protection.
An Inc. 5000 company, Choice Home Warranty allows you to tailor your home appliance warranty to your needs.
If you’re ready to skip the expense of an extended protection plan but don’t want to entirely fly by the seat of your pants and hope your appliance never breaks down, you’ve got some alternatives.
To decide which warranty provider is the best choice for your major appliances, ask yourself a few questions.
What does the manufacturer’s warranty cover, and how long will my new appliance be covered? Do I need more coverage?
Will paying upfront for the extended warranty give you peace of mind for when your appliances inevitably break down? If you are able to save some money every month, you could forgo this expense in favor of a rainy day fund. Parking the money in an interest-bearing savings account earns you a bit of interest, but you’ll need to be diligent about setting those dollars aside.
Do I have a house with older appliances that are likely to break down in the next few years? If yes, a home warranty might be right for you.
Contributor Veronica Leone Matthews is a North Carolina-based freelance writer with 11 years of experience writing for nonprofits and higher education. She covers lifestyle topics for The Penny Hoarder. Former staff writer Lisa McGreevey and freelancer Kent McDill contributed.
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When you walk into the house of your dreams, it should feel comfortable and peaceful. It should feel like home.
We want every step of the home-buying process to feel like that — intuitive. After all, so many people do it; In 2021 alone, 6.1 million home transactions occurred. Yet the fact remains: It’s a burdensome process that so frequently goes unexplained until you’re in the middle of it.
Once the offer on your dream home has been accepted, you might think the hard work is done. But that’s just when the hard work begins.
What’s next? We’re here to give you a primer before you find yourself immersed in a world you don’t understand.
The time it takes from when you make an offer and close on the home can vary quite a bit depending on where you live and the seller you’re working with. Here’s a typical timeline.
“Buyers typically make an offer to the seller through a real estate agent in a document called a letter of intent,” said real estate attorney Rajeh A. Saadeh. “Most offers have an expiration date within the letter, but either way, buyers usually receive responses from sellers within one to three days.”
Since responding quickly is seen as a common courtesy, you should expect to hear back from your seller (or their agent) with an acceptance, counter-offer, or rejection by the third day. There are some situations in which a seller may take longer to respond, which we’ll explain.
Once your offer is accepted, you’ll typically have three days to make what’s called an earnest money deposit, which acts as proof to the seller of your intent to buy the home. This usually ranges from 1-3% of the sales price but can go up to as much as 10% in a competitive market or a bidding war. The money is generally applied to the total down payment or closing costs.
What follows is a series of formalities that can bring forth their own set of complications: the home inspection, receiving loan approval and — the final step — closing on the home.
Real estate contracts are generally contingent on passing certain hurdles, so a hiccup in one of those can affect whether you close on the home. For example, many real estate contracts are dependent on a home inspection. If the inspection turns up unexpected problems that make the buyer wary, they generally have a certain amount of time to vacate the contract. Contracts can also have contingencies on a title search, ensuring that the seller is the rightful owner, and on mortgage approval, among other factors.
While real estate agents are supposed to shepherd the buyer through the process, it’s still important to understand what each step entails. When it comes to a home inspection, it’s a good idea to enlist a trusted third party home inspector even if the seller has provided you with a prior inspection report. Home inspections usually take several hours and range from about $300 to $500, according to Fixr. Before choosing an inspector, it’s important to research the various types of home inspections available, including a standard inspection, roof inspection, plumbing inspection, structural inspection and pest inspection. Based on common problems in your area or any issues in your home’s past, it may be a good idea to tack on a few specific home inspections in addition to a general report.
Once the inspection is finished, your next step will be to ensure your loan is approved. Before purchasing a home, buyers can submit a pre-approval letter from a lender showing how much the buyer is qualified to borrow. But this does not mean that the loan is in hand. Instead, the lender now needs to review in full the buyer’s information—along with the underwriting team—and ensure that the loan can still go through as planned. The home appraisal is an important part of this process: lenders will require that an unbiased appraiser determine the home’s value and ensure it is in line with the sales price. Just like an inspection, an appraisal costs money—in fact, it can cost between $300 and $450, usually paid by the buyer. If the appraisal comes in lower than the sales price, the price will either have to be lowered or the buyer will have to pay more upfront.
One thing is certain: the process moves fast. Almost every week brings with it a new challenge.
“If your offer is accepted, the sale process begins, a deposit is made within three days, and inspections and appraisal are typically completed within 17 days,” says broker Brandon Brown. “Loan approval is then completed before 21 days, with the closing of the property happening around day 30.”
But that is the low end of the timeline. Closings usually range from 30 to 45 days after going under contract. The average time to close a house purchase was actually 50 days, according to September 2021 numbers.
Once your lender has given the final loan approval (and produced the corresponding documents), they’ll be ready for your signature. Before COVID-19, signing typically happened with all parties (buyers, sellers, real estate agents and notaries) present. But with more transactions happening remotely and mobile notaries becoming more common, getting everything signed and notarized might take a little longer.
When all of the required documents are finally signed, they’ll be sent back to your lender for one more review, at which point the funds to purchase your new home will be released and a title will be generated. This title officially transfers ownership of the property from the seller to the buyer, and once it’s in place, the home is legally yours.
Somewhere between getting all your paperwork in order and ready to be signed, you may decide to do a final walkthrough. This step is usually more of a formality, but it also guarantees that the home is in the same condition as the day the offer was made — and it’s worth doing, especially if you have any outlying concerns.
Sometimes, sellers can go much longer than three days before responding to an offer. There are a few reasons for this.
If a seller receives a lot of offers, this can delay their response time.
Saadeh pointed to an offer made on a Friday during a weekend with an open house. In that case, the seller may want to wait.
“Sometimes a seller may want to hold off on responding to the offer to see if other offers may come in,” he said.
The same could be true if the seller has upcoming tours that they think might result in a competing offer.
So while it isn’t considered good practice to leave buyers hanging indefinitely, a seller may not get back to you ASAP.
In a competitive market, it’s a good idea to make sure your offer has an expiration date, ensuring that the seller must respond within a certain amount of time or the offer no longer stands.
If your offer is countered or rejected, you have a few options.
“If the seller counters, then the buyers have to decide whether to accept the seller’s new terms, or counter back and continue the negotiation until an agreement is made,” Brown said.
In the case of a rejected offer, you’ll likely want to start hunting around for a new house. But if you really love this home in particular, you can talk with your real estate agent about making another offer on it.
“If the offer is rejected, usually the conversation ends,” Saadeh said. “But the buyer can make another offer if they so choose.”
At this point, the seller will again either accept, reject or counter your offer. Since sellers aren’t under any obligation to respond to offers at all, it’s possible they even ignore your offer — especially if it’s an unappealing one. If that happens, chances are you just didn’t make a compelling enough bid.
Here are a few ways to avoid having your offer ignored.
Since you’ll rarely find yourself in a situation where you’re the only interested buyer, it’s important to know how to make a competitive offer. One of the most common reasons offers are rejected or ignored is when they’re perceived as shockingly low. But there are other reasons a seller might disregard or reject your offer.
“Even a higher offer may be less likely to be accepted by the seller if the buyer is asking for too many concessions or for the seller to pay for things that aren’t typically seller-paid in the contract,” says Scott Trench, CEO of Bigger Pockets. This might include things like getting the home surveyed and appraised, which are usually considered buyer expenses.
“Closing cost concessions requested by the buyer can pose an issue because they cut into the seller’s net profits,” Trench said. “Asking the seller to pay for things they normally wouldn’t may result in the seller choosing someone else’s offer over yours.”
Another reason sellers might say no thanks? If it doesn’t seem like you’re a serious candidate.
“Sellers want to know that you can close,” Trench said.=. “Include a copy of your pre-approval letter, or go one step further and have your lending officer call the seller’s agent and let them know how qualified you are.”
Find out what matters most to your seller, and you’ll be one step closer to making an offer they’re willing to accept.
How long should a response to your offer take?
You can expect to receive a response to an offer within one to three days, but it’s best to include an expiration date with your offer. This ensures that sellers realize they have to respond within a certain amount of time or the offer is no longer valid.
How do I make my offer stand out?
Remember that there is a lot more that goes into an appealing offer than just the sale price. Sellers may want a quick closing, cash versus a loan or a waived home inspection. Having a solid rapport between the seller and the buyer’s real estate agent will make a difference.
How long does the closing process take?
So you’ve gotten your offer accepted. Congratulations. Now is the hard part. The closing process on average tends to take between 30 and 45 days, but it can take as much as 50 days or more. Be prepared for the unexpected.
What should I know about the home inspection?
First, budget accordingly. Home inspections on average run between $300 and $500, but they can be even higher depending on how many you elect to have. This is an important distinction: depending on where your home is located, what previous problems it had and what your insurance requires, you may need to pay for inspections with a specific focus. This could include a roof inspection, a pest inspection or a structural inspection. While these inspections can save you money in the long run, they can be expensive in the moment.
How does the appraisal work?
If you plan to pay for your home purchase using a loan, then you’ll have to have an appraisal, required by the lender. The appraisal generally runs between $300 and $450 and is paid for by the buyer. The appraisal is meant to prove to the lender that the house is actually worth its listing price. But if an appraisal comes back with a number lower than the sales price, the seller will either have to lower the price or the buyer will have to make up the difference in their down payment.
I’ve reached closing day. Now what?
Closing day largely means signing documents and ensuring that your down payment and closing costs have been transferred to the seller or their appropriate source. Shortly before the closing, you’ll receive a closing disclosure that will go over the final totals. It’s important to review that document before closing day in case anything is different from initial tabulations.
Contributor Larissa Runkle frequently writes on finance, real estate, and lifestyle topics for The Penny Hoarder.
Writer Elizabeth Djinis is a contributor to The Penny Hoarder, often writing about selling goods online through social platforms. Her work has appeared in Teen Vogue, Smithsonian Magazine and the Tampa Bay Times.
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HONOLULU — A jury on Thursday found two Native Hawaiian men guilty of a hate crime for the 2014 beating of a white man who was fixing up a house he purchased in their remote Maui neighborhood.
U.S. District Judge J. Michael Seabright ordered Kaulana Alo-Kaonohi and Levi Aki Jr. detained pending sentencing scheduled for March 2, and marshals moved to handcuff the two men after the verdict was announced in the afternoon.
Family members and supporters wept in the courtroom and called out to the men: “I love you,” and “Be good.” “God bless you daddy,” said Alo-Kaonohi’s son Kahue, 3.
In an unusual move, the U.S. Department of Justice sought to prosecute Alo-Kaonohi and Aki and secured a federal grand jury indictment in December 2020 charging each with a hate crime count punishable by up to 10 years in prison.
Prosecutors alleged during the trial in U.S. District Court in Honolulu that Alo-Kaonohi and Aki were motivated by Christopher Kunzelman’s race when they punched, kicked and used a shovel to beat him in Kahakuloa village. Kunzelman was left with injuries including a concussion, two broken ribs and head and abdominal trauma, prosecutors said.
Alo-Kaonohi previously pleaded no contest to felony assault in state court and was sentenced to probation, while Aki pleaded no contest to terroristic threatening and was sentenced to probation and nearly 200 days in jail. The federal trial was held separately, to determine if they were guilty of a hate crime. It’s unclear why it took so long for U.S. prosecutors to pursue hate crime charges.
Local attorneys say they’ve never heard of the federal government prosecuting Native Hawaiians for hate crimes before this case.
Lawyers for Alo-Kaonohi and Aki did not deny the assault but said it was not a hate crime. It was not race that sparked the attack, they said, but Kunzelman’s entitled and disrespectful attitude.
The men were upset that Kunzelman cut locks to village gates, their attorneys said. Kunzelman said he did so because residents were locking him in and out. He testified that he wanted to provide the village with better locks and distribute keys to residents.
Kunzelman testified that while Alo-Kaonohi and Aki beat him, they told him no white people would ever live in Kahakuloa village. However, he acknowledged that’s not heard in video recorded during the attack.
Kunzelman said he decided to take two pistols to Maui after hearing that a contractor he hired to do mold remediation had been assaulted when he showed up and after his realtor said the close-knit community of Native Hawaiians had a problem with white people.
He also installed cameras on his vehicle, which were on during the attack. The vehicle was parked under the house and recorded images of what was happening downstairs, including Aki pacing with a shovel on his shoulder. The video only captured audio from the assault, which took place upstairs.
Lawyers for Alo-Kaonohi an Aki told jurors the video shows that they didn’t use any racial slurs.
“Haole,” a Hawaiian word with meanings that include foreign and white person, was central to the case, highlighting multicultural Hawaii’s nuanced and complicated relationship with race.
At one point Aki is heard saying, “You’s a haole, eh,” using a Hawaiian word that can mean white person. Defense attorneys said he didn’t use the word in a derogatory way.
“It’s not a hate crime to assault somebody and in the course of it use the word ‘haole,’” court-appointed attorney Lynn Panagakos said during her opening statement. She noted that Aki is part-Hawaiian and part-haole.
“’Haole’ has multiple meanings depending on the context,” she said. “It’s an accepted word.”
Megan Kau, a Native Hawaiian attorney not involved in the case, said it depends on the tone and manner in which the word is used.
“These Native Hawaiians who live in a secluded, very traditional community who use the term ‘haole’ to describe people that are not from Hawaii — that’s the term that they use,” she said. “We all very often use the term ‘haole.’ It’s not derogatory unless you use it in a derogatory sense.”
Wiping away tears outside the courthouse following the verdict, Alo-Kaonohi’s father, Chico Kaonohi, said bias was not a motivation behind the attack and “’Haole’ is not a racial word.”
“Where we come from, we’re not racial people,” Chico Kaonohi, said. “It wasn’t about race.”
Attorneys for both defendants declined to comment Thursday. Prosecutors did not immediately respond to an email seeking comment.
Kunzelman testified that he and his wife decided to move to Maui from Scottsdale, Arizona, after she was diagnosed with multiple sclerosis. He said his wife loved the island.
He said that a Hawaiian woman visited him in his dreams and told him to buy the dilapidated oceanfront house, which he and his wife purchased sight-unseen for $175,000 after coming across a listing for it online.
Kunzelman and his family never got to live in the home, he testified. They now reside in Puerto Rico.
He sat in the courtroom watching as the verdict was announced. He could not immediately be reached for comment afterward.
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This story has been corrected to reflect that the defendant’s son is 3 years old, not 4.
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HONOLULU — A white man who says he was a victim of a hate crime when two Native Hawaiian men assaulted him while he was fixing up a home he purchased in their remote Maui village testified Wednesday that his attackers were racially motivated, even though he conceded that no racist comments can be heard in video taken during the 2014 beating.
Christopher Kunzelman said the men beat him and told him no white people would ever live in Kahakuloa village — a comment that’s not heard in the footage. Kaulana Alo-Kaonohi and Levi Aki Jr. are on trial for one federal count each of a hate crime. Their defense attorneys don’t deny the assault, but say their actions were motivated by Kunzelman’s entitled and disrespectful attitude — not his race.
Alo-Kaonohi and Aki punched, kicked and used a shovel to beat Kunzelman, leaving him with injuries including a concussion, two broken ribs and head and abdominal trauma, U.S. prosecutors said.
Under questioning by Salina Kanai, a federal defender for Alo-Kaonohi, Kunzelman acknowledged that the men were enraged about Kunzelman earlier cutting locks on village gates but made no mention of his race.
“He’s not talking about your skin color, he’s not talking about your race,” Kanai said of Alo-Kaonohi, who is heard in the video calling him “brah” and “buddy.”
Kanai said Alo-Kaonohi, during an expletive-laced tirade about the locks, didn’t call Kunzelman a “haole,” a Hawaiian word that can mean white person.
Kunzelman responded, “Correct, not yet.”
More than five minutes into the incident, which was recorded by cameras on Kunzelman’s vehicle parked under the house, there was only one utterance of anything racial, Kanai said.
“You’s a haole, eh,” Aki said in the recording.
The video shows what is happening downstairs, including Aki pacing with a shovel on his shoulder. The video captures the sound coming from upstairs, where Kunzelman said he was beaten, but not any images.
What’s not audible in the video is the men calling him “haole” in a derogatory way and threatening to shoot him with his own gun, even though they were shouting, Kunzelman said.
Kunzelman testified that he and his wife decided to move to Maui from Scottsdale, Arizona, after she was diagnosed with multiple sclerosis. He said his wife loved the island.
A Hawaiian woman visited him in his dreams and told him to buy the dilapidated oceanfront house, he said, which he and his wife purchased sight unseen for $175,000 after coming across a listing for it online.
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HONOLULU — Lawyers representing two Native Hawaiian men don’t dispute they brutally assaulted a white man who purchased a house in their remote village on the island of Maui.
They acknowledged the 2014 attack was wrong, but they said it wasn’t a hate crime, as U.S. prosecutors allege.
Trial began Tuesday for Kaulana Alo-Kaonohi and Levi Aki Jr., who are charged with one federal count each of a hate crime.
Alo-Kaonohi punched and kicked Christopher Kunzelman and Aki hit him with a shovel when Kunzelman tried to fix up the house he purchased in Kahakuloa village, Assistant U.S. Attorney Chris Thomas told the jury.
Alo-Kaonohi dragged his finger down Kunzelman’s face and said his skin was the wrong color, Thomas said.
The attack, which left Kunzelman with injuries including a concussion, two broken ribs and head and abdominal trauma, never would have happened if it weren’t for his race, Thomas said.
It wasn’t Kunzelman’s race that sparked the attack, attorneys for the men said, blaming their actions on his entitled and disrespectful attitude.
The assault on Kunzelman is “hard to stomach,” said Craig Jerome, one of Alo-Kaonohi’s federal defenders. The attack was provoked by a belief that Kunzelman didn’t have a valid easement to the property and because he cut chains on village gates, Jerome said.
The altercation escalated when the men realized Kunzelman had a gun, Jerome said.
Kaonohi pleaded no contest to felony assault in state court in July 2019 in the case and was sentenced to probation. The trial in U.S. District Court in Honolulu is only to determine if they are guilty of a hate crime. They face up to 10 years in prison if convicted.
Footage of the attack from cameras on Kunzelman’s vehicle don’t show that Alo-Kaonohi uttered any racial terms or slurs, Jerome said.
Aki later told police Kunzelman was acting like a “typical haole,” Thomas said.
Haole, a Hawaiian word with meanings that include foreign and white person, is central to the case, which highlights multicultural Hawaii’s nuanced and complicated relationship with race.
An enraged Alo-Kaonohi called Kunzelman “brah,” “buddy,” and various other terms attached to expletives, Jerome said: “”But he never calls him a haole, not once.”
Aki didn’t use the word haole in a pejorative or hateful way, Jerome said.
“It’s not a hate crime to assault somebody and in the course of it, use the word haole,” said Aki’s court-appointed attorney, Lynn Panagakos, noting that Aki is both part-Hawaiian and part-haole.
“Haole has multiple meanings depending on the context,” she said. “It’s an accepted word.”
Kunzelman testified Tuesday that he and his wife decided to move to Maui from Scottsdale, Arizona, after she was diagnosed with multiple sclerosis because she loved the island.
“It’s just serene and beautiful,” he said.
They purchased the four-bedroom oceanfront house after seeing a listing for it online, he said, and that he went to Maui first to renovate the house for his wife and their three daughters.
Kunzelman said he decided to take two pistols to Maui after hearing that a contractor he hired to do mold remediation had been assaulted when he showed up and after hearing his realtor say that the close-knit community of Native Hawaiians had a problem with white people.
Kunzelman said he and his family never got to live in the Maui house and now reside in Puerto Rico.
He was expected to continue testifying Wednesday.
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Opinions expressed by Entrepreneur contributors are their own.
Homeownership, for many people, symbolizes the epitome of success that comes from years of hard work and dedication. Homeownership is an aspirational status even amongst those who would rationalize it isn’t for them when believing it is beyond their grasp.
When only the most “successful” individuals own their homes, we create a gap of disparity within the overall population. As many of us have seen in the last few years, this gap has grown dramatically and created an ever-widening moat around the fortress of affordability, deterring many families from the prospect of homeownership. It would be a rare individual who wouldn’t want to own a mortgage-free home and never have to make a mortgage payment or monthly rent payment again.
Related: How to Save the Dying American Dream of Homeownership
When looking for ways to introduce accessible and effective homeownership models, the shared equity housing model (SEH) stands out as a solution. Shared equity housing works because it accelerates the saving of a down payment while still offering affordable monthly payments. Through the SEH model, home buyers can plan a realistic route to ownership that allows them to believe they are contributing to their future investment. Even if the initial investment is a relatively small amount, it still contributes to the overall equity of the individual.
The three key components of the shared equity approach are: 1) an affordable monthly savings program, 2) a share in the growth in the equity in the home, which creates pride of ownership that leads to 3) the home being well looked after. Having the home cared for like an owner would reduce annual operating costs for the housing fund by more than the cost of the equity share given up.
There are several factors that make shared equity housing a financially and socially attractive concept. A few of these concepts are as follows:
The home buyer starts with a small deposit or down payment, ideally 1%.
The home buyer does not need to qualify for a mortgage upfront.
The buyer is matched with a home where the monthly payment is comfortable for their family’s income level.
The buyer shares in the equity growth in the home from the price appreciation.
The exact % share of the home equity growth is dependent on the deposit size. 20% is a good range because it accelerates the home buyer towards a 20% down payment.
The home buyer keeps their share of the equity even if they don’t end up buying the home.
These factors are all significant in the process, but the share of equity is crucial when it comes to implementing a change in the industry. Most rent-to-own programs that currently exist do not secure the home buyer’s equity and instead require the home buyer to either close on the home purchase or forfeit their equity.
Related: Accessibility (or Lack Thereof) in Today’s Housing Market
Due to the ongoing housing crisis, many families are struggling to even consider the prospect of homeownership. Rather than rely on the adaptive measures we see in the market today, shared equity housing could help alleviate the stresses facing homeowners by providing alternative investment opportunities. SEH models offer prospective buyers the realistic potential to achieve a position of ownership position and make strategic steps toward a more traditional purchase.
SEH allows smaller, more achievable investments that contribute to a healthier society, market and individuals, with buyers eventually building reputable equity. As a result of SEH models, research has found that the number of foreclosed properties drops drastically in markets where SEH is introduced. Shared equity housing benefits home buyers by creating an environment that increases care for the investment. When multiple individuals are invested in the well-being of one unit or housing community, we see increased pride and commitment to savings and even going above and beyond by adding even more value to the home through improvements.
Not only does this benefit the buyers, but it builds a stronger community as a result. For buyers, the shared equity housing model is a beneficial solution that opens the door to opportunity in an otherwise exclusive market.
Key takeaways:
Shared equity housing accelerates the ability to buy property by removing barriers.
The shared equity housing model creates the potential for buyers who are unable to contribute a substantial down payment.
The shared equity housing model is affordable and allows incremental investment opportunities.
Shared equity housing implies shared interest in a home and increases stewardship.
The model promotes community through a shared interest in one investment.
Pursuing SEH would allow the reduction of annual operating costs for the housing fund.
There is less instability in the housing market with a shared equity investment than when compared to a high loan-to-value mortgage financing approach.
Related: What Is a Housing Market Recession?
Many individuals are skeptical of a large institutional system’s ability to change, but it’s been done before. Developers and real estate professionals need to begin examining the future of the industry and the various ways they can create a more sustainable, families-focused housing market. Shared equity housing is one financial solution to an accessible future in housing for all, and it’s time we begin taking those next steps on both an individual and national scale.
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The expense of decorating your place can come as a shock.
A couple of throw pillows, an area rug and some curtains could total up to more than a month’s rent. But you shouldn’t have to drain your bank account or go into debt adorning your home.
Sure, you’ve probably already thought of big-box retailers like Walmart, Target and Bed Bath & Beyond, as well as the online behemoth Amazon. But there are lots more options for finding deals on home decor.
Here are 20 cheap home decor stores and websites to help you save money as you outfit your place.
At Home is a Texas-based chain that operates more than 200 stores in 40 states. According to its website, the large, warehouse-like stores “take unnecessary frills out [to] pass all of those savings on to [the customer].” Sign up for At Home Insider Perks for special discounts and information on new products and markdowns.
Check with each store about options such as curbside pickup or contactless delivery and for info on any shipping delays.
Big Lots is a chain that sells a variety of merchandise, including furniture and home decor. The company operates over 1,400 stores in 47 states. Budget-conscious shoppers can enjoy the store’s everyday low prices and free shipping for online orders of $59 or more. The BIG Rewards membership program offers exclusive coupons and savings.
CB2 is Crate and Barrel’s less expensive offshoot brand. Shop the “sales and offers” section of the website for discounted prices and get free shipping on over 1,000 items. CB2 also has more than 20 locations in major cities including Chicago, New York, Los Angeles and Miami — where you can meet with a home design specialist.
Dormify has all you need to outfit your college dorm or first apartment. Get free shipping on orders over $100. Shoppers can join the retailer’s referral program and earn rewards for referring friends.
H&M is not just a retailer for jeans and T-shirts. You can find H&M Home in select H&M locations — plus there are standalone stores in eight cities across the U.S. H&M Home sells a variety of affordable products for your bedroom, living room, bathroom and more. The company’s membership program offers savings and perks for those who sign up.
Habitat for Humanity ReStore is a secondhand store that sells home improvement materials, furniture and appliances. The stock at each of the 900-plus retail locations changes regularly as stores rely on donations from the community. In addition to scoring cheap deals at Habitat ReStore, you’ll also be supporting the nonprofit’s efforts of building homes for those in need. Check other local thrift stores if you don’t have a Habitat ReStore near you.
Hayneedle is an online retailer specializing in home decor and furniture — with a large selection of products to spruce up your outdoor area. Enjoy free shipping on all orders.
Power tools or gardening supplies might come to mind when you think of The Home Depot, but this home improvement giant also has a nice selection of home decor options. Shop for furniture, wall decor, lighting, rugs and more. The Home Depot has over 2.300 locations and offers price matching, special sales and virtual DIY workshops.
HomeGoods, a sister store to TJ Maxx and Marshalls, stocks its stores with products like bedding, housewares, rugs, furniture and decor — all for low prices. Shop online and get free shipping on orders over $119, or visit one of the more than 800 stores nationwide.
The Scandinavian chain Ikea is well-known for its ready-to-assemble furniture, modern housewares and Swedish meatballs — all at affordable prices. There are over 400 Ikea warehouse stores across the world. Join the Ikea Family membership club for discounts and rewards.
Kohl’s is a department store that sells various home decor products from brands like Food Network, Sonoma and Scott Living. Shop everyday deals, enroll in the company’s rewards program and earn Kohl’s Cash to help you save on future purchases. If you’re not shopping in person at one of the 1,000-plus stores, you can get free shipping on online purchases of $49 or more.
Lowe’s is another home improvement store that sells a selection of home decor products. You can find furniture, wallpaper, window treatments, home accents and more, online or in store. Use these tips to save money at Lowe’s.
You may think of Michaels as just an arts and crafts store, but you can also buy home decor items that don’t require any DIY skills. Michaels has a great selection of seasonal decor, frames, wall art, floral arrangements and more at its 1,250 locations and online. Become a Michaels Rewards member to get deals and information about upcoming sales promotions.
At Nordstrom Rack, you can find discounts up to 70% off original prices. Although the store is mostly known for its clothing and accessories, it also sells a variety of affordable home decor. There are about 350 locations in the United States and Canada.
Overstock is a popular online retailer for discounted home decor and furniture. Its loyalty program, Club O, costs $19.95 a year and comes with free returns, 5% off every purchase, price match guarantee and more.
Tuesday Morning is a discount retailer that operates in more than 450 locations across the country. The no-frills stores buy name-brand closeouts to pass along the savings to customers. Tuesday Morning Perks members get special offers.
Uncommon Goods sells unique, hand-crafted products from around the world. Prices vary, but shop sale items or join the Uncommon Perks program for $19.90 a year to enjoy benefits like free shipping.
Wayfair’s claim to fame is that it’s got just what you need when it comes to decking out your home. The online retailer regularly promotes sales and offers free two-day shipping on thousands of items over $35.
World Market sells merchandise from around the globe at affordable prices. The company operates nearly 250 stores nationwide or you can shop online. Sign up for the World Market Rewards program to earn additional discounts.
Instead of making your way to one of Goodwill’s 3,300 stores, now you can just click on your favorite bargains and have them shipped to you, via its website GoodwillFinds.com. Find more ways to find thrifty finds for your home in this story about Goodwill’s online stores.
Nicole Dow is a former senior writer at The Penny Hoarder. Deputy editor Tiffany Wendeln Connors contributed to this post.
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Despite signs of a cooling housing market, home prices are still relatively high, resulting in bigger down payments.
Over the past year, average down payments in the country’s 50 biggest metros have grown by more than 35%, according to a LendingTree report, based on 30-year fixed-rate mortgage data from Jan. 1 through Oct. 10, 2022.
While high home prices and interest rates may push some buyers to the sidelines, those still in the market may have “deeper resources,” particularly if they’re downsizing, explained Keith Gumbinger, vice president of mortgage website HSH.
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Here are the top five metros with the largest down payments.
In 2022, these five metros have had the highest down payments based on LendingTree mortgage data from from Jan. 1 through Oct. 10, 2022.
With higher average mortgages and annual household incomes, it’s not surprising these metros topped the list. And these down payments represent a large share of yearly earnings.
“In general, the more you can afford to put down, the lower your ultimate costs are going to be,” said Gumbinger.
A larger down payment means a smaller mortgage, which can “certainly help offset the cost of rising interest rates to a degree,” he said.
While certain kinds of mortgages allow down payments as low as 3%, you’ll have to pay mortgage insurance on loans with less than 20% down, and you may see higher interest rates, Gumbinger said.
The average interest rate for 30-year fixed-rate mortgages of $647,200 or less is still above 7% for loans with a 20% down payment.
“More is generally better because that helps to lower your costs overall,” he added.
In 2021, the median down payment was 13%, with nearly 4 in 10 using proceeds from a previous home sale, according to a 2022 report from the National Association of Realtors.
Despite softening demand, home prices are still “significantly higher than two years ago,” with many buyers struggling to put 10% or 20% down, said Melissa Cohn, regional vice president at William Raveis Mortgage.
The median home sales price was $454,900 during the third quarter of 2022, compared to $337,500 during the third quarter of 2020, according to Federal Reserve data.
Many buyers take advantage of lower down payment options, she said, such as 3% or 5% for conventional mortgages or 3.5% for Federal Housing Administration loans.
“With a smaller down payment, it’s more expensive every which way,” Cohn said. “But for many people, it’s the only way they can afford to get into their home.”
While smaller down payments mean higher interest rates and mortgage insurance, home buyers may reduce these expenses in the future, she said. When interest rates drop, there may be a chance to refinance, and buyers may remove mortgage insurance once they reach 20% equity in the home, Cohn said.
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Since 2011, the average price of a house in the U.S. has more than doubled — rising from $176,000 in 2011 to $358,000 in 2022.
Though home prices have recently dipped for the first time in more than a decade, inflation, growing student loan debt and high interest rates have made the dream of homeownership more challenging for each generation — especially in a booming real estate market.
But it’s not impossible. We’ll walk you through the process of buying a house step by step.
While the road to buying a house has become more riddled with potholes and speed bumps, it’s still one you can navigate with the right savings plan, a decent credit score and a little professional guidance.
Think you’re ready to embark on your home buying quest? Here’s how to buy a house in nine simple steps.
A strong credit score is crucial to securing a low interest rate on your mortgage.
Over 30 years, the most common length of a mortgage, paying just 1 percentage point more in interest could cost you big time. For example, if you bought a house with a $200,000 fixed-rate 30-year mortgage at a 5% interest rate, you’d pay an extra $40,000 in interest over 30 years than you would have at 4%.
At a minimum, your credit score should be 620. Some mortgage lenders may approve you for a loan if your score is under 620, but prepare for astronomical interest rates and larger down payment requirements. An above-average credit score falls within the 680 to 740 range. Anything above 740 will secure you the best interest rates available.
If you have poor credit, don’t rush to buy a house just yet. You can improve your credit score over time by paying off debts (especially credit cards), lowering your credit utilization and diversifying your credit portfolio responsibly.
Paying off debt is especially important because lenders look at your debt-to-income ratio, which is your monthly debt obligations (including your estimated future monthly mortgage payment) divided by your pre-tax monthly income. Lenders look for a debt-to-income ratio of 43% or lower.
Making just one extra mortgage payment a year can have a big impact on how much interest you pay over the life of your mortgage, too.
Saving for a down payment while also paying off debt is challenging, but if you want to be a homebuyer, you may need to do both.
The age-old wisdom is that you need to save 20% for a down payment. But with the average home sale price at $358,000 as of 2022, that would make the average 20% down payment $71,600. And in 2022, most first-time homebuyers do not have that kind of cash lying around.
In recent years, it has become more common to put as little as 10%, 5% or even 3.5% down. FHA loans, which are popular among first-time buyers require only 3.5% down when your credit score is above 580.
VA loans — reserved for members of the military, veterans and some surviving spouses — require no money down but typically require a funding fee, which varies based on the price of the home and whether the borrower has a down payment.
There are benefits to putting 20% down, however. When you put 20% down, you usually avoid having to carry private mortgage insurance, or PMI.
VA loans do not require PMI even if you put 0% down. A larger down payment can also make your offer more attractive in a competitive market.
How much house you can afford and how much you should actually spend on a house may be two vastly different numbers.
The golden rule: Never set your sights on a house that you could afford — but that will cause you to make other sacrifices you’re not jazzed about, like cutting vacations or ruling out education.
Similarly, if you or your significant other (if you’re buying with a partner) both work, but one of you is considering a career change that could result in less income or becoming a stay-at-home parent, you should not budget using your current combined income.
Be conservative. Your home shouldn’t cost more than three to five times your annual income, but if any part of you that suspects your income may decrease in the next 10 years, stay closer to three times your income than five.
Housing expenses — including your mortgage payment, homeowners insurance and property taxes — generally should not exceed 30% of your monthly income.
Before shopping for houses, you should shop for a lender. You can compare mortgage rates online and interview prospective lenders to find the best deal.
Ask friends, family and your real estate agent (if you already have one) for recommendations and try your own financial institution. But, ultimately, go with the mortgage lender that will offer you the best interest rate on your home loan.
Then ask that lender for a preapproval letter. This is different from being prequalified. Lenders can typically prequalify you with just a few data points that they don’t verify to give you a ballpark range of the loan amount and interest rate they might offer.
But a preapproval letter is an official document that says the lender is committed to giving you a home loan, assuming nothing changes in your finances. Getting preapproval takes more work, because the lender will send all of your financial documents (W-2s, pay stubs, tax returns, etc.) to an underwriter for verification.
A lender may preapprove you for a higher amount than you’ve budgeted for. Remember: Just because they are willing to give you that much does not mean you have to spend that much.
The beauty of the homebuying process is that the seller will typically pay your real estate agent fees, so hiring an agent doesn’t cost you a thing, though some sellers may lower the price slightly if you purchase without an agent.
Ask family members and friends for recommendations on real estate agents, and always hire a buyer’s agent. These home buying tips include several recommendations for hiring a good real estate agent who will find you the best deal on your dream home.
This is the most exciting step. Now you can actually set foot inside of homes and envision your life inside them. Visit open houses and go on private tours with your real estate agent, but also research houses on your own on sites like Zillow and Trulia.
But don’t be distracted by fresh paint and that hot tub in the backyard. When you’re house hunting, have a sharp eye for what really matters. If possible, bring along friends or family who know what to look for in a new house.
Cosmetic things like ugly carpet and questionable wallpaper can be changed relatively cheaply. The structural components are what you should be most concerned with. Some questions to think about when you tour a home:
Once you have found a house that fits your needs and is within your budget, you and your real estate agent will submit an offer. Be prepared to negotiate the purchase price, especially if you envision needing to do some remodeling.
Your real estate agent likely has a number of tricks up her sleeve to make your offer more appealing — but then, so does everybody else’s agent.
The seller may make a counteroffer. You can counteroffer right back until you land on a contract that you both find pleasing.
You might have to put up “earnest” money as a show of good faith to the seller that you are serious about moving forward with the sale. You’ll get this money back if the sale falls through because of issues with the appraisal or home inspection. If you purchase the home, the money is applied to the price of the home.
At this point, the house will go into escrow while you secure financing, get the house appraised and coordinate a home inspection ahead of closing.
Your lender will typically coordinate the home appraisal to determine what the house is worth. If the house is valued at less than what you offered to buy it, the contract will likely need to be revised, because it is not a good investment for the lender.
It is your responsibility to coordinate the home inspection. Though not always legally required, a home inspection is something you should absolutely do. A home inspector will investigate the property, checking for structural issues, HVAC problems and issues with the roof and major appliances. The average home inspection costs between $300 and $400.
You might need to hire specialized inspectors to test for pests, radon, mold and asbestos and to inspect pools, chimneys and sewers. These inspections can be more expensive.
A few days before you officially close, you should do a final walk-through of the house to ensure everything is as you expected. Check that all agreed-upon repairs were made, and if the contract specified that certain appliances would be left behind, like the washer and dryer, verify that those are still present.
On closing day, drink lots of water and maybe do some hand and forearm stretches because there’s going to be a lot of paperwork to sign.
This will also be the day you write a massive check for the down payment and any closing costs that you’ve agreed to cover. It can be painful to watch that paper rectangle slip away from your fingers, but it’ll all be worth it when you are christening your new home with a glass — or whole bottle — of Champagne.
When closing, you need to bring your checkbook, any required identification (driver’s license or passport, for example) and maybe even a thank-you card for your real estate agent.
All told, the process of buying a house takes, on average, 40 to 45 days from application to closing. But considering that there are a lot of steps before making an offer, be prepared for months of hard work.
Following the above step-by-step guide will keep you on the right path when buying your first house, but it’s still possible to make mistakes. These common mistakes are easy to avoid.
Real estate agents can get you into homes you might not otherwise find, help you negotiate and spot unfavorable terms in contracts. Plus they probably won’t cost you a dime as the buyer.
When you’re making your budget, it can be easy to see the cost of a house online and assume you would pay the listing’s estimated monthly payment.
However, those estimates assume your credit report is immaculate and you are putting 20% down. If you’re calculating expenses on your own, don’t forget that you will pay more than just the cost of the house. Plus there’s homeowners insurance, PMI, property taxes and, of course, interest.
If you forgo an inspection and issues surface shortly after your purchase, you are out of luck. You’ll be paying out of pocket, and the seller is not liable.
Even if you’re approved to borrow X amount, you should not buy a house for that amount if you don’t feel comfortable spending that much.
Remember: You are likely signing a 15- to 30-year commitment. Make it a number you’re comfortable with.
Timothy Moore is a freelance writer for The Penny Hoarder. Senior writer Robert Bruce contributed to this article.
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Adjustable rate mortgages got a really bad reputation during the Great Recession, but now they’re back in a big way. In fact, they’re more popular than they’ve been in 15 years.
Hordes of homeowners began defaulting on their adjustable rate mortgages back in 2008, contributing to a massive housing crash. ARMs have since become more heavily regulated and are less likely to break the economy into a million pieces.
Today’s homebuyers are increasingly choosing ARMs to save money as mortgage rates keep rising higher, making monthly mortgage payments painfully expensive. And the Federal Reserve has indicated it’s still concerned about inflation, which likely means additional interest rate hikes are coming.
But is an adjustable rate mortgage the right move for you? We asked a bunch of financial experts and mortgage brokers for their honest opinions, and what they had to say was eye-opening.
With a fixed rate mortgage, you’ll pay the same interest rate on your mortgage for the entire length of your home loan, most commonly 15, 20 or 30 years. Not so with an adjustable rate mortgage. ARMs start out with a lower, more affordable interest rate for a set period, like 5 to 10 years. After that, they “adjust” to a variable interest rate, based on whatever the market rate is at the time.
Let’s look a little closer at the pros and cons of an adjustable rate mortgage.
Interest rates on ARMs can go way up after the initial low-interest period, making your monthly payment a lot harder, if not impossible, to afford. That’s what happened to a lot of people in the last big housing crash.
It’s a risk that more people are willing to take these days, though, because inflation and the Federal Reserve’s rate hikes have jacked up mortgage rates to the highest they’ve been since 2008.
Picture an adjustable rate mortgage where the interest rate is set for the first five years. The average rate on that kind of loan is now more than a full percentage point below that of a 30-year fixed loan, according to Freddie Mac. On a $400,000 loan, that’s about $360 in monthly savings.
How tempting is that immediate savings? Well, the share of mortgage applications that are for ARMs has rocketed up to more than 12%, double what it was in January, according to Zillow. It’s the first time it’s above 12% since 2007. For most of last year, it was only around 2.5%.
The financial advisors we spoke with are quick to say that today’s adjustable rate mortgages aren’t the same ARMs that cratered the housing market back in 2008.
Back then, many lenders weren’t bothering to check whether homebuyers had enough income to afford a mortgage. When their monthly payments ballooned quickly, those homeowners defaulted on their loans. Since then, stricter regulations have tightened up lending practices.
“In the past, ARMs have been associated with poor mortgage practices, but it’s important to know that ARMs are very different from what they were decades ago and have more regulations in place,” said Heather Harmon, head of finance for Opendoor.
Here’s the million dollar question: If you’re struggling to afford a house, should you get an adjustable rate mortgage?
We spoke with a lot of financial advisors, and they would all ask you the exact same question:
How long are you planning to stay in that house?
“Adjustable rate mortgages can be good for people who don’t plan on staying in their property long,” said Nate Johnson, a real estate investment expert for NeighborWho, a property search site. “ARMs are almost always guaranteed to be worse deals financially for homebuyers who intend to live in their property for 10 or more years.”
Most ARMs have their interest rates fixed for five, seven or 10 years. After that period, the rate can adjust every six months, according to Matt Hackett, operations manager of Equity Now, a mortgage lender in Mamaroneck, N.Y.
When deciding on a loan, you really need to ask yourself how long you’re likely to stay in one spot.
“My advice to people considering an ARM is to fast-forward their lives,” said Matt Gray, founder of the AnthroFi Wealth Group in Denver. “Are they planning to stay in the house for longer than the fixed-rate period of the loan? If so, what are they going to do if the rate jumps up 3% and they end up owing significantly more per month?”
Not everyone thinks ARMs are a good idea. We found some experts who said they’d warn you away from them.
Jeffrey Zhou, CEO of Fig Loans, thinks ARMs are too risky because interest rates are probably going to keep going up for some time.
Between inflation driving prices up and the war in Ukraine that’s disrupting oil and gas supplies, the rising costs will likely result in higher interest rates for ARMs in the coming years, he said.
“Thus, getting an ARM doesn’t make sense at all,” Zhou said. “I discourage it.”
Rob Drury, executive director of the Association of Christian Financial Advisors, is suspicious that lenders are so readily offering ARMs these days. In his view, a bank that sells you an adjustable rate mortgage is betting that interest rates are going to rise and make your payments balloon.
“I would never recommend an ARM,” Drury said. “The only time the industry pushes ARMs is when interest rates are low, and in the 15 to 40 years before one’s mortgage is paid off, those rates will inevitably increase, possibly quite significantly.”
Other financial advisors say it can be worth considering an adjustable rate mortgage, as long as you’re careful and you have a contingency plan if mortgage interest rates continue to rise over the life of the loan.
ARMs can be especially useful for people who are in the military who tend to move a lot, said Mike Hunsberger, owner of Next Mission Financial Planning, based in Missouri.
“I work with military personnel who move frequently, so if the buyer knows they will only be in the location for a few years, using an ARM could make sense,” he said.
If you end up going this route, it’s important to decide exactly how long your mortgage’s interest rate will stay the same before it’s allowed to change.
How long will the rate be fixed? The shorter the time, the cheaper the loan is. But if you decide to stay in your house, be prepared to pay more in the long run.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.
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My husband and I purchased several timeshares over the years. (Apparently, I can’t say no.) My husband has now died, and I am 72.
Supposedly, one of the benefits of a timeshare is that your children can inherit it. However, our adult son has no interest in inheriting these “vacation opportunities,” nor in being obligated to pay the ongoing maintenance fees. How can I protect him from inheriting the timeshares, which include the burden of paying the annual fees or risking damage to his credit rating for not paying?
-J.
Dear J.,
Timeshares are often sold on the promise of idyllic family memories that can continue for generations to come. Instead, they turn out to be a financial albatross for countless buyers. That’s why eBay is filled with listings from desperate owners seeking to unload their “vacation investments” for as little as $1.
But I have good news: Saying no to buying a timeshare can be tough after a high-pressure sales pitch that stretches on for hours. But it’s fairly easy to say no to inheriting a timeshare in most situations.
In most cases, a timeshare will become part of your estate when you die. If you included it in your will, it would go through probate and pass to the beneficiary of your choosing. You could also transfer it directly to a beneficiary through a trust or joint tenancy titling should you know someone who actually wants a timeshare. If you die without a will or the timeshare for some reason isn’t included, your state’s intestacy laws would determine who inherits it. That would probably be your son, assuming he’s your only child.
When you die, your son could file what’s called a disclaimer of interest with the probate court and send a copy of each disclaimer to your estate’s executor, along with the timeshare companies. Basically, he’d be rejecting the inheritance.
Your son wouldn’t need to reject his entire inheritance if you have other assets that you plan to leave to him. The disclaimer would apply specifically to the timeshares. As always, it’s important to consult with an attorney whenever you’re drafting a legal document.
Generally, he’ll have nine months from the time of your death to do this, though the laws vary somewhat by state. Once your son rejects the timeshares, they would likely go to the next person in line according to your state laws. That means that each person who stands to inherit your timeshares would need to file their own disclaimers of interest.
If all your potential heirs reject the timeshare, the timeshare company will probably foreclose on it. Your estate may be responsible for fees, which could eat into any other inheritance your son would receive. But your son wouldn’t personally be on the hook for any timeshare-related costs.
Your son and any other heirs should avoid using these timeshares after you die. Whenever you reject an inheritance, you can’t derive any benefit from the property you’re disclaiming. By staying for even one night at one of your timeshares, he’d risk violating this rule.
The advice I’ve given up to this point has been for your son. One thing you can do to make things easier is to make sure his name isn’t on any of the deeds. Timeshare companies frequently push buyers to put their children’s names on the deed, saying it’s more convenient. But this will make disclaiming the inheritance more complicated for your son. If your son’s name is on any of the deeds, contact the timeshare companies about removing it. They’ll often agree if there’s no loan attached.
If you don’t use these timeshares much, look into your options for getting out now to make things easier for your son later. Unfortunately, this is much easier said than done — hence all those $1 timeshare listings. Some companies may agree to take back the timeshare if you don’t have a loan.
It may also be possible to sell some units if they’re located in a popular market, albeit for a small fraction of what you originally paid. Just be aware of the many unscrupulous players involved. Don’t pay any upfront fees to a company that promises to sell your timeshare or get you out of the agreement. Use the Licensed Timeshare Resale Brokers Association website to find a broker who will charge a commission if they sell your timeshare instead of demanding an upfront payment.
You’ve probably learned the hard way that timeshares are typically a terrible deal. Otherwise, the salespeople wouldn’t have to lure you into presentations with free hotel stays and theme park tickets. They’d have a willing pool of buyers.
Fortunately, though, it’s a lot easier to say no to inheriting a timeshare. You may be stuck with your timeshares for now, but your son doesn’t need to take on the burden of these money pits.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
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