Scottsdale Homes for Sale Archives - Page 24 of 42 - Scottsdale Real Estate Team / Arizona Luxury Homes

How to Buy a Home in One Market While Selling in Another By Joe Szabo, Scottsdale Real Estate Team

October 13, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team Someone being transferred for work or making a major move for personal reasons may end up selling in one market and buying in another. The ideal scenario would be to sell in a sellers’ market, like the San Francisco Bay area or Seattle, and buy in a buyers’ market, such as Providence, RI. The worst-case scenario is to do the opposite. Here are some tips for buyers and sellers in any market.

Know before you go

The days of a national estate market are gone. Today, markets vary by state, town, city and even block by block. But most people don’t realize this. So it’s important to start by researching the hyper-local market of the town or neighborhood that interests you. Read local blogs. Watch the number of days a home is on the market. Understand the sale price to list price ratio in the town where you’re buying. Upfront research can save you a lot of time and headaches. Plus, you don’t want to rely entirely on your real estate agent to tell you about that market. Get informed on your own.

How to sell in a buyers’ market

Selling your home in a buyers’ market can subject you to a harsh reality. Your market could be slow due to a high level of inventory, low demand from buyers or simply slow economic times. If you need to sell in a buyers’ market, put your best foot forward from the start. Make sure your home is priced to sell. You may not have the luxury of waiting for six months to test the market. Homes will sell, no matter the market, when priced right. Spend days or weeks removing junk and prepping your home for the market. You’ll have to pack up when you move anyhow, so it makes sense to start packing before you even list your home. Not only will it save time later, but it will help thin out the house, make more space available and help the home show better during open houses. Strongly consider any suggestions your agent makes for slight cosmetic fixes or staging.

How to buy in a buyers’ market

Who doesn’t love being a buyer in a buyers’ market? You have lots to choose from and the full attention of sellers. Take your time to see as many homes as possible to get the lay of the land. Focus on the most motivated sellers, as this is where you may uncover the best values. If a handful of homes meet your needs, ask questions such as: Why is the seller selling? What is the seller’s time frame for moving? How long has the seller lived in the home? You can ask these questions through your agent or by asking the seller’s agent directly. The more you ask, the more you may uncover just who is the most motivated seller. Be open to taking on some renovation work, because that can add value to the property. The market will eventually turn, and there’s no better feeling than knowing that you bought low, with some bonus equity.

How to sell in a sellers’ market

Along the West Coast, sellers are being overwhelmed with buyers at open houses and private showings. Demand is high, and things are moving quickly. But you still have to work at selling. If you don’t clean the home or present it to the market in its best possible light, you may leave money on the table for the buyer who is desperate for a “deal.” If you have the luxury of receiving multiple offers, focus on the best buyer and the best terms and not so much on the bottom line. You want the buyer who is going to close. The last thing you want is to have to go back on the market. When this happens, everyone will wonder what’s wrong with your home. It could be that the buyer got cold feet or remorse. If you aren’t sure who is the best buyer, ask your agent. The best buyer is the one who has seen the home multiple times, is pre-approved for a loan, has been in the market and has even lost out on recent home sales. This buyer is working with a local agent and committed to buying. Your agent will know who they are.

How to buy in a sellers’ market

Buyers in a sellers’ market find themselves frustrated over a lack of inventory and homes that sell quickly. The competition is fierce, and they need to invest a good part of their time on buying a home. For a serious buyer, then, finding a home becomes a part-time job. Have your ducks in a row and your team in place. Work closely with a good local agent and a local mortgage pro. When a home hits the market, get in ASAP. Don’t wait for the open house, because a more aggressive buyer might get in and take it away before you do. When competing with other buyers, have your inspections and do as much due diligence as you can before making an offer. An offer with swift, few or no contingencies is music to the sellers’ ear. They want to be sure the deal will close for the most money as quickly as possible. Find out what the sellers want and give it to them.

Reducing the stress of buying and selling

Today’s younger buyers and sellers, enabled by the global economy and the Internet, can live anywhere and move around multiple times in a short period of time. For them, as well as everyone else, understanding that all real estate markets are different, requiring different approaches, is always the first step toward success. After that, it’s important to plan well in advance. Buying and selling real estate can be extremely stressful. Approaching each transaction methodically, and with as much advance planning as possible, can help relieve some of that stress. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings

Retirement Investments & Condo Insurance By Joe Szabo, Scottsdale Real Estate Team

October 6, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team Real estate investor and Zillow Blog contributor Leonard Baron answers questions from readers regarding buying, selling and investing. Have a question? Send it to [email protected]

Rental properties vs. stock market

Hi Leonard — I will retire in the next few years with a little over $1 million. I fear the stock market at this time. Will property rentals be a good way for income in my retired years? If yes, is it better to buy the property with cash and have no debt and have rental income? Robert W., Buffalo, NY Hi Robert — You’ve got some good questions and significant decisions herein, and you need some expert guidance. A good fee-only certified financial analyst (CFA) or certified financial planner (CFP) should be able to walk you through options on what you can do with that million, and what income you can expect based on the risk you are willing to take with your portfolio. This will help you determine whether rental real estate, which generally has much higher risk than a well-diversified portfolio of stocks, should be part of your portfolio. After an education from a financial adviser, if real estate is part of the plan, that’s where my guidance could help. So to your questions:

Will property rentals provide good retirement income? The answer is probably not. Most real estate investors who have cash flow properties bought them decades ago, and now they are starting to pay off. But in general, don’t expect cash flow for a long time.
Should I buy with cash instead of debt? Having a significant amount of money tied up in property during retirement is probably not a good idea. What if you need the money, your tenants stop paying rent, the property is destroyed or you need long-term care? Owning dirt won’t pay the bills! It’s much easier to obtain cash from liquid assets when in need.

By the way, congratulations on having over $1 million saved!

Condo insurance

Hi Professor — I bought a condo – with all cash – where the HOA insurance covers the structure and common areas. My insurance agent says I should get a policy for the interior of the unit. They’re not very expensive, so I’m going to do it. However, it’s going to be a rental property so I don’t own anything inside, so I don’t really see a need for it! Is this just another revenue generator for insurance companies with a product that isn’t really needed? Mike H., Portland, WA Hi Mike — NO, NO and NO! Get a new insurance agent if yours can’t explain why you need an interior policy. I agree with you: Who cares about the interior property? The issue with condos, whether a personal residence or investment property, is liability. Wait until you or your tenant causes a fire, smoke damage or a flood that damages nine of your neighbors’ units. The HOA is going to say it’s your problem, which it might very well be. Then your neighbors are all going to be coming after you for reimbursement for their losses. Without an interior HO-6 condo policy with adequate liability insurance, it’s not going to be a pleasant experience. Get that policy in place today. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

Fall, Holidays Still Prime Season for Sellers By Joe Szabo, Scottsdale Real Estate Team

September 29, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team Fall officially began Sept. 23, but that doesn’t mean you should scrap plans for selling your home this year. In fact, October, November and December can actually be good months to sell. Now is the time to plan for it if you’ve even considered putting your home on the market. For decades, the conventional thinki

ng was that if you missed the spring selling season, you missed the boat. Once summer rolls around and school starts shortly after that, families are more settled, the thinking went, and therefore less inclined to pick up and move (unless a job change or other circumstance forced them). Also, Thanksgiving, Christmas, New Year’s and the January cold snaps follow the start of school. In the past, no one wanted to take time to drive around looking at homes when all of this was happening. Things have changed. Today’s buyers aren’t necessarily timing a home purchase or sale around school schedules because people tend to settle down later in life and live longer. The result is urban expansion; more single, first-time and millennial buyers as well as baby boomers looking to buy (and sell). Also, a lot of home shopping, at least initially, happens online and via apps. Buyers don’t have to take time out of their busy schedules to drive around — they can just sit down with a tablet on the couch. As a result of the Internet, our hectic schedules and mobile lifestyles, the fall months are no longer a real estate dead zone. True, spring is still the busiest time overall. But there’s plenty of action happening after Labor Day through Christmas, enough to make it worth your while to put up the ‘For Sale’ sign. Here’s why.

Buyers are still out there

As mentioned, buyers never stop looking. A serious buyer is looking at new homes online 24/7, even through the holidays. If the right home appears, they’re ready to move. In fact, it could be that buyers in the early winter months are even more motivated than buyers in warmer months because there is less going on. They have fewer distractions and are laser focused on finding a home.

There’s less competition

A lot of people still buy into the old thinking that real estate slows to a crawl by October and virtually stops from Thanksgiving until, say, Valentine’s Day. As a consequence, many potential sellers figure there’s no reason to go on the market during these months. So they wait for spring. And that’s good news for you, because less inventory on the market = less competition for you.

Even January can be a good time to sell

By now you’re probably thinking about all the disruptions to your life that selling a home during the holidays might cause. For instance, you’re in the middle of wrapping Christmas gifts when your agent calls. She wants you to leave the house right away so she can bring a motivated buyer by for another look. If the potential for disruptions concerns you, put your home on the market in January. Inventory will still be very tight, and there will still be buyers out there looking. In fact, with the holidays over, there may even be more buyers out in January than in December. Also, January buyers may be more motivated. They’ve started doing their taxes and realize they need to buy. Or they’ve set a New Year’s resolution to buy a home within the next 12 months. Ultimately, as we enter the final quarter of 2014, there will no doubt be plenty of motivated buyers in the market, searching for just the right home at a time when there’s less inventory. Doesn’t that sound like a good time to sell? Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

Why You Should Get Off the Fence About Buying a Home By Joe Szabo, Scottsdale Real Estate Team

September 18, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team As the housing market continues to stabilize and show more signs of health and improved conditions, you might be thinking more seriously about purchasing a home, right? Here are some reasons why it’s (still) a good idea to get off the fence — sooner, rather than later.

Mortgage rates are (still) low

During the recession, the rate on the 30-year, fixed-rate loan averaged 4.32 percent. Now, rates are close to that, and there’s no recession! That means they’ve got nowhere to go but up — particularly because the Federal Reserve is expected to end its bond-buying program, which has been credited with pushing mortgage rates to historic lows, in October. Granted, rates aren’t expected to skyrocket overnight, but don’t think that a small uptick wouldn’t affect your budget. In fact, if rates were to go up by just 1 percentage point, your purchasing power would be reduced by a whopping 11 percent. To put this in further perspective: If you could afford a $400,000 loan at 4 percent mortgage rates, you could afford a loan of just $356,000 at 5 percent. An even smaller rise in rates — say from 4.5 percent to 5 percent — would add $75 to the monthly payment on a $300,000 house with $50,000 down. To see how much waiting could cost you, specifically, check out Zillow’s recent analysis here.

Home prices are (still) affordable

While home prices, nationally, continue to rise, up nearly 7 percent from July 2013, they are still 11 percent below their 2007 peak. And get this: Home buying is more affordable now than ever before. According to a recent Zillow analysis, U.S. home buyers at the end of the second quarter spent 15.3 percent of their incomes on a mortgage, far less than the 22.1 percent share homeowners devoted to mortgages in the pre-bubble days. This situation won’t last forever, especially as mortgage rates continue to rise.

Buying is (still) cheaper than renting

No doubt, buying a house is a significant purchase, but in a majority of the country, it’s (still) cheaper than renting. In fact, in half of metros in the U.S., buying beats renting after only two years. This can be attributed to historically high rental prices that have helped skew the rent vs. buy decision toward buying for those who can afford it. So if you can afford to buy, now is the time as rents aren’t getting any cheaper! Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

The Seller Won’t Negotiate: Time to Move on? By Joe Szabo, Scottsdale Real Estate Team

September 15, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team You’ve found your dream home, visited it a few times and reviewed the reports and disclosures. You’ve made an offer — only to discover that the sellers aren’t willing to negotiate. They’re firm on their price, no matter how high it seems relative to the market. Unlike retail businesses, which price their products based on inventory levels and market conditions, each seller is independent and has different selling motivations. Here are three strategies to help you move past a home you’re obsessed with.

1. Don’t waste time over-analyzing the seller

It’s easy to obsess over the possible reasons why the sellers rejected your offer. You might spend hours looking up a home’s sales history and tax records and then combine that data with the information you received from the sellers’ agent about their situation or motivations. Like a detective, you’re trying to solve the mystery by examining all the clues. Don’t do it. Trying to figure out the seller won’t get you anywhere. Worse, the time spent attempting to get inside the head of someone you don’t know is precious time spent away from your home search. If the sellers “just aren’t that into you,” it may be time to move on.

2. Put your best offer on the table

Maybe you haven’t offered the maximum you can afford yet, wanting to keep some room for negotiation. If you find that the sellers aren’t responding positively to your offers so far, it could be a sign that they are not motivated to sell. Just because you’re a real and active buyer wanting to purchase their house doesn’t mean they have to accept your offer. If they’re not responding, or they come back with a not-so-great counteroffer, cut to the chase. Make your maximum offer immediately and put it in writing. Then, if they still don’t respond, start looking elsewhere. If the sellers have a change of heart later, they’ll know how to find you.

3. Put the home behind you

Because purchasing a home can be both personal and emotional, it’s easy for a buyer (particularly a new one) to get hung up on one house and have trouble moving on. But this can only keep you from getting the house you want. To be a savvy buyer, consider each experience and the lessons learned. Chalk up unrealistic or unmotivated sellers to experience. Use that to your advantage the next time you make an offer. At the closing table weeks or months down the road, you’ll likely look back on that home you “had to have” and realize that the home you ended up with is much better in the long run. Never forget that, no matter how much you believe this one was meant for you, there will always be another great house. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

August 2014 Scottsdale Arizona real estate market update

September 11, 2014 Joe Szabo

Fall may be quickly approaching but with the triple digits still in the forecast it doesn’t feel like it will be cooling down any time soon. Fortunately activity in the Scottsdale real estate market is picking up! Let’s take a glance at how the Scottsdale real estate market faired in August. New listings are up from July with a total of 705 new listings vs. 687 in July. New contracts are also up slightly with 638 total. This is great news for the coming months as we will start to see an increase in closed sales. Current closed sales are also down this month, as expected, based on the previous month’s activity. The median sale price remained constant for the first time in several months, which is a nice change from the downward movement from the previous months. We are optimistic about the market improving as the weather cools down (hopefully!). During these up and down activity months it is more important than ever to consult a real estate professional that knows the Scottsdale market.

August 2014 Scottsdale detailed market report

Considering a purchasing or selling a property in Scottsdale? Call Joe and Linda Szabo – The Scottsdale Real Estate Experts! We hope that you enjoy reading and analyzing the Scottsdale Luxury Home Report and should you have any questions or comments, please feel free to Contact Joe Szabo at 480.688.2020 or email him directly at [email protected]. You can also visit https://scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results.

Buying and Selling a Home – at the Same Time – in a Buyers’ Market By Joe Szabo, Scottsdale Real Estate Team

September 11, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team Buying a home can be a nerve-wracking experience, so can selling a home. Try to take on both tasks at the same time and you’re doubling the stress. Good news: Doing some advance planning can help reduce your number of sleepless nights.

What is a buyers’ market?

Real estate is a business based on supply and demand. If there are only a few houses for sale, buyers have to compete for those available homes, making it a sellers’ market. When hundreds of homes are on the market, house hunters find themselves in stronger bargaining positions relative to sellers, making it a buyers’ market. According to an analysis published by Zillow, the nation’s top five buyers’ metro area markets are:

Cleveland
Philadelphia
Tampa
Chicago
Pittsburgh

In the Cleveland-Elyria-Mentor metro area, for example, the average listing spent 119 days on the market, and 28 percent of those properties had experienced a recent price cut, according to the Zillow analysis. Compare that to San Jose-Sunnyvale-Santa Clara, the nation’s top sellers’ market, where properties spent an average of 44 days on the market and the list price had been lowered on just 14 percent of those homes. Understanding your local housing market can help you determine how best to handle your own buy-and-sell scenario. “Buying and selling at the same time is something we help people do all the time,” said Leslie Ebersole, a real estate agent based in Chicago’s western suburbs. “The most important thing for people to realize is that, just like they’re out looking for the best home at the best value, people are looking at their home with the same lens. You have to realistically participate in the market.”

Read the rest of the article here

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

What to Know Before Building a Guesthouse By Joe Szabo, Scottsdale Real Estate Team

September 8, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team

Those tiny, often very cute homes that people are adding on their properties seem to be popping up everywhere these days. The tiny buildings can provide extra rental income, offer a less-expensive housing option or provide a home for a relative. Accessory dwelling units, or ADUs, are second dwelling units created on a lot with an existing house or attached house. They’re often referred to as mother-in-law apartments, granny flats or studio apartments. As a homeowner, what are the legal issues to consider before building an ADU of your own?

Different cities, different rules

First off, different cities have different rules. Before plotting the space for your new tiny house, check with your city’s planning and zoning department to determine what those rules are. You can start online at accessorydwellings.org for a list of regulations by state and city. Although it’s not always necessary to hire an architect or engineer in the design process, it’s often a good idea, says Lydia Afeman, who is building a home with two micro-apartments on her property in Houston. Involving professionals can help ensure that you’ve covered all your bases on structure safety. Southern California real estate lawyer Flavia Berys urges homeowners to check local zoning laws and apply for the proper building permits with their local planning department. She also advises them to confirm that their contractor is insured and licensed. Homeowners should check for building restrictions in their home or property title policy and consult their homeowners association, if applicable.

How to Own a Vacation Home With Friends By Joe Szabo, Scottsdale Real Estate Team

August 28, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team If you’re in the market for a vacation home but are looking to minimize costs as real estate prices rise and you face a stagnant paycheck, you might be considering going in with trusted friends or family members. Assuming you go that route, here are a few things to keep in mind so that you don’t turn your dream house into a nightmare.

Decide how the property will be used

Conflicts will arise if you approach the purchase of this second home with different assumptions. For example, one party may view the home as a money-making rental unit and may be fixated on its investment potential; the other side, however, may think of it primarily as a vacation spot for all to enjoy. For a house-sharing arrangement to succeed, you’ve got to be in agreement as to how this property will be used — in advance.

Put business before pleasure

Just because everyone gets along and is compatible doesn’t mean there won’t be conflicts down the line. To avoid possible disagreements (and keep the relationships in tact) consult with your attorney to draft an ownership agreement that specifies when each co-owner gets to stay in the house and how you’ll share costs and responsibilities. While how often you get to use the house is generally determined by how much money you put in, creative arrangements can work, too. After all, each situation is unique, but you will need to agree – not only on how and when you can use the house, but perhaps more importantly, how you’re going to handle the big-ticket expenses (mortgage, taxes, insurance, utilities) as well as minor repairs.

Consider an LLC

We’ve all heard the horror stories: An owner loses his portion of the home when a co-owner defaults on the mortgage; one homeowner dies, and that person’s portion of the investment goes to a co-owner rather than to the deceased owner’s relatives; there’s a lawsuit, and someone loses his/her stake in the property. The best way around these types of issues — and others — is to buy the property within a limited liability corporation, or LLC. Consider setting one up. It’s relatively inexpensive to do.

Have an exit strategy

Any sense as to how long you both plan to keep the property? What happens if one of you becomes financially strapped and can’t keep up with payments? Might you sell the property one day, and if so, under what circumstances? Can you sell to an outsider? How will pricing — and payouts — be determined? Could you prevent a sale by buying out your partner? An exit strategy is essential. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

Can Paying Off Your Mortgage Early Damage Your Net Worth? By Joe Szabo, Scottsdale Real Estate Team

August 18, 2014 Joe Szabo

By Joe Szabo, Scottsdale Real Estate Team Just about every homeowner has experienced the same sensation at one time or another: The excitement of a home purchase is deflated at the closing table when the closing agent slides over the Truth in Lending Statement that shows just how much money the loan will cost over the term of the loan. It is a sinking feeling to see that a $250,000 loan will likely cost in excess of $500,000. To avoid this, many people strive to pay off their loans early. Indeed, one extra mortgage payment a year can make a huge dent in reducing the length and total cost of your loan. Assuming you can, the question still remains: Should you? Saving money seems like a no-brainer, but the answer that is right for you may be more complex.

Don’t throw away money on prepayment penalties

Before you can even crunch the numbers to decide if it is right for you, make sure you know what — if any — prepayment penalty you will be accountable for. Depending on the area of the country and the lending institution, you may or may not be liable for paying a penalty on an early payoff. Penalties are wasted money. They are funds that could be doing more productive work. At least if you are making mortgage payments, you get the benefit of tax deductions. You might be able to find a better use of your funds.

Have savings for retirement or cash cushion

Are you maxing out your retirement investing? If not, it is likely your financial planner will tell you to do this first. Besides the numerous benefits of maxing out retirement account payments, your money may be better suited toward alternative endeavors rather than reducing your mortgage debt payments. By continuing to carry your mortgage debt, you will be able to devote more of your funds to the here and now. You can increase your present-day savings by squirreling away for a cash cushion so that in the case of an unfortunate event in the future (such as illness or job loss), you will not feel the hit as much. If you spent all your extra money reducing your mortgage principal, you may be forced into a situation where you have to refinance to get that money back.

Consider your other debt payments and prioritize

If you carry consumer debt from month to month, especially credit card debt, you should first consider using all extra money to reduce those debt payments that have interest rates higher than your mortgage rate. If you start paying back low interest rate loans (mortgages) before high interest rate loans (credit cards), you are leaving money on the table each month. Until your high-rate loans are paid off, it does not even make sense for you to think about an early payoff. Why pay off a principal of a 4.5 percent loan and continue paying interest on a 14.5 percent loan?

Using your mortgage to outlast inflation

Your monthly payment may seem high to you today, but it is likely that in 30 years the same amount will seem like a joke. As inflation rises, keeping your mortgage may actually be a hedge against inflation if you have a fixed-rate loan. Your payments will never increase and over time will actually become “cheaper” comparatively.

Gaining emotional freedom

Perhaps the best argument for paying down your mortgage debt is the psychological release you will get in owning your home debt-free. There is a liberating sense of freedom in paying off a loan, especially when that means you now own a piece of property outright. It gives you flexibility, confidence and a method to avoid risk of loss since your dollars have been spent on achieving equity. But this may not be the fastest way at growing your net worth because those dollars are no longer working for you. The funds are tied up in your property and not out there in the world gaining interest. Just like most decisions in life, there are positives and negatives when deciding whether to pay down your mortgage early. On the one hand, you may have a debt-free asset. On the other, it may not make financial sense. The best advice is to first seek guidance from a financial planner. And then be honest with yourself about your goals. Only you can make the best decision for you. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

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