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Month: January 2021

7 Key Benefits of Downsizing

Posted on by Hometown Development

If you’re considering selling your large home to move into a smaller one, there are many advantages to living a cozier life. Let’s take a look at several benefits of downsizing you may not have thought about.

#1 Increased Capital

Starting with one of the most important benefits of downsizing, when you sell a larger house to buy a smaller one, you’ll likely have money to spare which can be used to pay off debts or invest in your future. With a smaller home, you’re also likely to have a smaller monthly mortgage payment, so you can enjoy the savings and use them toward something important to you.

#2 Reduced Costs

When you downsize, you can reduce your utility costs and living expenses by living in a smaller dwelling. Not only is there less house to maintain, but you’re also saving energy to power and heat a smaller home. Reduced square footage equals a reduction in energy costs, which not only improves your carbon footprint, but means serious savings for you.

#3 A More Manageable House

Another of the benefits of downsizing to a smaller home is more time for you and your family. Smaller homes require less upkeep, which means less time stressing about when you’re going to do chores, and less time doing chores when you get around to them. When you have a smaller house to take care of, you have more time to do other things that are more important to you — time to pick up that new hobby, spend time with your family, or get out and see more of the world.

#4 More Opportunity to Travel

A larger home ties you down with upkeep, security concerns, and general stress. When you downsize, it frees up your time and energy for other pursuits, like traveling. In a smaller house, you can spend less time worrying about housework and take that road trip you’ve been dreaming about. 

#5 A Happier Family

Downsizing can lead to a happier family dynamic. Living in close quarters encourages the family to spend more time together in communal spaces like the living room and kitchen. Rather than withdrawing to their own corners of a large house, family members are forced to spend time together — for the better. Although it can take a little adjusting at first, one of the major benefits of downsizing your home is a focus on gathering the family to eat, chat, and enjoy one another’s company.

#6 Effective Budgeting

Did you know that one of the benefits of downsizing is that it can help you stick to a budget? If your resolution is to keep your spending in check, downsizing can help you do just that. With a smaller home, you will enjoy reduced monthly expenses including a more manageable mortgage payment, and lower utilities. Also, since you don’t have extra space to fill with furniture and things, you’re less likely to spend the money on things you don’t need, and more likely to get creative with storage and multipurpose items.

#7 Something New

Downsizing your home is a great way to start the next chapter of your life and try something new. Whether your kids have grown and moved out of the family house, you’ve just gone through a divorce, or you’re just ready for a new adventure, you can start your new life in a smaller home and embrace the benefits of downsizing.

Thinking about downsizing, but stressed about the prospect of preparing a home for sale? Downsize without the hassle — talk to the team at Hometown Development about your options for a simple, fast home sale.

How Does a Second Mortgage Work?

Posted on by Hometown Development

Second mortgages are a type of lien used on a property that is already attributed to a loan. They can be beneficial tools for some homeowners and a huge risk for others. If you’re considering a second mortgage on your home, it’s important to be prepared for what it means for your home and your financial future.

Here’s everything you need to know about a second mortgage, including what it is and how a second mortgage works.

What Is a Second Mortgage?

A second mortgage, similar to a traditional mortgage, is a loan that is taken out against your home as collateral. Since it is taken out after the purchase loan, it’s called a second mortgage. A second mortgage is also second in line to be repaid if your home is sold in the foreclosure process.

Some homeowners may be interested in taking out a second mortgage if they need to free up money to pay for things like unexpected repairs, bills, or fees. While taking out a second mortgage may be an option for many homeowners, it also comes with risks that are important to understand before making this financial decision. 

Let’s look at how a second mortgage works, some of the pros and cons of this type of loan, and some other options that may work for you if a second mortgage doesn’t feel right. 

How Does a Second Mortgage Work?

A second mortgage works by borrowing based on the home equity you have accrued. Home equity is the value of the home you own. When you have a mortgage on your home, you don’t technically own all of it, so the part that you do own (equity) is the part of the mortgage you have paid off. Keep in mind, this doesn’t include interest, which makes up a significant portion of your mortgage payment.

How Do You Build Home Equity?

Equity can be accrued in a few ways. First, if your home’s value increases over time, so does your equity. This can happen if you make improvements to your home, or the real estate market in your area becomes more lucrative and your home’s value appreciates. Also, when you make payments on your mortgage, you will own a larger percentage of your home, so the total equity you have will increase. 

Similarly, if your home’s value decreases over time or you take out more loans against your home (reducing the percentage you own) your home equity decreases.

What Does a Second Mortgage Look Like?

When your lender grants a second mortgage, it will typically be a percentage of your home equity (on average, 20 percent). The second mortgage can take a few different forms. It can either be granted as a lump sum or a revolving line of credit.

Second Mortgage Lump Sum

The home equity loan can be given as a lump sum for you to spend as you wish. Second mortgages can be used in an almost infinite number of ways – to pay for repairs to your home, pay off credit card debt, or pay tuition fees. When you receive the lump sum, you will begin making monthly payments toward resolving the debt, with interest of course. This is an additional payment to that of your “first” mortgage, or purchase loan.

Second Mortgage Line of Credit

A home equity line of credit works similarly to a credit card, your loan amount is stated as the credit limit and you can borrow against that amount. Whatever you borrow is what you pay interest on and repay — so if you only use 5,000 of the 10,000 limit, you will make payments on the 5,000. You can make as many withdrawals as you want up to the credit limit. Once the borrowed amount is repaid, you can withdraw the full 10,000 limit again.

Pros and Cons of a Second Mortgage

While a second mortgage can free up your home’s equity into funds you can use right now, it could put you in a difficult financial position. Before taking out a second mortgage on your home, consider the pros and cons of this important decision.

Pros of a Second Mortgage

  • Lower interest rates than credit cards: due to the high value of your home, your interest rates for a second mortgage will likely be significantly lower than your credit card interest rates. For this reason, many people use a second mortgage to pay off their credit card debt, and then repay the second mortgage over the loan term.
  • Flexible uses: With a second mortgage, you are not restricted to using the loan amount in any way. You can spend the money on almost anything — as long as you’re able to pay it back with interest over the agreed period of time.
  • Higher loan amounts: A second mortgage allows you to borrow more than you could usually get from a loan without using your home as collateral. Because homes are typically worth a significant amount of money, there is more collateral to borrow against, giving you a higher loan amount.

Cons of a Second Mortgage

  • Higher interest rates than refinancing: Because there is less collateral than your original home loan, second mortgage interest rates will be higher than those of your original mortgage. If refinancing isn’t an option, you may still be able to take out a second mortgage.
  • Financial Strain: A second mortgage requires an additional mortgage payment to your current monthly bills, which could put a strain on your finances, especially if you’re taking out the second mortgage to cover previous debt, or find it difficult to meet your original mortgage payments.
  • Higher risk of foreclosure: If you stop making payments on any of your mortgages, you enter the foreclosure process. With the additional strain of a second mortgage, there’s a higher risk of foreclosure. This is why it’s not a good idea to use a second mortgage to pay for living expenses or costs — even for your first mortgage — as this method of spending is not sustainable and will likely result in losing your home.

Alternatives to a Second Mortgage

Is a second mortgage really the best way to accomplish your goals? If the risk of a second mortgage isn’t appealing to you, you may still have other options available for freeing up some extra cash flow from your home. As an alternative to a second mortgage, you could discuss refinancing your mortgage with your lender, or consider selling your home to resolve debt, get out of a troublesome mortgage, or free up the available capital locked in your home.

Refinancing Your Home Loan

When you refinance your home loan, you discuss your loan terms with your lender. They may be able to repackage your home loan with lower interest rates, or a longer loan term, depending on your needs. With a refinanced loan, the new loan takes the place of your existing mortgage. This is a great way to save a little money without having to assume the risks of a second mortgage.

Sell Your Home to a Real Estate Investor

If refinancing isn’t an option, or you’re having trouble making payment on your original purchase loan, a second mortgage isn’t going to help you resolve your financial problem. The best thing you can do with a home you cannot comfortably afford is to sell it and look for another that better fits your financial needs. When you sell your home, the sale will pay off the original mortgage, and you will have cash left over you can use to purchase another home, or pay off other debts or costs. 

For a simple, hassle-free sale, you can sell your home to a real estate investor. When you sell to a real estate investor, they will assess your home based on its current condition and make you a fair cash offer based on its market value. With this type of sale, you don’t have to make any repairs, prepare your home for the market, or hire a Realtor. Best of all, in as few as five days, you could have your home sold and liquidate the equity locked in your home for use however you see fit.

If you’re considering taking out a second mortgage on your home, it’s important to take time to really think about it. If your finances might be better served by getting out from under a troublesome house, the Hometown Development team can help. Give us a call to learn more about your options today.

How to Sell Rental Property With or Without Tenants

Posted on by Hometown Development

If you have a rental property to get off your hands, it can be complicated to sell quickly. The sale process can seem even more complex if you still have tenants occupying some or all of the units on the property. While selling a rental property without tenants is more straightforward, both are possible with the right buyer. Let’s talk about how to sell rental property with or with or without tenants — without the hassle. 

 

How to Sell Rental Property Without Tenants

If you need to sell rental property that’s vacant, the process isn’t too different from a typical property sale. You’ll go through the same steps of preparing the property for sale and listing it on the market, but you’ll be looking for the right buyer willing to take on an investment property — and all of the upkeep it requires. Decidedly easier than selling with tenants, prepare the property for sale, and find the right buyer looking for an investment property

In these situations, real estate investment firms make an ideal buyer for a rental property because they are actively looking for real estate investments, have the time and energy to devote to a new project, and have the capital available immediately to make you a fair offer and sell on your timeline. If you need to sell a rental property without tenants, sell to a real estate investor for a fast, hassle-free sale.

How to Sell Rental Property With Tenants

It’s no secret that it can be more difficult to sell a rental property with tenants. This is mostly because it takes just the right buyer for the sale. You also have to consider your tenants’ rights and try to make the sale easier for all involved parties. 

To sell a rental property with tenants, you’ll likely need to vacate the property before you can sell, unless you can find a buyer willing to take over the current leases. Let’s talk through a few of the options available to you.

Wait for Tenants’ Leases to Expire

If your tenants rent month-to-month, you could simply give them notice and the appropriate amount of time to vacate. Or, wait until the current lease term is up for the last tenant. However, if you need to sell now, you may not have time to wait 6 months or more for your tenants to move on their own. In that case, it’s best to be up-front with your tenants about your plans to sell, and hope that they will move out sooner. Or, you can try to convince them to move.

Convince Tenants to Move

Tenants with a fixed-term lease are entitled to fulfill the lease term and continue living at the property. If the end date of the lease is beyond the sale date, the buyer must take over the lease. However, if both the property owner and the tenant mutually agree to dissolve the lease, both parties can decide on a flexible end date.

The best way to go about this is to have an honest discussion with your tenants about selling the property. It’s important to actively communicate with your tenants throughout the process. This way they’ll feel involved in the process and be more likely to participate in making the sale a success for everyone.

Persuading your tenants to move cannot involve threatening behavior or a blanket refusal to maintain the property. Their rights clearly state they may continue to live on the property until the end of their lease, so the ball is in their court, so to speak. You may try to sweeten the deal for tenants to move early, such as offering to pay moving expenses or the security deposit for their next apartment, but ultimately it is their decision.

Sell Rental Property to Buyer Who Will Honor Tenants’ Leases

The final option is to find a buyer willing to take over the current leases of your tenants. Under the new owner, tenants will maintain their current lease agreements. Once the lease term has expired, it’s up to the new owner whether they want to renew the lease with the tenant or not. 

This option suits tenants because they won’t be required to vacate, but can make it more difficult to find a buyer willing to take on the extra responsibility. If they want to schedule renovations, they may have to wait until the tenants move on their own.

Sell Rental Property to a Real Estate Investor

If you need to sell rental property with tenants, consider selling to a real estate investor. A real estate investor has the time and capital to sell according to your timeline and will work to find the best solution for you and your tenants. They care about your situation as well as your tenants’ rights and will help the sale go through with minimal disruption.

When you sell rental property to a real estate investor, you don’t need to worry about making repairs and updates to the property before selling. You don’t have to work with a Realtor, or host open houses. You don’t have to wait weeks or months to find the right buyer for your property. Real estate investors can help you sell rental property fast for cash in a hassle-free sale that works for you and your tenants.

Need to sell your rental property, but not sure what it means for the current occupants? Talk to Hometown Development. We can help make selling your property easier for you and your tenants.

Copyright 2021 Hometown Development Company, LLC

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