Robert Dietz, senior vice president and chief economist of the National Association of Home Builders, predicts that single-family home construction will continue to grow.
“With home builder confidence near record highs, we expect continued gains for single-family construction,” he tells Forbes in a December 2020 interview. “Albeit at a lower growth rate than in 2019-2020.”
Pandemic-driven demand put 2020 home sales at the highest level since 2006. Experts claim buyers were driven by a desire for larger suburban homes with dedicated spaces for work and school.
Charles Moore
CityScene asked Charles Moore, president of Central Ohio Middlefield Bank, the most common questions hopeful homeowners have about the process.
CS: When it comes to mortgages, should I choose a fixed-rate or an adjustable-rate mortgage?
CM: With a fixed-rate mortgage, your loan interest is set and cannot change. Variable has a range of rates that can fluctuate over time. Before you choose an adjustable-rate mortgage, be sure to know how high the rate can go and if you can maintain payments at that rate.
CS: Should I get a 15-year or 30-year term loan?
CM: This depends on if you prefer a shorter repayment period with higher payments and lower interest rates or a potentially higher interest rate with lower monthly payments. Your banker can help you crunch the numbers to see how both outcomes will affect your total interest paid. If you can afford a larger monthly payment, 15-year mortgages can save you money over the life of your loan.
CS: What are some core questions I need to ask when thinking about investing in my new home?
CM: The biggest factor is cost. No surprise there. Many folks justify a new dream home over low interest rates and overlook the increased financial and time cost of maintaining a larger property. Be sure to do a thorough accounting of the monthly budget and be honest with yourself about the sacrifices it will require. Proper planning is key to making sure your dream home really is the perfect fit.
CS: What can I do now to prepare for my next home?
CM: After figuring out your projected monthly budget, you’ll want to begin an intense research period to see what makes the most sense for your lifestyle and financial situation. Save for a down payment and create a list of your dream home’s non-negotiables. Lastly, get pre-approved for a loan so you’ll know your total potential budget upfront.
Mortgages and Airbnbs
In many cases, you can finance an Airbnb rental under specific circumstances. If you want to live in a property but host short-term renters, one option would be to pursue a traditional mortgage for a primary residency. However, you must intend to live there. Also, when you buy and finance the property and it's listed as a primary residency, you won’t get to use rental income to qualify for your mortgage.
Another option for funding an Airbnb is an investment property loan, which means you wouldn’t use this space as your living quarters. These can be harder to qualify for and require at least a 20 percent down payment.
A third loan option would be a private loan, financing offered by a private investor or lender. While there are very few requirements and hoops to jump through, the down payment is the most costly out of all the options.
3 things to avoid when refinancing a mortgage
Refinancing at the wrong time
You may not be in the best position to refinance if there’s less than half a percentage point different between current interest rates and the rate you were given when you purchased your home. You should also note your credit score and if it’s decreased since you first applied for the mortgage. Also, if you currently own less than 20 percent stake in your home, you may not want to refinance.
Paying more attention to the interest rate than the annual percentage rate (APR)
It’s a good idea to look into the APR, as that will give you a better idea of how much your loan will cost in total. Interest rate only tells you how much the lender is charging you for borrowing, while APR reflects the interest rate plus many of the fees the lender charges for closing your loan.
Not talking to different lenders
As a rule of thumb, it’s best to get quotes from at least three different vendors before you commit to a new loan. A study by LendingTree reported that homeowners who only got one quote paid an additional $66,000 in interest over the course of the loan compared to those who shopped around and got multiple quotes.
Information curated from Tara Mastroeni of Forbes Magazine.
Should I pay off my mortgage before I retire?
While paying off your mortgage before you retire is a major financial achievement, a financial contributor from U.S. News & World Report says that it’s not essential to a healthy retirement. There are several scenarios in which you would be of sound mind to keep your mortgage going into retirement.
- You are earning a better rate on investments than you pay on your mortgage.
- You have other higher-interest debt.
- You can qualify for a tax deduction by saving elsewhere.
- You would be paying off your mortgage with savings. This varies by individual and depends on things like cash flow, investment accounts and how much you’ve saved for retirement.
Mallory Arnold is an editor. Feedback welcome at marnold@cityscenemediagroup.com.
