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Tom Ramsey's Blog

By Tom Ramsey | Broker in Portland, OR
  • Cut the cost of home maintenance

    Posted Under: Quality of Life, Remodel & Renovate, Home Ownership  |  February 14, 2014 6:59 AM  |  283 views  |  No comments

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      Homeowners once had to make a choice: the beauty of genuine wood and stone, or the easy maintenance of a man-made alternative.

      Installing vinyl siding over wood shingles, for example, meant you'd never have to repaint again, but also required sacrificing architectural charm -- and possibly getting kicked off your neighbor's dinner party guest list.

      Now, though, you can have it all. A new breed of manufactured products available at home centers and specialty shops looks realistic enough to preserve or even boost your home's appearance.

      While some of these modern materials are pricier than the natural versions, they will save you money and effort over the long term.

      Plus, "it's a compelling one-two punch for selling," says Lake Forest, Ill., realtor Carol Russ. "The traditional looks draw buyers in, and then I tell them that they're actually seeing new, super-durable materials."

      On the slides that follow, you'll find six imitations that might be better than the real deal.

    • Reverse mortgages: Safer, but far from risk-free

      Posted Under: Market Conditions, Financing, Home Ownership  |  February 7, 2014 9:12 AM  |  306 views  |  No comments
      reverse mortgage

      About 10% of reverse mortgage borrowers go into default.

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        NEW YORK (CNNMoney)

        For years, many older Americans who were short on cash turned to reverse mortgages to solve their money troubles -- only to find themselves deeper in debt or, worse, losing their homes.

        New federal rules have made reverse mortgages safer, but there are still some major pitfalls.

        Reverse mortgages are loans that people age 62 or older can take out against their home's equity. Backed by the Federal Housing Administration, the loan doesn't have to be paid back until the borrower either moves out or dies.

        Yet, many borrowers have run into problems because they took their payment as a lump sum and spent the cash too freely. They didn't have enough cash to paytheir property taxes, insurance and homeowner's association bills and were forced to default. As of September, nearly 10% of reverse mortgage borrowers had defaulted on their loans and had lost or were in danger of losing their homes, according to the FHA.

        Related: 5 housing bubbles to watch

        New rules, which launched in October, discourage homeowners from taking lump sum payouts by reducing the payment a borrower receives if they take the entire amount immediately. Homeowners who choose the lump sum option could see their payouts reduced by 10% to 18%, depending on underwriting factors. So the payout on a $140,000 reverse mortgage would go down to $125,000 or so if the borrower chooses a lump sum.

        Monthly payments usually work out better anyway, especially for those who live longer. Even if payments -- plus interest -- to the borrower exceed the value of the home, the payments keep coming. "You could live to 103 and still get payments," said Peter Bell, CEO of the National Reverse Mortgage Lenders Association (NRMLA).

        Yet it will still cost you. Reverse mortgages are expensive. There's a 2.5% origination fee on the first $200,000 borrowed for some loans, an upfront mortgage insurance fee of 2%, and a host of other fees that can push the extra costs to $15,000 or more for a $200,000 loan.

        Calculator: How much will I need for retirement?

        In addition, lenders tack on interest charges every month, plus a servicing charge of up to $35 a month and an annual FHA insurance premium of 1.25% of the mortgage balance. At the current interest rate of about 5% for a reverse mortgage, plus the service charge and insurance, a lump sum mortgage balance of $100,000 would increase by about 6.6% a year and the debt would double in 11 years to $200,000.

        Zillow CEO: Hottest housing markets 
        Zillow CEO: Hottest housing markets

        All of this counts against the residual value of the home, so there's less left for the estate when the home is finally sold to pay off the mortgage after the borrower either passes away or moves out.

        In addition, borrowers still have to keep paying annual property taxes, homeowners insurance and any homeowner's association bills, those recurring expenses that got many homeowners into trouble in the past.

        The new rules now require lenders to make sure borrowers have sufficient enough income from Social Security, pensions and other savings in order to afford both living expenses and these charges. If borrowers run a risk of defaulting, they are required to fund escrow accounts to cover the property taxes and other routine expenses on the home.

        Related: Million-dollar housing markets

        One big issue the new rules don't address, however, is that many couples take out reverse mortgages in the name of the older of the two spouses, in order to maximize payouts. Cash benefits are based on a borrower's life expectancy. A 62-year-old, for example, may only be able to get a payout of about $140,000 on a $300,000 home, while a 73-year-old would get $147,000 and an 82-year-old $163,000, according to a National Reverse Mortgage Lenders Association calculator.

        When the spouse on the deed dies or moves into a care facility, lenders take possession of the home -- often leaving the spouse out in the cold.

        "We heard from a lot of surviving spouses getting evicted from their houses; lots of folks didn't even know they were taken off the deed and found out when they're spouse died," said Jean Constantine-Davis, an attorney with AARP, which sued the Department of Housing and Urban Development, which oversees FHA, in a U.S. court to prevent the evictions of surviving spouses.

        Related: American Dream homes: What you'll pay in 10 cities

        The judge in the case found for the plaintiffs and asked HUD to find a solution. What that remedy may be has not been determined. HUD declined to comment because the case is not settled.

        "[Reverse mortgages] are counterintuitive and much more complicated than regular mortgages, which are complicated enough," said Constantine-Davis. "A lot of people sign them without thinking, 'I could be put out of my house.'" To top of page

  • Covered by homeowners insurance? Don't be so sure

    Posted Under: Home Buying, Investment Properties, Home Ownership  |  April 12, 2013 7:22 AM  |  283 views  |  No comments

    What you really have to worry about is the gaps in your homeowners insurance that leave you on the hook for costly repairs.

    NEW YORK (Money Magazine)

    Bought or renewed a homeowners insurance policy lately?

    You've no doubt noticed that premiums have gotten pretty pricey. Rates have climbed 69% over the past decade to an average of $1,000 a year.

    What you may not realize is that you could be facing another vast expense. Insurers have also been quietly hiking deductibles, scaling back basic coverage, and adding new restrictions.

    Coverage now varies widely among carriers, but that's not always clear when you're shopping around, says Daniel Schwarcz, a University of Minnesota professor who has studied hundreds of policies.

    "Consumers shop almost entirely on price and reputation," notes Schwarcz, and exclusion clauses are often written in legalese and buried in a policy that runs dozens of pages. Moreover, comparison shopping is difficult, since consumers rarely get a copy of the policy before they buy.

    When disaster strikes, you could get hit with tens of thousands of dollars in costs for damages that you thought were covered.

    The reasons for the changes are complex. Homeowners is one of the least profitable types of insurance; on average, over the past 10 years firms have lost money on these policies, according to the National Association of Insurance Commissioners (NAIC).

    Insurers say that's largely because of unpredictable weather. There were 953 "weather events" insurers considered catastrophes in the U.S. in the past five years, compared with 602 in the previous five, according to industry data.

    Related: 10 things you need to know about homeowners insurance

    In 2011 the amount insurers paid out for the average claim was nearly double the amount in 2002, according to the Insurance Research Council. More trouble: Firms make money in part by investing your premiums; that means at times they can recoup higher claims costs with market returns. The financial crisis and low interest rates haven't provided much relief there.

    To cope with squeezed profits -- and so they could beef up their reserves to pay for freak massive storms -- insurers stopped writing new policies in some disaster-prone areas in recent years and pushed for higher premiums. Regulators pushed back on the prices. "If we allowed the rate increases companies wanted, nobody would be able to afford insurance," says Kevin McCarty, Florida's insurance commissioner and a past NAIC president.

    So insurers made up the gap by cutting coverage, leaving homeowners in a precarious position, say consumer advocates. "It's easy to think you're covered when you're not," says Amy Bach, executive director of advocacy group United Policyholders, which has lobbied the states to reject stripped-down policies and make coverage more transparent.

    For the foreseeable future, however, the onus is on you to make sure your biggest investment is fully protected. In the following you'll find out where your coverage most likely falls short and learn the best way to plug those holes.

    MORE: Water damage


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