Whether you are thinking of buying an apartment or condominium as an investment property or as your primary residence, you are going to have to pay more than just your monthly mortgage and living expenses. Unique to the apartment/condo market are the monthly maintenance fees. These fees can range in amount and can mean the difference between owning and renting.
Consider this: your monthly maintenance fee can be as cheap as $50 a month or as much as $1,000 a month. It all depends on the size of the apartment and the location. With location being everything, buy in a sought-after neighborhood and you’ll be paying more in maintenance fees than if you purchased a condo in a rural area.
Monthly maintenance fees can impact more than just your bank account; they can change the property value. That’s because an apartment or condo with low maintenance fees is going to sell quicker than one with high monthly maintenance. What’s more, the ones with low monthly charges can often sell for more than the apartments that command high fees each month. After all, cash strapped real estate buyers/investors
Buying your first home can be exciting and amazing, and scary. But knowing the common mistakes of first-time buyers will ensure you don’t make the same ones, and can help make the transition to “New Home Owner!” that much smoother.
1) Spending Too Much
It’s important to be realistic about what you can afford. The final sale price isn’t the only cost to take into account when owning a home. Houses come with plenty of bills like heating and property taxes, future renovations and occasional unforeseen costs like burst pipes or city trees needing to be trimmed.
What you can do about it: Take a close look at your finances. Be aware of your current fixed costs and always leave some breathing room. Ask the homeowners what they spend in a year on their bills so there aren’t any surprises. Canada Mortgage and Housing Corporation has plenty of useful online budget calculators to help. As a general rule your monthly housing costs (mortgage, property tax and heating expenses) should be no more than 32% of your gross monthly income.
If you’re 62 or older and you want to buy a house, you have three options: Get a traditional forward mortgage, use your savings to pay for the house in full, or get a special type of reverse mortgage called a Home Equity Conversion Mortgage for Purchase (HECM for Purchase, or “reverse for purchase”). You might choose this third option if you don’t have enough income to qualify for a forward mortgage or enough savings to pay in full. Here’s what you need to know about using an HECM for Purchase to buy a home.
HECM for Purchase: Overview
While lenders can count your retirement savings, investment income and Social Security income to help you qualify for a forward mortgage, the formula they are required to use isn’t generous. Even with $1 million in retirement assets, if you aren’t working, your income might be too low to qualify for a forward mortgage. That’s where a reverse for purchase comes in. (Learn about the differences in Comparing Reverse Mortgages vs. Forward Mortgages.)
The rules for eligibility and repayment are almost identical for an HECM for Purchase and
Shopping for the best home-equity loan is a little more complex than shopping for groceries. There are payments terms to consider and interest rates to factor in over a potentially long stretch of time. Several interest-rate structures are available to borrowers, namely: fixed, variable and adjustable. Whether you’re taking out a first mortgage, home-equity loan or home-equity line of credit (HELOC), rates are constantly changing. That means your first step in landing the best deal is to search competitive rates in the marketplace.
A second mortgage (another way to describe home-equity financing) operates on the same basis as a first mortgage, allowing homeowners to borrow a lump sum of money, and subsequently pay back via monthly repayments. Home-equity mortgages (see Home-Equity Loans: What You Need To Know) are frequently used to fund renovations or home upgrades, consolidate bills, or provide a down payment on another investment.
Given the range of interest-rate structures, it’s crucial to do your homework. You could shop around yourself, engage a mortgage broker to do the research for you or simply utilize an online search tool (such as E-LOAN or Lending Tree) that will trawl the universe of lenders and their up-to-the-minute
This real estate bubble isn’t like the last one that lasted roughly from 2005 to 2006. That one was based on loose lending standards and covered most of the country. In today’s market, we’re seeing much different conditions, including tight lending standards and segmentation. In regards to the latter point, some cities are overvalued and in extreme bubble territory while other cities are undervalued and might present long-term investment opportunities.
So, which cities are overvalued and which ones are undervalued? (For related reading, see: When Is the Best Time to Buy a House?)
Fitch Ratings recently rated overvalued and undervalued cities based on the following factors:
- Local economic fundamentals
- Unemployment rates
- Population growth
- Mortgage rates
- Rental prices
- Buyer demand
- Inventory levels
Based on those factors, Fitch found the following cities to be overvalued and listed the percentages of how overvalued they are:
- Austin, Texas 19%
- Houston, Texas 18%
- Phoenix 18%
- Riverside, Calif. 17%
- Miami, Fla. 16%
- Las Vegas 14%
Dallas and Denver might not have made Fitch’s overvalued list, but they both of late have seen record-high home prices, even higher than they saw in 2006. In Dallas, the median price for a condominium is $1.13 million, and the median
Housing starts, new homes sales, existing homes sales: economic data that comes out of the housing sector has an enormous impact on consumer confidence and the economy’s overall trajectory. The real estate market was historically thought to be a very safe investment; one that seemingly always moved higher. Then the great financial crisis of 2008 hit. That recession shined a new light on the market, its players, and inner workings. Far more complicated than was once though to be, the real estate market has revealed its outsized influence on the economic wealth of consumers.
As a specialty market, the real estate sector requires a thorough knowledge and understanding of local fundamentals, as well as the workings of different vehicles that are used to invest in real estate. For example, real estate investment trusts (REITs) appeal to investors because of their structure. They are required to pay out at least 90% of their income as dividends. But while investors enjoy these high payouts, REITs often find themselves in need of capital, relying heavily on debt and equity issuances. For this, REITs turn to investment banks. The investment banks that focus on this sector tend to be large, global