Berkshire Hathaway HomeServices Towne Realty - Tanya Barrow

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WHICH DOWN PAYMENT STRATEGY IS RIGHT FOR YOU?

4/30/2019



You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.

FIVE MONEY-SAVING GREEN UPGRADES

1/27/2019

Going green is great for the environment, but that’s not the only benefit. When you make green upgrades in your home, it can also lead to some major savings.

  1. Solar panels: The upfront cost is big, but the long-term savings are huge. Solar panels will cost several thousand dollars to install, but ongoing maintenance costs are very low, and a typical system could save you hundreds of dollars per year. You can even sell your surplus electricity.
  2. Wood furnace: Wood-burning furnaces are relatively inexpensive, and though the yearly savings aren’t as dramatic (about 10% on heating bills), it adds up over the long run.
  3. Insulation: There’s a good chance your insulation isn’t very efficient, especially in older homes. Look into installing floor, cavity, wall, and loft insulation to reduce your heating bills.
  4. Rain barrels: Rain barrels are extremely inexpensive, and provide gallons of free water to use when you wash your car or water your garden.
  5. Geothermal system: OK, so the price tag is scary at first. A geothermal system uses the earth’s temperature to heat and cool your home, but can cost $30,000 to install. But tax credits allow you to get a lot of that money back, and the energy savings average about $1,900 per year. If you plan to be in your home for a decade or two, it’s a great investment.
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