Real Estate Market Minute

The Power of Assumability
by DEAN HARTMAN on JANUARY 12, 2012

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA homebuyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.

Most people believe that interest rates will return to a “normal” range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.

As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.

Compare that to a new $272,000 loan at 6.5% for 25 years, which would carry a monthly payment of $1,836.56 (over $400 more a month than the assumption and more than $120,000 more over the 25 year term).

At 6.5% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $212,000…$60,000 LESS!

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less (especially here in New York where NYS Mortgage Tax is such a large component of closing costs).

The borrowers must be credit-worthy of course (have good credit, qualifying income, and necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!

Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan’s assumability.

From RisMedia Top 5 in Real Estate

Here are 10 things you can do right now to cut down on your heating and power costs. And you won’t break the bank or much of a sweat.

1. Lock the windows.
Even when a window is closed, a little space remains between the sashes where air can leak in. Simply locking the window pulls the sashes tightly together.

2. Unplug.
Many appliances, electronics and other electrical devices — even cell phone chargers—draw power even when they’re turned off. Unplugging them when they’re not in use eliminates this vampire power drain.

Granted, that’s not always easy or even possible to do. But where it’s practical, you can plug more than one device—say, your TV and DVD player —into an accessible power strip. With the flip of just the strip’s power switch, you cut the power to everything plugged into it.

3. Wash in cold.
If you’re used to washing with warm water, you can probably switch to cold without noticing a difference. And no matter what temperature you wash your clothes in, you can always rinse in cold. You’ll save on the energy that would have gone into heating the water.

There’s a bonus: Cold water saves wear on your clothes, so they’ll last longer. Or at least they’ll be in better shape to donate to charity when you just have to replace them when this season’s new fashions.

I wouldn’t suggest abandoning hot-water washes altogether, though. I’d still use hot for towels, bedding, underwear and laundry with oily stains.

Want to save even more? Skip the dryer and hang the clothes to dry.

4. Dim the lights.
A dimmer works by reducing the power flowing to a lamp or light fixture. If you don’t need full brightness, turn the lights down a little.

Maybe I should do that with the lights over my bathroom mirror.

One note: Not all compact fluorescent bulbs work with dimmers. If you use CFLs, check the package to make sure you’re buying the dimmable kind.

Oh, and take Dad’s advice: Turn off any lights you don’t need.

5. Turn off the computer.
When you’re done surfing the Net and updating your Facebook status for the day, shut down your computer. Better still, activate its system standby or hibernating feature to save power when the computer is on during the day.

Of course, you don’t want to turn off the computer if you’ve scheduled automatic maintenance checks that happen at night.

6. Rearrange the furniture.
A forced-air system works best when air can flow freely from registers and into cold-air returns. Make sure your furniture isn’t blocking these vents.

The same thing applies to radiators. If you block them with furniture, you block their heat.

7. Change the furnace filter.
The filter’s primary purpose is to trap dust and other gunk before it gets to the furnace. Dirty filters impede air flow, causing the furnace blower to work longer.

Dirty parts also wear out faster. By keeping them clean, you’ll cut down on furnace repair costs and reduce the chance of a furnace failure — which, of course, always happens on the coldest day of the year.

Change the filter monthly, or clean it if it’s a reusable type.

8. Turn down the tank.
For most homes, a setting of 120 degrees is plenty hot for a water heater. The only exception is if you have a dishwasher without a booster heater. Check the user manual to find out whether you need hotter water.

When the water isn’t as hot, mineral buildup and corrosion slow. That helps your water heater run better and last longer.

9. Let the sun shine in.
The sun is a powerful heating source, even in winter. Opening window coverings on sunny days lets you take advantage of that free heat, reducing the amount your furnace needs to produce.

Close those coverings at night to help keep the heat inside.

10. Avoid the range.
As much as possible, skip using the stove or oven and opt instead for smaller cooking appliances—slow cookers, microwave ovens, toaster ovens and the like. They use less energy than that big appliance.

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