Second Home Purchase: Budgeting and Other Tips

second home budgeting tips

In part one of this two-part blog series, we went over some of the basics on why certain homeowners choose to purchase a second home. Often for retirement or vacation purposes, or even sometimes to allow parents to live close by without entering a nursing home, the purchase of a second home can be enormously beneficial – but those going this route will have to consider some of the important details along the way to ensure they make a smart purchase.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. We offer a wide range of home loan options, ideal for everyone from first-time homebuyers to those considering a second home purchase – plus many others in between. While part one of our series looked at some of the top reasons why you might consider a home, today’s part two is for those who have already decided to move forward with a second home purchase. Here are some important details to attend to:

Proper Budgeting

First and foremost, in many of the same ways you’d budget and prepare for a mortgage and other expenses for your initial home, you have to take on the same themes here for a second home. Many of the steps here are similar or even identical: You should start by meeting with one of our lenders to discuss your situation, plus obtain pre-approval that not only gives you an idea of what you can afford, but allows you to prove your purchasing power.

In addition, keep in mind additional expenses and closing costs. These include home maintenance costs, taxes, utilities, and possibly more than one type of insurance coverage. Especially if you plan to rent out your second home for any period of time, this is a vital area to consider.

Taxes

While there are some tax deductions available for a second home, similar to for your initial home, they’re more limited. For instance, tax deductions on a second home are limited to a total of $10,000. In cases where you’re renting the second home, rental income will only be tax-free for the first 14 days – after this point, taxation is required.

Is a Consolidated Mortgage an Option?

A consolidated mortgage refers to a situation where your current remaining mortgage is folded into the new mortgage you take out on your second home, creating a single loan. In some cases, a consolidated mortgage will offer you great interest rates that makes it easier for you to manage payments on both homes. Speak to our staff about whether a consolidated mortgage might be an option for you if you’re considering a second home.

For more on purchasing a second home, or to learn about any of our mortgage rates or home loan services, speak to the staff at Altius Mortgage today.

Second Home Purchase: Why Provo Buyers May Consider It

second home buyers consider

At Altius Mortgage and our partners with Mortgage Ogden, we’re here to help with a comprehensive range of mortgage needs and services in Provo and numerous other parts of Utah. From first-time homebuyers up through current homeowners who need assistance with mortgage refinancing, plus numerous buyer types in between, we offer a range of mortgage rates and home loan programs to ensure you have the proper funds available.

One particular buyer type we’re happy to assist in several areas, including their desire to purchase in the first place: Those considering a second home, whether for their own purposes or for someone close to them. This two-part blog series will begin by going over the common reasons why some people choose to purchase a second home, then will dig into some tips we offer to those who are entering this situation.

Retirement Planning

In many cases, a second home is desirable to those who are planning to retire in the near future, and want to move into a new space while doing so. For some in this position, the prudent move is to downsize slightly – you might not need all the space you have in your current home, especially if your kids have recently moved out. In this situation, you can often utilize the equity you’ve built in your current home, which will help you fund a second home purchase.

In other cases, you may pay for a second home using assets you already have, such as savings, dividend income or inheritances. In these cases, depending on the amounts you have available, you might not have to downsize at all, or could even purchase a larger home for retirement.

Home for Parents

For others who have the funds available, there may be a desire to purchase a second home for your parents. This often helps older adults avoid senior living facilities that they often have little interest in living in – in addition, purchasing your parents a home allows them to stay closer to you, plus any kids you have (their grandkids). Of course, it’s prudent to speak to your parents about this in detail before moving forward here.

Trips and Vacations

Finally, again for those who have the available budget, a second home is fantastic as a getaway location. Do you and your family have a single place you like to visit every year for vacation? Instead of wasting money on hotels or rentals, purchase a vacation home. The same goes for those who travel regularly to the same location for business purposes. And in periods where you aren’t actively using the home, you can rent it out for additional income (some purchase a second home purely for rental purposes, as well).

For more on the benefits of purchasing a second home and the situations where you might consider it, or to learn about any of our mortgage rates or home loan services in Provo and other parts of Utah, speak to the staff at Altius Mortgage today.

Mortgage Payment Components: Taxes, Insurance, Amortization, Part 2

mortgage payment taxes insurance amortization

In part one of this two-part blog series, we went over some basics on the various components that make up your monthly mortgage payment. There are a few such elements to be aware of, but it’s also important to note that the precise percentages you pay toward each of these can and will typically vary throughout the life of your mortgage repayment.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with this and numerous areas of the mortgage process, both for first-time homebuyers and anyone else on the market. While part one of our series went over principal and interest payments, the two primary areas you should be aware of, today’s part two will go over taxes and insurance payments, plus give you a quick word on how to understand the changing percentages you’ll be paying toward as you move forward through the years.

Taxes

For any home that’s purchased, real estate or property taxes will be assessed by government agencies. These taxes go toward numerous public services, from police and fire departments to public schools and many others.

These taxes are calculated on a yearly basis, but for most mortgage holders, they’re paid monthly as part of your mortgage payment. This is done through the lender setting up a separate escrow account, one that collects these tax payments each month and then holds them until they actually need to be paid.

Insurance Payments

Another payment type that’s generally paid out into an escrow account through your lender is insurance payments, which come in two common types:

  • Property insurance: Required for virtually all homeowners, property insurance protects the home and its contents from disasters, theft risks and other potential issues.
  • Private mortgage insurance (PMI): For those who purchase a home with a down payment below 20%, private mortgage insurance is typically required to protect the lender in case of default. However, once you reach 20% equity in your home (or even 18% in some situations), you will be able to remove PMI from your payments, as risk for the lender will have dropped by this point.

Amortization Schedule

As we’ve noted multiple times in this series, payments will not be the same through the life of your loan. For the first few years, you’ll pay a larger portion of interest; as your payments proceed, larger and larger chunks will be devoted to principal.

And if you want to know exactly how this works for your mortgage, you have this information at your fingertips in the form of what’s known as an amortization schedule. Given to all borrowers at the time of closing, the amortization schedule demonstrates exactly how much you’ll be paying to principal, interest and various tax or insurance payments over the entire life of the loan – it will even give you the payment numbers for 25 years from now if you’re on a 30-year mortgage. This allows for detailed financial planning years or even decades into the future.

For more on the elements of your mortgage payment, or to learn about any of our mortgage services, speak to the staff at Altius Mortgage today.

Mortgage Payment Components: Principal and Interest, Part 2

mortgage payment principal interest

If you’re in the home market and considering the important factors involved with a mortgage, one key element you’ll likely be interested in is what your monthly payments go toward. There are a few separate things you’ll be paying money toward as you pay down your mortgage, and understanding what these are – and how much of your monthly payments will be going toward each – is very important as you plan your finances moving into the future.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with this and numerous other areas of the mortgage process. We offer a huge range of home loans, including those tailored to first-time homebuyers, plus provide expertise and answers to all your most important questions. In this two-part blog series, we’ll go over all the important elements that go into a standard mortgage payment, plus some tips on how to best understand your payment schedule and plan out your long-term home finances.

Size and Term

While these are not direct components of your mortgage payment, the size and term (length) of your mortgage loan are important for a simple reason: They’re the single largest factors defining what you’ll be paying each month. The longer your term is, the lower your monthly payment will be; on the flip side, if you have the funds, you can go for a shorter term that comes with higher payments, but completes your payments far sooner and allows you full ownership of the home.

Our next several sections will dig into the specific components of your monthly payments.

Principal

Some portion of each monthly payment will be sent directly to repaying your principal loan balance, or the original amount you borrowed. This amount will begin on the lower end, with the bulk of your payments for the first few years often focused on interest (more on this in a moment); as the loan ages, however, your payments become a larger and larger percentage of principal, all the way up until you complete your final mortgage payment and own the home outright.

Interest

Interest, on the other hand, is the fee you pay the lender in exchange for the risk they take in loaning you this money. One of the single most important components of any mortgage is the interest rate, which will vary depending on your personal finances, credit history and other factors.

As we mentioned above, you pay the most interest nearer to the start of your mortgage. However, as time goes on and your principal balance shrinks due to payments you’ve made, your interest generated will also become smaller – and this allows you to make the same monthly payment as earlier in the mortgage, but to do so while sending more of the money directly toward paying down your principal.

For more on what comprises a mortgage payment, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

First-Time Homebuyer Errors: Timing and Future Expenses

first-time homebuyer errors timing

In parts one and two of this multi-part blog series, we’ve gone over some of the most common errors to avoid if you’re a first-time homebuyer entering the market. While there are several such areas to steer clear of, you also have resources available to you for assistance, including your loan officer and realtor.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to offer several loan programs that are ideal for first-time homebuyers, plus expertise on how to navigate the market if you’re entering it for the first time. In today’s final entry into our series, we’ll go over some of the errors we sometimes see later in the process, plus what you should do to avoid them and ensure you’re in a great position moving forward with your new home.

Other Credit Applications

It’s vital to be aware of the timing gaps between when you apply for your mortgage and when the home sale will actually be closed, which will be a few weeks in most cases. And during this in-between period, we strongly recommend taking on any other kind of credit application, whether for a car loan, furniture purchases or any other reason.

This is because your credit is still a deciding factor during this period, where your lender will be evaluating your credit score, debt-to-income ratio and your income to determine your creditworthiness. If you apply for other forms of credit that require hard inquiries, these will lower your credit score and may increase your debt-to-income ratio, neither of which will look good to your lender. As a result, your mortgage interest rate or fees on the mortgage might be changed, or your closing could be delayed.

Shopping Too Early

While we know the home shopping part of this process is what you’re really looking forward to, you can’t be impatient here. If you’re evaluating or even visiting properties before being at least pre-qualified or pre-approved for a mortgage, you’ll be doing so blind – without a true idea of your purchasing power or the ability to make a competitive offer. Instead, speak to your loan officer about the steps for being pre-approved.

Improper Cost Calculations

Finally, one mistake some first-timers make is miscalculating various long-term expenses as they close on their home. In some cases, these refer to various homeownership costs, including utilities, homeowners’ insurance and related expenses. In others, they’ll refer to repair or renovation needs that are required in the home, including some that will present safety or long-term property risks if they aren’t remedied.

For more on how to avoid common pitfalls among first-time homebuyers, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

First-Time Homebuyer Errors: Programs, Savings, Points

first-time homebuyer errors savings

In part one of this multi-part blog series, we went over some of the common errors first-time homebuyers often make as they enter the market. Many of these are based on simple misunderstandings or myths that have arisen over time, but there are also some simple resources that will allow you to avoid these risks.

At Altius Mortgage and our partners with Mortgage Ogden, our quality loan officers are here to serve as one of these resources, assisting clients with numerous loan programs ideal for first-time buyers and providing several other areas of expertise. What are some of the other common issues we see our first-time buyer clients get wrapped up in, and how can you avoid these?

Missing Out on First-Timer Programs

As we just noted above, and as all first-time buyers should be aware, there are several programs out there that are either specifically designed for you or are often used for buyers in your position. These allow for themes like lower down payments, moderate interest rates or other benefits – but as a buyer, you have to do your research and determine which of these might be beneficial to you, something your loan officer will help you with.

Here are some of the specialty loan programs you might be eligible for:

  • FHA loans: These loans, backed by the Federal Housing Administration, allow for down payments as low as just 3.5% of the purchase price. In addition, they also have lower credit thresholds than other loan types, allowing you to qualify even if you might not have for a conventional loan.
  • VA loans: These loans are guaranteed by the US Department of Veteran’s Affairs, and are for military members, veterans and certain spouses. They allow for no down payment and 100% financing.
  • USDA loans: Meant for homes in rural areas, these loans are backed by the US Department of Agriculture and also allow for zero down and 100% financing.

Running Savings Dry

While you might use a sizable chunk of your savings for a down payment and closing costs on your home, it’s important not to sap them completely. It’s vital to leave funds available for unexpected repairs or costs once you move into the home, plus things like moving expenses. This is another area where our loan officers will be happy to provide basic advice.

Misunderstanding Discount Points

For some, the use of discount points – fees you pay up-front to reduce your interest rate down the line – might be valuable. Whether you go for discount points will depend on the break-even period, or how long it takes for this up-front cost to be exceeded by the monthly savings you’ll receive from a lower interest rate. In reality, only a small percentage of buyers will truly benefit from discount points, and you should inquire specifically with your loan officer about their benefits before considering them.

For more on how to avoid common first-time homebuyer errors, or to learn about any of our home loans or mortgage rates, speak to the staff at Altius Mortgage today.

Ogden First-Time Homebuyer Errors: Credit, Quotes, Down Payment

first-time homebuyer errors credit

While entering the homebuying and mortgage market for the first time may feel somewhat intimidating to some people, the reality is that you’re in a much better position here than your parents would have been a decade ago when it comes to information and resources. Due primarily to the internet and our connected society, including resources like this blog, homebuyers have numerous robust resources at their disposal to help them navigate the mortgage and home purchase process.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with not only numerous loan programs geared specifically to first-time homebuyers in Ogden and other parts of Utah, but also important information and resources to help you move through this process – including the ability to work with our great loan officers to receive financing. Our officers will inform you on numerous areas of this process, including helping you steer clear of a few of the mistakes first-timers often make in several different realms as they enter the mortgage and homebuying world. This multi-part blog series will go over several of the most common errors and how you can avoid them.

Lack of Purchasing Power Understanding

First and foremost, you have to have an understanding of the purchasing power at your disposal before you move any further. That is, how much home can you realistically afford, based on both the down payment required and the expected monthly payments – and how these compare to your household income.

This is a great example of an area where modern resources make things simple. While your parents might have had to do this math by hand, today there are numerous quality mortgage calculators online, including on our Altius Mortgage site. These will allow you to plug in basic numbers for your income and expenses, then get a broad idea of what you can afford.

Avoiding Credit Areas

Credit is vital for any mortgage application, and it’s a simple reality that you will have to scrutinize yours a bit during this process. Especially if your credit is subpar, but even if it’s not, you should plan to take the time to look up your credit score and request a copy of your credit report from bureaus so you can check it for errors.

Single Rate Quote

Just like any other area where you have numerous options, you should be comparing the available rates that are out there. Don’t simply take the first rate you’re offered – check if you might be able to get a better number by applying with multiple lenders.

Small Down Payment

Down payment is a curious area within the mortgage world. On the one hand, it’s a complete myth that you must have 20% of the purchase price for a down payment no matter what – there are numerous programs that allow for much smaller down payment amounts, as low as zero down or 3.5% down in other cases.

However, lower thresholds don’t mean the down payment isn’t important. Putting too little money down will mean your remaining principal balance and interest payments are high, and this will put some buyers in a position they can’t afford. In some cases, it might be prudent to wait six months or a year to add to your down payment savings before you enter the market.

For more on first-time homebuyer mistakes to avoid, or to learn about any of our mortgage loan programs or mortgage rates in Ogden and other parts of Utah, speak to the staff at Altius Mortgage today.

Home Tour Tips: HVAC Unit, Location, Child Themes

home tour HVAC location

In part one of this two-part blog series, we went over some of the top areas to be keeping an eye on when touring homes you’re considering for purchase, including mortgage and budget-related themes. There are several important variables to consider while seeing homes you might think about making an offer on, from standard market factors to several personal areas that speak to your individual needs and desires.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. We offer numerous mortgage loan products, including several mortgage programs ideal for first-time homebuyers, but also a whole host of areas of expertise for our buyers, who we strive to assist in every way possible. While home tours are generally carried out either on your own or in the company of your realtor, there are a few areas where you may have questions or require tips from your loan officer. Here are some of the other important themes to be considering while touring a home or group of homes.

HVAC Unit

We went over some basics on appliances and fixtures in the home in part one here, but the HVAC unit and system deserves its own section. As one of the highest-value components in any home, the comprehensive HVAC system often has a major impact on your budget required, whether for the mortgage itself or for future repair needs.

For instance, if the furnace or AC condenser in a home you’re looking at are over 10 years old, you should be planning to replace these in the next few years. These are not cheap jobs, so if you plan to move forward with such a home, you need to budget properly – both for the mortgage and closing costs themselves and for this significant future expense.

Location Factors

While there are several location-related elements you can check on without actually visiting a home, such as proximity to various areas you visit often, there are also those you should get an idea of in-person. For instance, walking around the neighborhood itself and getting a feel for it is often an important task, as is inquiring with neighbors about the quality of the neighborhood.

Children Considerations

Both in terms of location and other factors, whether you have children is a major variable here. If you do, a big chunk of your location search will often revolve around the school district you’ll live in and the schools your children will attend. In addition, you’ll want to consider child-friendly elements of the home and whether the space is properly outfitted for your needs.

For more on areas to look into when touring homes, or to learn about any of our mortgage rates or related home loan services, speak to the staff at Altius Mortgage today.

Utah Home Tour Tips: Budget and Mortgage, Appliances, Remodels

home tour tips mortgage

Within the majority of homebuying situations, multiple things are happening at once. Most buyers will be touring homes at the same time as they’re working with their loan officer and mortgage lender on basic approval and related areas, for instance, and while these are certainly two distinctly different parts of the process, they tend to cross over in some basic ways.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with comprehensive mortgage loan services, from standard home loans to first-time buyer programs, mortgage refinancing and many others for Utah clients. However, our loan officers are not limited to their expertise in the mortgage realm alone, and we often serve as basic advisors and confidants to our clients in several areas, including how their home tours may occasionally interact with our roles. For instance, if you’re considering touring a home that’s above your originally-planned budget, your loan officer will work with you to obtain a pre-approval letter at this higher range if you decide to make an offer on the home.

What are some general themes you should be keeping in mind when it comes to touring homes? This two-part blog series will go over several.

Price and Budget

Your overall budget will obviously be a significant factor here, as will the listed price of any home you’re touring or considering. This is one major theme you’ll have a chance to evaluate ahead of time through online listings and other resources, though as professionals in the industry will tell you, you can never truly know a home’s quality until you see it in person.

One major tip here: Be sure to budget for more than just your mortgage. You need additional funds for closing costs, long-term maintenance and any potential emergencies that come up, and sapping your entire savings just to get the home will leave you in a bad spot financially.

Quality and Age of Appliances

Another important factor in any home tour is the quality and age of the major appliances that will be remaining in the home, such as the dishwasher, various plumbing fixtures, and possibly several others. If all the major fixtures are only a few years old, you can be confident knowing they won’t need replacement anytime soon; if there are older items, however, you may have to budget for replacements or repairs within the next couple years.

Remodeling Qualities or Capabilities

For many buyers, the home’s remodeling capability will be a huge factor, and something you’re looking at closely during a home tour. Not only should you be considering this from a budgetary standpoint, you should also be looking for simple areas or components that can be easily remodeled or upgraded to meet your eventual goals. Is there some extra room in your kitchen that might allow for an island upgrade, for instance? Or perhaps there’s a certain wall in the home that you feel you could tear down to create a more open space. The potential themes here are limitless, but you need to be able to spot them.

For more on what to be looking for as you tour homes and obtain a mortgage loan, or to learn about any of our mortgage rates or related services in Utah, speak to the staff at Altius Mortgage and our partners at Mortgage Ogden today.

Understanding Escalation Clauses in Home Offers

escalation clauses home offers

Buyers who have been on the home market anytime in the past six months are well aware: It’s a seller’s market out there. Many homes will have multiple offers placed on them within just days of hitting the market, and buyers – plus their realtors and loan officers – are looking for ways to improve offers and make them more attractive to sellers.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to serve the vital loan officer role in this process, offering mortgage loans for a variety of buyers. We’ve assisted numerous clients with everything from pre-approval and confirmation of purchasing power through finalizing their loan, and we’re happy to offer several areas of expertise when it comes to improving offer quality. One tool that some buyers are using is the inclusion of what’s called an escalation clause in their offer to the seller – what is an escalation clause, how does this work, and should you consider using one in your next offer? Here are some basics to consider.

Escalation Clause Basics and Example

Also simply referred to as an escalator in some circles, an escalator clause involves a buyer stating in their offer that while they are offering a certain monetary amount, they are actually prepared to pay some extra if needed – to a certain point, which will also be defined in the offer.

As a simple example, let’s say you’re considering a home that was listed at $300,000, and offering at this listing price. However, you’re also including an escalation clause that says you are prepared to go over the asking price by $10,000. In this case, if another prospective buyer offers a maximum of $305,000, you would be the winning bid as part of your escalation clause.

In other cases, an escalation clause can be done differently. You can state that you will beat the next-highest offer by some amount, usually $1,000 or sometimes more – in the above example, if you used this method, your offer would automatically trigger to $306,000 if the next-highest offer was $305,000.

Do I Need an Escalation Clause?

There’s no such thing as “needing” an escalation clause, but these have absolutely become more common over the last six months or so as the market has become so tough. If you’re offering on a great home you know will have several offers, an escalation clause is often a great way to put all your cards on the table and perhaps gain an advantage over other buyers. Your realtor will often be able to speak to the seller’s agent and determine if lots of offers will be coming in – if this is the case, you may consider an escalator.

Possible Reasons to Avoid an Escalation Clause

On the flip side, some realtors won’t work with escalation clauses – whether the seller’s agent or even your own agent. This is for a few reasons, including the possibility that there aren’t multiple offers; in these cases, adding an escalator really just signals to the seller that you’re willing to pay more than what you offered, and often limits your leverage in negotiations. In addition, for the second form of escalator we went over above, where you offer a set amount above the next-highest offer, there’s some serious potential risk here if another offer comes in very high.

For more on escalator clauses, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.