A new study released by FreedomWorks found that various programs proposed or enacted to address the ongoing mortgage crisis don’t benefit homeowners evenly.
The group noted that many of the programs reward those who made the riskiest decisions while hurting those who were more conservative and bought only what they could afford.
For example, the American Securitization Forum’s Framework for Loan Modification plan, which freezes the teaser rate on subprime ARMs and refinances subprime borrowers into fixed loans, leaves those borrowers in a better position than those who originally chose fixed-rate loans, the study argued.
The idea here is that many of these borrowers made minimum payments on option-arms and other adjustable-rate mortgages that equated to lower monthly mortgage payments than those made by fixed-rate borrowers, allowing them to take out larger loans in the process and subsequently qualify for aid when they failed to make the higher reset payments.
The paper also cites a variance in state foreclosure rates driven by “exogenous economic forces,” and not the loans or borrowers themselves.
It found that that prime loans are defaulting at the highest rate where subprime defaults are the worst, noting that aid programs exclude good borrowers “unlucky enough to live in the states that experienced the worst of the current economic downturn.”
“Current programs and proposals reward borrowers who took out risky subprime mortgages and who live in states where the economy has held up,” author Todd Sinai wrote. “They do nothing for borrowers who chose more prudent financing and/or those who have entered default.”
In relation to that, Sinai believes taxpayers in all 50 states will fund federally mandated programs that only benefit homeowners in a few states such as California, Florida, New York, and Texas.
“The exposure of subprime mortgage debt is not evenly distributed across the United States. Rather, it is concentrated in a handful of states,” Sinai wrote.
He added that the four aforementioned states hold 50 percent of the “outstanding stock of subprime mortgages,” with 25 percent held in California alone.
The study also took a crack at the impending conforming loan limit increase, claiming that it will only help households with annual incomes between $129,000 and $180,000 based on sheer loan size, doing little to help median and low income families.
“A truly equitable policy of homeowner assistance would not distinguish among borrowers based on a borrower’s choice of financing, and it would not interfere with preexisting mortgage contracts.”
Read the entire study, written by Todd Sinai, a real estate professor at the Wharton School at the University of Pennsylvania.
Home prices will drop next year, but so will inventory, the real-estate site says in its 2024 housing forecast
The 30-year mortgage rate will fall below 7% by April 2024, Realtor.com says in its housing forecast for next year.
The average mortgage rate in 2024 is expected to be 6.8%, and the 30-year may fall to as low as 6.5% by the end of the year, according to Realtor.com’s report.
“We’re gonna to start to see some relief for buyers who have been priced out,” Danielle Hale, chief economist at Realtor.com, told MarketWatch.
“It’s still expensive to buy a house, but instead of getting more expensive, we’ve turned the corner,” she added. “We’re starting to see housing get less expensive.”
Realtor.com sees mortgage rates falling to 6.5% by the end of 2024
A weakening U.S. economy will be the key driver pushing down mortgage rates in 2024, Hale said.
“We expect unemployment to begin to gradually tick up – but we don’t expect to see a huge surge – and the labor market to begin to soften,” she said.
But “more importantly,” Hale added, “we expect inflation to improve.”
The economy has begun showing indications of cooling off. In October, inflation was flat, thanks to cheaper gasoline prices. The job market is also showing some signs of weakness, and the unemployment rate edged up that month to a 21-month high of 3.9%.
Mortgage rates have already begun to fall, Hale noted. They are no longer hovering at the 8% range, thanks to weaker economic data. The 30-year mortgage was averaging 7.29% as of Nov. 22, according to Freddie Mac.
But don’t expect to see rates fall much lower. Even though Realtor.com noted that the historical average for the 30-year mortgage rate between 2013 and 2019 was 4%, home buyers should consider those days long gone.
That period “was not quite a normal housing market,” Hale said. “It seems unlikely that we’ll see mortgage rates get back to that range in the foreseeable future.” Between 2013 and 2019, inflation stayed below 2.5%, according to data from the St. Louis Fed.
“The Fed was constantly worried about inflation that was too low” back then, Hale said.
Below are Realtor.com’s predictions for the housing markets that will see the most and least home price appreciation in 2024.
Home prices to fall 1.7% in 2024
Realtor.com also expects home prices to fall 1.7% over 2024. Sale prices took a dip over the spring and summer this year, but they may stay flat or rise over the rest of 2023, Hale said.
But starting in May 2024, home prices overall may drop. That’s partly because home sellers may cut prices, but it could also be due to a further pullback in homeowners listing their homes. Realtor.com expects existing-home inventory to fall sharply by 14% over 2024, which is steeper than the 5.7% drop in 2023.
That means that the typical monthly cost for a median-priced home could drop to $2,200 in 2024, which would be down from $2,240 in 2023.
The Realtor.com report also suggested strong home price growth in the Midwest and the Northeast. The company expects home prices to grow on an annual basis in 2024 by 10.9% in the Detroit-Warren-Dearborn, Mich., metro area, 10.4% in Rochester, N.Y., and 9.9% in the Des Moines-West Des Moines, Iowa, metro area.
On the other hand, the data indicates a sharp slowdown in home price growth out west. Home prices are expected to fall the most in 2024 in Austin-Round Rock, Texas, by 12.2%, as compared to 2023. Other metros at the bottom of the home price growth list include St. Louis, Mo.-Ill., and Spokane-Spokane Valley, Wash., where prices are expected to fall by 11.7% and 10.2% respectively.
Demand is also expected to be lower, because rates will continue to stay relatively elevated, Hale said.
But lower rates could also convince homeowners who bought with a 3% rate to consider selling, easing the so-called lock-in effect, which could increase inventory.
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch publisher Dow Jones is also a of News Corp unit.
-Aarthi Swaminathan
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
Mortgage originators will pay more to access consumer credit reports in 2024, reigniting complaints from mortgage lenders and trade associations.
In 2024, Fair Isaac Corp. (FICO), the company that retains the rights to the market’s adopted methodology to measure consumer credit risk, will charge one price – higher than the current price – to all mortgage lenders, independent of their volumes. The change represents a departure from the tier-based pricing structure it implemented in early 2023.
FICO will also collect the same per score price for soft pulls and hard pulls next year, an initiative that started in 2023 despite significant differences in these products.
“FICO will collect approximately $10 total for all three scores out of a $50 (or more) tri-merge report and score bundle, which continues to constitute a low percentage (approximately 20% or less) of the overall cost of a tri-merge report,” a spokesperson for FICO wrote in a statement to HousingWire.
For 2023, FICO said it would collect approximately $2 to $8 for all three score tiers out of a $40 to $50 (or more) tri-merge report and score bundle and out of an average $3,800 in closing costs. Compared to 2022, mortgage lenders in 2023 saw a price increase between 10% and 400%, mortgage trade groups and other stakeholders said.
For 2024, two mortgage executives who spoke on the condition of anonymity for fear of retaliation, told HousingWire that they expect prices to increase by more than double in some cases. Ultimately, the sources added that lenders will charge more to their borrowers, who are already facing affordability challenges.
“It seems like only yesterday you could pull a single borrower tri-merge for $15 and a joint for $30,” Greg Sher, Managing Director of NFM Lending, wrote in a LinkedIn post that went viral in the mortgage industry. “Now those prices will be in the neighborhood of $50 and $100 respectively — one well-known, widely used credit reporting agency plans on charging $75/$150. For clarification purposes, every IMB uses 3rd party vendors (also known as credit reporting agencies).”
Scott Olson, executive director at the Community Home Lenders of America (CHLA), said that increasing prices in this difficult economic environment will “only make it difficult for borrowers to participate in the American dream.”
Soft and hard pulls
Another change for 2024 is related to the pricing structure of soft pulls, which are performed to provide pre-approval letters, only visible to the borrower and without impacts on credit scores. Its prices will come closer to those applied to hard pulls, which are recorded on the borrower’s credit report, visible to anyone and can trigger leads.
“Last year, we implemented a tier-based pricing structure for mortgage originations, and FICO collected the same per score wholesale price for most soft pulls as hard pulls, but some lenders qualified for a lower price in certain cases for some soft pulls,” the spokesperson for FICO told HousingWire.
Brendan McKay, president of advocacy at the mortgage broker group Association of Independent Mortgage Experts (AIME), complained FICO doubled the cost of hard pulls at the beginning of 2023.
“Now they are charging the same amount for a soft credit pull, an inherently inferior product that provides less actionable information than a hard credit pull. There has been no justification given for the increased expense.”
According to McKay, the cost burden will be passed directly onto consumers, and those from underserved communities will feel it most.
“Despite being a private institution, FICO is currently a critical component in the mortgage process. As an industry, we owe it to future homeowners to bring attention to the misuse of power,” McKay said.
Fannie Mae and Freddie Mac are moving away from the current Classic FICO credit score model, requiring lenders to use two credit scores generated by the FICO Score 10 T and the VantageScore 4.0 models, which are considered more inclusive than their predecessor.
Price to originators
A FICO representative said the company does not set the retail price for end users.
Ultimately, “Anything above these wholesale prices, charged as part of a tri-merge score and report bundle, is collected and retained by others who sell and distribute the scores,” the spokesperson said.
Credit bureaus, which work with the FICO model, may pass the FICO price increases to their clients.
TransUnion and Experian did not reply to a request for comments.
Meanwhile, a spokesperson for Equifax wrote to HousingWire that beginning in January 2024, it will have a price adjustment to “reflect cost increases from third-party providers of credit reports and credit scores.”
However, the spokesperson added, “Equifax is sensitive to the impact these third-party cost increases may have on customers, especially given current market conditions. With this in mind, Equifax is not increasing the costs related to the Equifax credit file component of the tri-merge credit report for 2024.”
The Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit said that, “In light of these media reports about another round of unexplained sharp price increases, we reiterate our concerns about the lack of transparency into the factors that are driving these pricing changes.”
“Given the unique market structure and limited options for obtaining credit reports and credit scores, MBA urges policymakers to examine the drivers of these cost increases to ensure transparency and to protect consumers from paying higher costs in connection with their home mortgages,” Broeksmit said.
Editor’s note: This story was updated after publication to include comments from the Mortgage Bankers Association.
To the native Wintu people it was Bohem Puyuik, the “Big Rise,” and no wonder. Mt. Shasta towered above everything else, her loins delivering the natural springs and snowmelt that birthed a great river.
The Sacramento River provided such an abundance of food that the Wintu and many neighboring tribes — the Pit River, Yana, Nomlaki and others — had little to fight over. They thrived in pre-colonial times, on waters that ran silver with salmon, forests thick with game and oaks heavy with acorns.
But centuries of disease, virtual enslavement and murder wrought by European and American invaders scrambled the harmony that once reigned along the Upper Sacramento River.
Today, three tribes here are locked in a bloodless war. At issue is a proposal by one Indigenous group to expand and relocate its casino and whether the flashy new gambling hall, hotel and entertainment center would honor — or desecrate — the past.
The casino envisioned by the Redding Rancheria and its 422 members would rise nine stories on 232 acresalong Interstate 5. The rancheria — home to descendants from three historic tribes — began planning the development nearly two decades ago, envisioning a regional magnet for tourists and gamblers.
But the proposal has been buffeted by influential opponents, including the city of Redding, neighborhood groups and the billionaire next door — who happens to be the largest private landowner in America. The naysayers list a cavalcade of complaints against the new Win-River casino complex, saying it would despoil prime farmland, exacerbate traffic, increase police and fire protection costs and threaten native fish in the Sacramento River.
Those complaints have helped stall, but not kill, the project, whose fate rests almost solely in the hands of the Bureau of Indian Affairs in Washington, D.C. And now the BIA’s obscure bureaucrats have been confronted with an explosive new charge from two neighboring tribes: that construction of the casino would desecrate what the tribes say should be hallowed ground — the site of an 1846 rampage by the U.S. Cavalry that historians say probably killed hundreds of Native people.
The Sacramento River massacre has not received the attention of other atrocities of America’s westward expansion, such as the one in 1890 at Wounded Knee, S.D., where U.S. troops killed as many as 300 Lakota people. Estimates of the carnage, recorded over the decades from witness accounts and oral tradition, range from 150 to 1,000 men, women and children slaughtered along the banks of the Sacramento River.
If the higher estimates of the death toll are correct, it would rank as one of the largest single mass killings of Indigenous people in American history.
“In my heart, I find it hard to believe that there are Wintu people that are willing to build a casino on … the blood-soaked dirt of the massacre site,” Gary Rickard, chair of the Wintu Tribe of Northern California, told a state Assembly committee in August. “There are dozens of other places along the I-5 corridor and the Sacramento River.”
Redding Rancheria Chair Jack Potter Jr., himself part Wintu, called the claim that his tribe would build its casino on the massacre grounds “a slander that will not be easily forgotten.” He told state lawmakers that the real massacre site is miles away. Rancheria leaders said their opponents have manufactured the controversy for a less honorable reason: to block what would be a sparkling new competitor.
“Gaming in Indian country can be a tide that raises all of our canoes,” insisted Potter, who appeared at times to fight back tears as he spoke at the Sacramento hearing. “We should not battle against one another, in that spirit.”
Column One
A showcase for compelling storytelling from the Los Angeles Times.
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Friendships that go back decades and tribal ties of a century or more have been imperiled by the casino furor. Native people normally aligned against a hostile or indifferent U.S. government — “We’re all the children of genocide,” as one elder put it — have watched sadly as their conflicts turn inward.
It’s a dynamic that has played out before. Robbed of their ancestral lands, tribes now sometimes fight when one tries to claim new territory, often as a base for a lucrative modern endeavor: gambling.
The friction is exacerbated by the peculiar history of the Redding Rancheria — and by opponents’ eleventh-hour invocation of the Sacramento River massacre, 19 years after the rancheria began to assemble parcels for the project.
The Redding Rancheria refers to a nearly 31-acre stretch of land near the south end of Redding that the federal government bought in 1922 for “homeless Indians” who came to the area as seasonal workers for ranches and orchards. The rancheria sits in a relatively obscure location compared with the interstate-adjacent site of the proposed casino, more than three miles by car to the northeast.
In 1939, the Wintu, Pit River, Yana and other Indigenous peoples formed a rancheria government. It was recognized by the United States. But in 1958, an act of Congress “terminated” recognition of multiple California groups, including the Redding Rancheria, in an attempt to force Indians to disperse into the general population. It took a landmark 1983 court settlement to formally restore recognition of 17 rancherias, including the one in Redding.
The result is that there are Redding Rancheria members with Wintu blood, like Potter, 52, who firmly support the casino, while other Wintu descendants who are not descended from the original rancheria families, like Rickard, 78, adamantly oppose it. Rickard grew up with Jack Potter Sr. and has known his son since he was a boy.
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Cordiality prevails, at least outwardly, when Rickard and Potter meet today. But the bad blood between their groups has become fierce, exacerbated by the yawning wealth disparity between the rancheria and the Northern Wintu.
Rancheria members have thrived largely because of the success of their existing Win-River Resort & Casino, which operates 550 slot machines, a dozen table games, an 84-room hotel and an RV park.
The complex is the biggest income producer for the rancheria, which also owns a Hilton Garden Inn and a marijuana dispensary in Shasta County. Sources familiar with the tribe said each enrolled member receives a monthly “per capita” payment of at least $4,000 and perhaps as high as $6,000.
The rancheria’s chief executive, Pitt River descendant Tracy Edwards, 54, declined to discuss the amount of the payments.
That income, along with health clinics and other benefits, makes the Redding Rancheria members the envy of Indigenous groups with comparatively paltry assets. Rickard’s Northern Wintu claims roughly 560 certified members, but like many groups across America, the tribe has been laboring for years and still has not received formal recognition from the U.S. government. That means the tribe can’t put land into trust, a prerequisite to casino development and also a shield against federal, state and local taxes.
“We don’t have the resources in order to obtain the things we need,” said Shawna Garcia, the Northern Wintu’s cultural resources administrator. “We don’t have the revenue to assist our members with things like college, housing and other assistance.”
Historians and ethnographers say the Wintu were the predominant tribe around the site proposed for the casino complex, an expanse of meadow and scrubland that locals dub the Strawberry Fields because of its agricultural history. And Rickard questioned why the “pure-blood Wintu people” he represents have been left to struggle, while the rancheria — representing an amalgamation of tribal groups — stands poised to create an even bigger cash cow with its new casino.
Rancheria leaders like Edwards, a UC Davis-trained lawyer, have emphasized how the tribal group has supported Native and non-Native people, both as one of the largest employers in Shasta County and through its charitable foundation.
In just one year, 2018, the rancheria said it gave more than $1.2 million to community organizations, helping serve the homeless and victims of the Carr fire. During the early phase of the COVID-19 pandemic, the rancheria donated $5,000 each to 60 businesses struggling to stay afloat.
At a cost of $150 million, the rancheria’s new casino would feature 1,200 slot machines — more than double the number at its current casino — and with 250 rooms, the new casino hotel would be more than triple the size of the existing hotel. The tribal group has pledged to close its current Win-River casino when the new one opens.
The rancheria’s outsized community presence has created substantial goodwill around Redding, but a portion of residents have stepped forward — via petitions and ballot measures — to express disdain for large developments they feel could harm the rural character of their community.
Among the more powerful opponents is Archie Aldis “Red” Emmerson, president of logging giant Sierra Pacific Industries, whose sprawling estate looms along the Sacramento River, just south of the casino site.
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In 2020, an Emmerson-allied company purchased property from the city of Redding that included a portion of a road that would be the north entry to the casino site and created an easement that would have barred access to the rancheria land for all but agricultural purposes. The easement effectively would have thwarted the casino by blocking vehicle access to the development.
But in 2022, a Shasta County Superior Court judge voided the deal, saying that in selling the land (for just $3,000 to the billionaire) the city had violated its “own processes, procedures and the relevant law.” The ruling nullified the easement, preserving the rancheria’s unrestricted access to the property.
The Redding City Council and neighboring homeowners have maintained their opposition to the project for years, while a new conservative majority on the Shasta County Board of Supervisors recently reversed the county’s earlier objections. The supervisors supported the casino, despite admonitions from the sheriff, fire chief and county counsel that the agreement with the rancheria did not provide sufficient compensation to cover the increased costs of serving the big development.
The rancheria agreed to make one-time payments totaling $3.6 million to support Shasta County, the Sheriff’s Department and fire and emergency services. That initial infusion would be supplemented by recurring payments: $1,000 for each police service call and $10,000 for each fire/emergency service call.
No issue has unsettled intra-tribal relations, though, like the debate flowing out of the terrible events along the Sacramento River 177 years ago.
Oral histories of the Wintu and neighboring tribes recall how Native families and elders had gathered along the river known as the Big Water each year in early April for the spring salmon run. Traditionally, the season signaled rebirth.
But Capt. John C. Fremont had other ideas.
Fremont diverted his men from their ordered assignment: completing land surveys in the Rocky Mountains. The Americans instead went adventuring to California, where, in the spring of 1846, they responded to sketchy claims from settlers that they were endangered.
About 70 buckskin-clad white men set upon the Native people, the locals far outgunned by the invaders, each toting a Hawken rifle, two pistols and a butcher knife, according to UCLA historian Benjamin Madley‘s detailed account of the massacre.
The horsemen completed their grisly work with such evident pride that legendary frontiersman Kit Carson later bragged that the coordinated assault had been “a perfect butchery.”
The massacre marked the beginning of “a transitional period between the Hispanic tradition of assimilating and exploiting Indigenous peoples and the Anglo-American pattern of killing or removing them,” according to Madley’s “An American Genocide: The United States and the California Indian Catastrophe.”
Fremont (later a U.S. senator from California and a Republican presidential candidate) would say that his party attacked the natives because of reports of an “imminent attack” upon settlers. But the “battle” was one-sided, with the federal troops suffering no known casualties. Afterward, according to Madley’s account, Fremont’s men feasted on the Native people’s larder of fresh salmon.
In the nearly two centuries since, the tragedy would be more forgotten than remembered. There is no historical marker around Redding noting the event.
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The Wintu people believed to have been the principal victims have preserved memories of the mass killing in their oral history. But no ceremony marks the atrocity. And at the Wintu cultural resource center in Shasta Lake City, a wall-size timeline of the group’s history makes no mention of the 1846 bloodshed.
There’s also the now-pressing question — pushed to the fore by the casino feud — about precisely where the massacre occurred. The Northern Wintu and another outspoken opponent, the Paskenta Band of Nomlaki Indians, insist that the Strawberry Fields property was a key location in the atrocity.
The Paskenta commissioned a study by a retired anthropologist from Cal State Sacramento that drew on research from the late 1800s by a linguist from the Smithsonian Institution who, in turn, got much of his information from a Wintu elder who survived the massacre. The report, by Dorothea Theodoratus and a colleague, said that the “center” of the massacre was “opposite the mouth of Clear Creek” in the Sacramento River, a point roughly two miles south of the proposed casino location.
But other accounts from participants and witnesses said Fremont’s soldiers chased down victims after the initial assault, leaving the exact range of the bloodshed unknown. The Theodoratus report says that six villages, including two on the proposed casino property, were so thoroughly intermingled that all “would have had some direct involvement with that massacre.”
Andrew Alejandre, chair of the Paskenta Band, told the Assembly Governmental Organization Committee in August that his tribe is seeking to have the state and federal governments designate the Strawberry Fields a sacred site, off-limits to development. Alejandre, 35, said his tribe vehemently opposes building a casino “on top of men, women, children and elders. The spirit of these ancestors … Let them rest!”
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In rebuttal, Potter and rancheria CEO Edwards note that during the many years that they and others have pursued developments in the region, the rival tribes never mentioned the massacre. Divisive fights over a proposed auto mall and a sports complex (both scrapped) came and went without any discussion about desecration of a mass grave site.
“I would never disrespect the remains of my ancestors,” Potter said.
Fifty miles south of Redding in rural Corning, the 288-member Paskenta Band opened the Rolling Hills Casino and Resort two decades ago. The luxe gaming hall is just one part of an economic surge by the tribe, which has also opened an equestrian complex, an 18–hole golf course, a 1,400-acre gun and hunting center and a 3,000-person amphitheater, where Snoop Dogg performed in May.
Potter charged that the fight over the historic massacre is really a ploy by the flourishing Paskenta to squelch the Redding Rancheria’s hopes for a shimmering destination casino “because of the mistaken belief that it … will cut into the profits of their gaming facilities.”
Paskenta’s Alejandre, a designer who once ran a clothing company, denied that is the case.
While representatives for the Paskenta and Northern Wintu tribes bashed the casino proposal at the August hearing, representatives of at least eightother California tribes argued in support of the Redding Rancheria. One said the Redding group had proved itself a good steward of cultural resources.
Another speaker at the hearing was Miranda Edwards, the 28-year-old daughter of the rancheria CEO. The Stanford-educated Edwards and her mother spoke about the importance of moving the tribal group forward for the “Seventh Generation,” future descendants whose livelihoods must be planned for today.
“We work hard every day to provide for this rural community and make it the best that we can for everyone that lives there,” Miranda Edwards told legislators. “It’s disheartening to hear from those that choose not to see that. But it will not stop our work.”
Potter, the rancheria’s chairman, had a sardonic take on the dispute.
“We always talk about crabs in a pot,” Potter said. “We are like all these crabs, stuck in a pot. When one tries to get out of the pot, all the others reach up and pull him back in.”
Will arguments about the Sacramento River massacre sway the final outcome of the Redding Rancheria’s casino quest? A BIA spokesman said only that “these issues are under review.” Nearly two centuries after representatives of the U.S. military decimated a civilization here, the federal government still retains ultimate authority over the fate of Native people.
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Your home is not just the cherished place you live. It is a valuable asset that can bring you opportunities for financial security and growth. Owning a home helps you build equity, and in turn, wealth, providing an option when you need to access funds. But there are other ways you can use your home as part of your financial strategy. Let’s explore how you can put your home to work for your financial benefit.
The Tangible Benefits of Homeownership
Owning a home can be a very rewarding experience. In addition to giving you a sense of pride and a connection to your community, homeownership provides tangible benefits that can improve your financial well-being. Two key benefits are equity and tax advantages.
Building Equity Over Time
As you make mortgage payments, you build equity in your home. Equity is the difference between the market value of your home and the amount you owe on your mortgage. Once you’ve accumulated enough home equity, you can tap into it for various needs like home renovations, debt consolidation or other expenses. You can typically obtain this cash through a second mortgage, such as a fixed-rate Home Equity Loan or a Home Equity Line of Credit (HELOC).
Tax Advantages
As a homeowner, you can deduct some of the interest you pay on your mortgage from your federal income taxes. This can save you a significant amount of money each year.*
Strategies to Unlock Your Home’s Financial Potential
Understanding the different ways you can take advantage of your home can help you unlock its full financial potential and move you closer to your goals.
1. Home Equity Loans
Having home equity can be a safeguard for managing large expenses. For example, if you need access to funds for home improvements, debt consolidation, school tuition, an emergency or any other significant expense, consider a Home Equity Loan.
A home equity loan allows you to borrow against your home’s equity and receive a one-time cash payment. Since this type of loan is a second mortgage, your primary mortgage, including your interest rate, remains unaffected. This can be a great advantage if you have a very low interest rate on your first mortgage and you want to access cash from your home equity without refinancing your entire loan balance — especially if rates are running on the higher end in the current market. You’ll also have the security of a fixed interest rate and payment on this type of loan, unlike a line of credit. The amount borrowed may even be tax deductible if the funds are used to renovate your home.*
2. Consolidate Debt
Your home equity can help you take charge of your debt. If you have a lot of high-interest debt from credit cards or personal loans, consider consolidating your debt with a home equity loan or cash-out refinance. A cash-out refinance replaces an existing mortgage with a new loan with a higher balance, sometimes with more favorable terms than the current loan. The difference between these two loans is distributed to the homeowner as cash.
Credit card and personal loan interest rates are typically much higher than home loan interest rates, so a cash-out refinance or home equity loan could potentially save you a lot of money on interest payments.
Paying down debt can also boost your credit score. But don’t treat a cash-out refinance or home equity loan like an ATM. Have a plan in place to avoid further debt.
3. Home Improvements
Certain improvements to your property can substantially enhance your home’s worth. Upgrading areas like the kitchen and bathrooms or incorporating energy-efficient elements can greatly appeal to future potential buyers if you choose to put the house on the market. Even if you’re not planning on selling anytime soon, this kind of investment often yields long-term financial benefits. Any increase in market value also contributes to an increase in your home equity.
4. Exterior Improvements
Exterior improvements like landscaping, a new wood deck or a wrap-around porch not only boost curb appeal but may also boost your home’s market value. When your market value increases, so does your home equity. Plus, when you’re ready to sell, potential homebuyers may be willing to pay more, often making these types of upgrades good long-term investments.
5. Investment
If you have good credit, liquid reserves and other qualifications, the equity in your home could be used to purchase an investment property.
A single-family home, townhouse or multi-family unit can be a long-term asset, offering additional tenant income. A vacation home can provide a reliable getaway that appreciates over time — and you can buy one with as little as 10% down.
6. Higher Education
As the equity in your home grows, so does the amount of accessible funds you have available to pay for a child’s education or your own tuition expenses. Just be sure to compare the interest rates of a home equity option vs. taking out a student loan. And do the math to ensure your existing budget can manage the increased or additional loan payments you’ll be responsible for.
7. Renting Out Spare Rooms or Basement
If you have extra space, you may be able to generate additional income by renting out a spare bedroom, guest house, casita or basement. A bedroom, guest house or casita could be rented to a tenant, and a spacious basement or garage could be leased to someone who needs storage space. Do your due diligence before renting out a room to ensure you understand the laws involved, any HOA restrictions, insurance, permits and safety requirements and tax implications.
8. Listing Your Space for Short-Term Rentals
Earn money by listing your guest house, casita or extra room as a short-term rental on a peer-to-peer exchange service such as Airbnb. Hosting out-of-town visitors can be very profitable, especially if you live in a tourist spot, business or transportation hub or near a university. Again, you’ll need to comply with your area’s legal, zoning, insurance, tax rules and other regulations.
9. Rent Out Your Pool or Backyard
Have a pool or backyard that often goes unused? Rent it out and bring in some extra cash. Apps like Swimply and Peerspace allow you to list your pool or yard and connect with individuals looking to swim, host a party, conduct photoshoots and even film commercials. That said, before you get started on using your property for this type of business venture, be sure to check with your homeowners insurance provider on any additional protections needed.
10. Home Equity Line of Credit (HELOC)
A HELOC allows you to access your home equity by providing a line of credit, which behaves similarly to a credit card. Borrow the amount you need when you need it, up to your approved limit. Keep in mind that HELOCs use variable rates, so the interest rate will fluctuate based on certain benchmark rates and the current market.
Want to leverage your home equity? Check out our home value estimator to help give you an idea of your home equity, then explore our home equity loan options or contact a Pennymac Loan Expert today.
*Consult a tax adviser for further information regarding the deductibility of mortgage interest and charges.
hikesterson/Getty Images; Illustration by Issiah Davis/Bankrate
After topping 8 percent in October, mortgage rates beat a hasty retreat in November. The average rate on 30-year loans fell under 7.5 percent in Bankrate’s most recent survey of lenders.
“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” says Sam Khater, chief economist at mortgage company Freddie Mac.
One key reason for the reversal: Investors bid down 10-year Treasury yields, the main indicator for 30-year fixed mortgage rates.
Another factor is inflation, which was down to 3.2 percent for October. While that’s still above the Federal Reserve’s official target of 2 percent, forecasters think the Fed is done raising rates, a shift that will relieve some of the pressure on mortgages.
“If the Fed signals an end to interest rate hikes and takes on a dovish tone, there may be some downward pressure on mortgage rates,” says Odeta Kushi, economist at title insurer First American. “But don’t expect any large declines in mortgage rates until inflation is much closer to the Fed’s 2 percent target or there’s a decline in economic activity.”
Mortgage rate predictions December 2023
The downward momentum in mortgage rates will be sustained, albeit modestly, as the Federal Reserve signals they are done raising interest rates and projects slower inflation in 2024. Cautious projections from the Fed about the timing of rate hikes, along with the elevated volume of Treasury issuance, will be offsetting factors that limit the extent of decline in mortgage rates.
— Greg McBride, Bankrate Chief Financial Analyst
Many forecasts now call for rates to stick in the 7 percent range, either at 7.5 or higher.
“While mortgage rates have trended down from their peak in October, they remain above 7 percent and will likely stay there for some time,” says Ruben Gonzalez, chief economist at real estate brokerage Keller Williams.
As inflation cools and the Federal Reserve stands down, rates should drift down to 7 percent, says Lisa Sturtevant, chief economist at Bright MLS, a real estate listing service in the Mid-Atlantic region.
“Part of it is the Federal Reserve is pausing on interest rate hikes,” says Sturtevant. “Of course, mortgage rates are affected by things other than what the Fed does. For example, mortgage applications are down, and lenders are competing for a shrinking pool of applicants.”
Current mortgage rate trends
After rising sharply through late October, mortgage rates have trended back down. The average rate on a 30-year mortgage was 7.4 percent as of Nov. 29, according to Bankrate’s survey. This represents a departure from 8.01 percent on Oct. 25.
Bankrate’s weekly mortgage rate averages differ slightly from the statistics reported by Freddie Mac, the government-sponsored enterprise that buys mortgages and packages them as securities. Bankrate’s rates tend to be higher because they include origination points and other costs, while Freddie Mac removes those figures and reports them separately. However, both Bankrate and Freddie Mac report similar overall trends in mortgage rates.
When will mortgage rates go down?
While the experts we talked to don’t expect rates to come down significantly this month, they do forecast an eventual easing in 2024. The Mortgage Bankers Association projects rates to fall to 6.1 percent late next year. The National Association of Realtors estimates rates will be at 6.3 percent in a year, while Fannie Mae forecasts they’ll be at 7.1 percent.
Still, mortgage rates aren’t easy to predict.
“A lot of us forecasted we’d be down to 6 percent at the end of 2023,” says Sturtevant. “Surprise, surprise, we’re not.”
One wild card has been the unusually large gap between mortgage rates and 10-year Treasury yields. Normally, that spread is about 1.8 percentage point, or 180 basis points. This year, the gap has been more like 280 basis points, pushing mortgage rates a full percentage point higher than the 10-year benchmark indicates.
“There is room for that gap to narrow,” says Sturtevant, “but I’m not sure we’ll get back to those old levels. In this post-pandemic economy, the old rules don’t seem to apply in the same ways. We’re sort of figuring out what the reset is. Investors have a different outlook on risk now than they did before the pandemic. We’re just in this weird transition economy.”
What to do if you’re getting a mortgage now
Mortgage rates are at generational highs, but the basic advice for getting a mortgage applies no matter the economy or market.
Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. To help qualify for a conventional mortgage, you’ll generally need a score of 620 or higher. However, the best mortgage rates go to borrowers with the highest credit scores, usually at least 740. In general, the more confident the lender is in your ability to repay the loan on time, the lower the interest rate it’ll offer.
Save up for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid private mortgage insurance (PMI), which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are specific loans, grants and programs that can help. The eligibility varies by program, but often are based on factors like your income.
Understand your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.
Check out different mortgage loan types and terms. A 30-year fixed-rate mortgage is the most common option, but there are shorter terms. Adjustable-rate mortgages have also regained popularity recently.
FAQ
It might seem like a bank or lender are dictating mortgage terms, but in fact, mortgage rates are not directly set by any one entity. Instead, mortgage rates grow out of a complicated mix of economic factors. Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs.
The Federal Reserve doesn’t directly set mortgage rates, but it does set the overall tone. The closest proxy for mortgage rates is the 10-year Treasury yield. Historically, the typical 30-year mortgage rate is about 2 percentage points higher than the 10-year Treasury yield. In 2023, that “spread” has been more like 3 percentage points.
Mortgage rates have jumped to 23-year highs, so not many borrowers are opting to refinance their mortgages in late 2023. However, if rates come back down in the near future, homeowners could start looking to refinance.
Deciding when to refinance is based on many factors. If rates have fallen since you originally took out your mortgage, refinancing might make sense. A refi can also be a good idea if you’ve improved your credit score and could lock in a lower rate or lower fees. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.
A typical 20% down payment on a home in a U.S. metropolitan area costs $80,250, based on the median price of a single-family home of $402,600 in the second quarter of 2023. However, for many first-time homebuyers, the hurdle of making a substantial down payment can seem insurmountable and many can only put down 3-5%, or $12,078 – $20,130.
This is where down payment assistance programs can come into play, offering a lifeline to those aspiring to become homeowners. But, what are they exactly and how can we help our clients utilize them?
What are down payment assistance programs?
Down payment assistance programs (DPAs) are initiatives designed to help first-time homebuyers bridge the gap between their savings and the down payment required to purchase a home. These programs are typically offered by government agencies, nonprofit organizations and occasionally private entities. DPAs can take various forms, such as grants, loans or second mortgages, and they are typically tailored to meet the specific needs of the target demographic.
There are four main types of down payment assistance:
Grants: Gifted money that never has to be repaid.
Loans: Second mortgages that are paid monthly along with your primary mortgage.
Deferred loans: Second mortgages with deferred payments that only have to be paid when you move, sell or refinance.
Forgivable loans: Second mortgages that are forgiven over a set number of years (often five, but maybe up to 15 or 20). These only need to be repaid if you move, sell or refinance too early.
Examples of down payment assistance programs
The FHA offers low down payment loans to first-time homebuyers. With an FHA loan, borrowers can put down as little as 3.5% of the home’s purchase price. This low barrier to entry makes homeownership more achievable for those with limited savings.
Many states in the U.S. also offer their own DPA programs to assist local homebuyers. These programs can provide grants, low-interest loans or second mortgages to cover a portion of the down payment and closing costs. The specific details vary from state to state, but they generally aim to make homeownership more accessible.
Some local housing authorities and city governments provide down payment assistance to residents. For instance, the city of Denver has its “metroDPA” assistance program, which is currently helping people throughout the Front Range become homeowners. If you make up to $188,250 a year and have a credit score above 640, metroDPA can help with a home loan and down payment assistance to help you buy a home.
Nonprofit organizations like Habitat for Humanity have been instrumental in promoting homeownership among low-income individuals and families. They offer sweat equity programs and interest-free loans to help prospective homeowners achieve their dreams.
We all know that one of the most significant barriers to homeownership for first-time buyers is the initial down payment. Many people are eager to learn ways they can afford it but feel lost as they try to navigate the landscape of what to do next.
This is where we as Realtors are ready to educate our buyers with information and help clients find the right path(s) to alleviate financial burdens by providing funds to cover a portion of the down payment.
Remind clients about demographics for DPAs
First, we educate clients that DPAs often target specific demographics, such as low-income families, veterans or those living in high-cost housing markets. By doing so, these programs broaden the pool of eligible homebuyers and ensure that homeownership is not solely reserved for the well-off. As a result, we should also set expectations for clients so they don’t assume they’ll have DPAs to rely on.
Explain the different assistance programs available
Another factor to guide clients on is that DPA programs provide assistance in the form of grants or forgivable loans, though these are harder to lock in. These funds do not need to be repaid if the homeowner stays in the property for a specified period, typically several years. This helps lower the overall cost of homeownership, making monthly mortgage payments more manageable. Be realistic with clients on whether this is a viable option for them and their current financial situation.
Suggest credit counseling services
Educate clients on where to turn to for credit consulting. For so many, one medical bill or missed payment can take a hammer on credit scores. Clue clients in on places they can turn to in order to help improve their credit scores.
Find a housing counselor
Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures and credit issues. The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD) and they can offer independent advice, often at little or no cost to the client.
Over time, homeowners build equity as they pay down their mortgages and as property values appreciate. DPAs set first-time homebuyers on the path to wealth accumulation, enabling them to build a financial foundation for the future.
The resurgence of down payment assistance programs represents a ray of hope for first-time homebuyers, particularly those facing financial constraints. These programs play a pivotal role in reviving the dream of homeownership by reducing the initial financial barrier and making it more attainable for a diverse range of individuals and families.
By offering assistance in various forms, from government-backed loans to nonprofit grants, DPAs allow first-time homebuyers to step onto the property ladder. This not only benefits the homeowners themselves but also strengthens communities and fosters financial stability.
As the popularity of DPAs continues to grow, they hold the promise of expanding homeownership opportunities for countless individuals, ensuring that the American dream remains within reach for all those who aspire to call a house their home and ultimately build generation wealth.
Jessica Reinhardt is the 2022-2023 chair of the Denver Metro Association of Realtors.
A roof over your head is a great blessing. However, homeownership has its ups and downs. One of those low points might be shelling out thousands of dollars to replace the roof that has protected you from the elements for years.
At some point, every roof will need to be replaced. It’s one of the many joys of homeownership. But, according to Angi, the average roof replacement cost ranges from $4,900 to $14,100. With a wide range of costs, you may be wondering how you can land the best deal.
The wide range of roof replacement costs is due to various factors such as style, location, the size of your roof, and the professional you hire.
Let’s take a closer look at how you can lower your overall costs and get ready for this significant undertaking.
Factors Affecting Roof Replacement Cost
The cost of replacing your roof can vary significantly based on several key factors. Understanding these factors is crucial for managing your budget effectively. Here are the primary elements that influence roof replacement costs:
Roofing material: The type of material you choose for your new roof can have a substantial impact on the overall cost. Materials like asphalt shingles are generally more affordable, while options such as metal or slate can be considerably more expensive.
Location: Your geographical location plays a role in cost variations. Areas prone to extreme weather conditions or high wind zones may require more durable and costly roofing materials.
Roof size and complexity: Larger roofs with multiple peaks and angles, as well as varying roof pitch, will require more materials and labor, leading to higher costs.
Professional you hire: The choice of roofing contractor can affect costs. Highly experienced professionals may charge more for their expertise.
Additional accessories: Roofing accessories such as flashing, underlayment, and ventilation systems can add to the overall expense.
Types of Roofing Materials and Their Costs
When it comes to replacing your roof, one of the critical decisions you’ll face is choosing the right roofing material. The choice of material not only affects the aesthetics of your home but also significantly impacts the overall cost of the project. Let’s delve deeper into some common roofing materials, their characteristics, and how they influence the cost of roof replacement.
Asphalt Shingles
Cost: Basic asphalt shingles are often the most budget-friendly option, with prices ranging from $1.20 to $4 per square foot.
Durability: They offer reasonable durability and come in various styles and colors to match your home’s design.
Energy efficiency: Standard asphalt shingles are less energy-efficient compared to some other materials.
Metal Roofing
Cost: Metal roofing tends to be more expensive, typically starting at around $5 per square foot.
Durability: Metal roofs are known for their longevity and resistance to harsh weather conditions.
Energy efficiency: They are highly reflective and can help reduce energy costs.
Slate Tiles
Cost: Slate tiles are among the costliest roofing materials, often exceeding $10 per square foot.
Durability: They are incredibly durable and can last for a century or more if properly maintained.
Energy efficiency: Slate tiles provide excellent insulation, contributing to energy efficiency.
Wood Shingles
Cost: Wood shingles fall in the mid-range of roofing material costs, typically starting at $5 per square foot.
Durability: They offer a charming, rustic look but may require more maintenance.
Energy efficiency: Wood shingles provide decent insulation but may not be as energy-efficient as some other options.
Solar Panels
Cost: Solar roofing can be expensive, considering both the cost of the panels and installation.
Durability: Solar panels have a long lifespan and generate renewable energy.
Energy efficiency: Solar panels are highly energy-efficient, potentially reducing your utility bills.
Clay Tiles
Cost: Clay tiles are often on the higher end of the cost spectrum, starting at around $10 per square foot.
Durability: They are incredibly durable and can withstand severe weather conditions.
Energy efficiency: Clay tiles provide good insulation, contributing to energy efficiency.
It’s important to note that the roofing costs mentioned here are approximate and can vary based on factors such as your location, the complexity of the project, and the specific product you choose. When selecting a roofing material, consider not only the initial cost but also its longevity and energy efficiency, as these factors can impact your long-term savings and the value of your home.
By understanding the characteristics and costs associated with different roofing materials, you can make an informed decision that aligns with your budget and aesthetic preferences. Keep in mind that the choice of material is a significant factor in determining the overall cost of your roof replacement project.
When Should You Replace Your Roof
The first thing you need to do is determine whether you really need a new roof. A visible hole in your ceiling is not the sign you should be waiting for. If you get your roof replaced before it reaches the final stop of its useful life, then you could be avoiding potentially bigger problems down the road.
A few signs that your roof is ready to be replaced include:
Water leaking into the house
Cracked shingles
Missing shingles
Shingles that are curling on the edges.
“Bald spots” on your roof where granules are missing.
Overall signs of age on your roof.
Another tip is to be mindful of your neighbors. If your homes were built in the same time period, then you may notice many new roofs in the area. It could be a sign that the inevitable demise is coming to your roof soon.
As soon as you spot any of these signs, you should start considering a new roof. The longer you wait, the more damage might be done to the value of your home.
If you are considering selling your home, do not assume that you can pass along the failing roof to the new owner. Many buyers will shy away from aging roofs because it is an added cost that they can easily avoid by choosing another home to buy.
Make sure to regularly take a closer look at what is happening on your roof. You can help prolong the life of your roof by taking care of it. For example, removing moss and algae growing in your shingles can prevent damage to the shingles can help prevent damage to your roof’s shingles.
How much does a roof replacement cost?
As with all things in life, you have choices for your roof replacement. The total roof replacement cost will vary considerably based on your choices.
The costs stem from the materials, labor, and disposal of your old roofing material.
In terms of material, you’ll need to choose between numerous shingles such as wood, clay, asphalt, solar, slate tiles, metal, and more. The material you choose may be based on cosmetic preference or necessary toughness to combat the elements of different locales. For example, in high wind areas of hurricane-prone Florida, homeowners are required to upgrade their roofing materials in hopes of withstanding potential hurricanes.
Asphalt shingles will most likely be your least expensive choice. An asphalt shingle roof costs about $1.20 to $4 per square foot to remove and replace an entire roof. Other materials, such as metal roofing, will generally cost at least twice as much per square foot. However, a new metal roof will likely save you money on homeowners insurance.
The cost to install 30-year architectural shingles is typically around $350 to $500 per square foot. And 50-year architectural shingles are even more expensive. Of course, they are stronger and last longer.
For labor, the size and construct of your roof will be a significant factor. If you have many peaks and ledges, expect your labor costs to be higher.
Assessing the Condition of the Current Roof
Before diving into a roof replacement project, it’s essential to assess the condition of your existing roof thoroughly. This step can significantly impact your overall cost and project planning. Here’s how to evaluate your roof’s condition:
Look for signs of damage: Check for water leaks, cracked or missing shingles, curling edges, bald spots, and any visible signs of aging.
Neighborhood trends: Pay attention to neighboring homes; if many have recently replaced their roofs, it might be a sign that your roof is due for replacement soon.
Preventive maintenance: Regular maintenance, such as removing moss and algae, can extend your roof’s lifespan and help you avoid costly roof repairs.
When evaluating the condition of your current roof, you might find that not all areas require a full roof replacement. In some cases, a partial roof replacement can be a viable option. This approach is typically chosen when the damage is localized to specific sections of the roof or when budget constraints are a concern.
Estimating the Size and Complexity of the Project
Understanding the size and complexity of your roof replacement project is vital for accurate cost estimation. Here’s how to estimate the scope of your project:
Measure your roof: Determine the square footage of your roof to calculate the amount of materials needed.
Consider roof design: Roofs with many peaks and angles may require more labor and materials, leading to higher costs.
Roofing layers: If your existing roof has multiple layers, removal and disposal costs will increase.
Roof features: Any additional features like chimneys, skylights, or roof vents can affect the complexity of the project.
Labor and Installation Costs
The cost of labor and installation is a significant part of your roof replacement budget. Several factors influence these costs:
Roof size: Larger roofs require more labor hours, leading to higher installation costs.
Roof complexity: Roofs with unique designs or many angles may demand more skilled labor, increasing costs.
Contractor expertise: Experienced contractors may charge higher labor fees, but their quality of work can be worth the investment.
Location: Labor costs can vary by region due to local labor rates and demand.
Additional Costs for Roofing Accessories
In addition to the primary roofing material and labor, there are other accessories and components that can impact your roof replacement cost. These include:
Flashing: Necessary for sealing roof joints and preventing leaks.
Underlayment: Provides an extra layer of protection beneath the roofing material.
Ventilation systems: Ensures proper airflow in the attic, which can affect the longevity of your roof.
Gutters and downspouts: Proper drainage is essential to protect your home’s foundation.
Removal and Disposal of the Old Roofing Materials
Before installing a new roof, the old roof must be removed and properly disposed of. This is a necessary step in the replacement process and can add to your project cost. Key points to consider:
The number of existing layers: Removing multiple layers of old roofing can be more labor-intensive and costly.
Disposal fees: Depending on your location, there may be fees associated with disposing of old roofing materials.
Potential Hidden Costs and Unexpected Expenses
While you plan your roof replacement budget, it’s essential to be prepared for potential hidden costs and unexpected expenses that may arise during the project. Some factors to be aware of include:
Structural damage: If hidden structural issues are discovered during the replacement, repairs can be costly.
Unforeseen leaks: Roofing projects can reveal additional leaks that were not visible before, requiring immediate attention.
Weather delays: Adverse weather conditions can cause project delays, potentially leading to increased labor costs.
Comparing Quotes from Different Contractors
To make an informed decision, it’s crucial to obtain multiple quotes from different roofing contractors. Here’s how to effectively compare these quotes:
Ensure each quote includes warranty information for both materials and installation.
Beware of significantly low bids, as they may indicate lower quality work.
Check online reviews to gauge the reputation of the roofing company.
Verify that the contractor is licensed by contacting your state consumer protection office.
How to Reduce Your Roof Replacement Costs
You should expect to pay thousands of dollars for your roof repair. However, there are methods to lower your overall roof replacement cost.
1. Hire a Professional Roof Inspector
If you’ve noticed that your roof is looking a bit worse for wear, then you should call in an inspector. Although it can cost a few hundred dollars to hire an inspector, it might be well worth the cost.
An inspector will be able to tell you whether you really need a new roof. They might recommend a patch or suggest that you wait a few years before replacing the whole roof. Either way, it will give you a better understanding of the problem at hand.
2. Replace or Repair?
After receiving the inspection report recommendations, you’ll need to decide whether you will replace or repair the roof. It is a good idea to go with the guidance of the inspector. However, as the owner, you have the final say in this decision.
3. Check the Home Warranty
When was your roof last replaced? If the answer is recently, then the replacement might be under warranty.
If you recently bought the home, you should check through the closing paperwork. Home warranty information is often available in that fine print. If you can’t find the information, consider contacting the previous owners to see if they can provide you with that paperwork.
The home warranty may cover your replacement costs, so it is an option you should look into.
4. Decide What You Want
Before talking to a roofing contractor or salesman, make sure you know exactly what you want on your new roof. Take the time to research the different materials and options and choose the one that will work well for your area and your budget.
Build an understanding of the features of your roof. Is it huge? Does it have many peaks and ridges that will increase labor costs?
With this level of research, you’ll be able to discuss the details of contractor bids coherently. Doing this homework helps ensure that you are not being taken advantage of. You might not need the latest and greatest product that the salesman attempts to sell you.
5. Compare Bids
Once you have a good understanding of what you need, then it is time to call in the contractors. Obtain estimates from various roofing contractors. Each bid should include roof warranty information on both the materials and the installation.
Do not automatically jump for the lowest bid. If the bid is significantly lower, do more research before accepting that bid. Sometimes very low bids translate into lower quality work. Online reviews of a roofing company may help you find out if the company is worth doing business with.
Make sure to confirm that the bid is from a licensed contractor. You can contact your state consumer protection office to confirm this.
Trust your instincts when choosing a roofer. You want a roof that will last for years to come at an affordable price. Cutting corners now will only cause more problems down the line.
6. Go the DIY Route
In the world of homeownership, there is always the option to fix the problem yourself. Although the roof is a high stake home repair, you may be able to do part of it yourself for a fraction of the cost.
The labor costs of a DIY roof replacement can account for the bulk of the expense. Sometimes, a contractor will allow you to remove the old roofing material yourself to cut the total cost. However, you should only pursue this option if you have the proper tools and knowledge.
7. Check Your Insurance Policy
If you are like most Americans, you carry a homeowner’s insurance policy on your home. In that case, the policy might cover roof damages.
Most insurance policies will help cover some or all of your roof replacement. However, if the need for replacement is due to neglect, then it is unlikely they will assist you. Call your insurance provider to find out how much they might be willing to cover.
8. Ask for a Discount
Most roofers are at the whim of seasonal work. In the winter, work can dry up in some places. Whereas in the summer, they can’t work through the jobs fast enough.
If you are willing to wait for a convenient time for the roofing company, then ask if they will give you an off-season discount. For example, you could request a 10% discount to wait until they have a slow month for your roof repair.
It never hurts to ask; the worst thing they can say is ‘no.’
Financing Options for Roof Replacements
Replacing a roof can be a significant financial undertaking. If you’re concerned about the upfront cost, consider these financing options:
Home improvement loans: Home improvement loans are tailored for renovation projects like roof replacement. They typically offer competitive interest rates and flexible terms, available from banks or online lenders.
Home equity loans or lines of credit: Leverage your home’s equity to finance your roof replacement. Home equity loans provide a lump sum upfront, while home equity lines of credit (HELOCs) offer flexibility in accessing funds.
Insurance coverage: Review your homeowner’s insurance policy to check if it covers roof replacement, especially for damage caused by specific covered perils like severe storms or hail.
Contractor financing: Many roofing companies offer financing options to help you manage the cost of roof replacement. When considering this option, inquire about terms, interest rates, and the company’s reputation to ensure transparency and fairness in their financing offerings.
Bottom Line
Understanding the cost of roof replacement is a crucial step for homeowners. It’s not merely an expense but an investment in the protection and value of your home. By taking the time to assess your roof’s condition, research materials, budget wisely, and seek multiple quotes, you can make informed decisions that align with your financial situation.
Roof replacement can be a substantial undertaking, but with careful planning and consideration, you can ensure the longevity and safety of your home. Remember that each roof is unique, and roofing costs can vary based on several factors. Whether you’re facing an imminent replacement or planning for the future, being well-informed is the key to making cost-effective choices for your roofing needs.
Frequently Asked Questions
How much does a roof cost?
The cost of a roof varies widely based on factors like size, materials, and geographic location. For standard materials like asphalt shingles, prices can range from $7,000 to $12,000 for an average-sized home. More premium materials like metal, slate, or tile can significantly increase the cost. Additional factors like roof design complexity, labor rates, and regional costs also play a crucial role in determining the final price.
What is the average cost of replacing a roof?
The average cost of replacing a roof in the United States is around $10,000, but pricing can vary widely depending on factors like the size of the roof, materials used, and geographic location. High-end materials or complex roof designs can push costs significantly higher.
How do different types of roofs affect the replacement cost?
The type of roof has a major impact on replacement costs. Asphalt shingles are generally the most affordable, while materials like metal, tile, or slate are more expensive. The complexity of the roof design, such as the presence of skylights or multiple levels, also affects the cost.
Are there any additional expenses associated with roof replacement?
Yes, there can be additional expenses beyond the basic cost of materials and labor. These might include costs for permits, structural repairs, gutter replacement, or disposal of the old roofing materials. These costs should be considered when budgeting for a roof replacement.
Does the size of the roof influence the cost?
Absolutely. The larger the roof, the more materials and labor will be needed, which increases the overall cost. Roofing costs are often calculated by the square foot, so a larger roof area will result in a higher total cost.
What factors can affect the overall cost of a roof replacement?
Several factors can affect the total cost, including the type of roofing material, the complexity of the roof’s design, the need for structural repairs, local labor rates, and whether the old roof needs to be removed first. Weather conditions and seasonal demand can also play a role.
Is roof removal included in the replacement cost?
In many cases, the cost of removing the old roof is included in the roof replacement quote. However, this is not always the case, so it’s important to clarify this with the contractor. The cost of removal can vary depending on the size and material of the existing roof.
Do I need permits for a roof replacement?
Yes, most local governments require permits for a roof replacement. The cost and requirements for these permits vary by location. It’s important to factor in these costs and ensure that your contractor handles the permit process.
Are there any financing options available for roof replacement costs?
Many roofing contractors offer financing options to help manage the cost of roof replacement. Additionally, some banks and credit unions offer home improvement loans. It’s advisable to compare rates and terms to find the best financing solution.
What are some signs that indicate a need for a roof replacement?
Signs that you may need a roof replacement include missing or damaged shingles, frequent leaks, sagging, and daylight visible through the roof boards. If the roof is more than 20 years old, it might also be time to consider replacement.
How long does a typical roof replacement take?
The time required for a roof replacement can vary, but most projects are completed within a few days to a week. Factors that influence the timeline include the size of the roof, weather conditions, and the complexity of the job. More complex projects or unforeseen issues can extend this timeline.
How much can I save by replacing my roof myself?
DIY roof replacement can lead to significant savings, primarily by eliminating professional labor costs. You may also reduce expenses by sourcing materials and handling waste disposal yourself.
However, while DIY can cut initial costs, it’s crucial to consider the value of professional workmanship, which often ensures quality and adherence to safety standards. Inexperienced DIY attempts might lead to costly future repairs, potentially offsetting the initial savings.
In speaking to the Committee on Banking, Housing and Urban Affairs yesterday, FDIC Chairman Sheila Bair addressed the issue of streamlined loan modification and called on servicers to do more than just set up repayment plans.
Since July of last year, 1,035,000 homeowners received loan workouts through Hope Now, but an overwhelming 758,000 of those were simple repayment plans, while just 278,000 were full scale loan modifications.
Bair and many others are concerned that repayment plans will simply delay a growing problem, and lead to a larger number of delinquencies in the not-so-distant future.
“In spite of some encouraging signs that servicers are increasing the pace of loan modifications, some reports continue to show a great reliance by servicers on repayment plans,” Bair said.
“Repayment plans or brief deferrals of payments will not allow us to get past our current problems. They are analogous to “kicking the can down the road”.”
Instead, Bair wants long term solutions, such as teaser rates extended for five years to allow borrowers to get caught up on mortgage payments and survive the housing downturn.
“Servicers should quickly identify loans facing likely default, develop broad templates for restructuring these loans into long-term, sustainable loans with fixed rates for at least five years, and proactively initiate that process,” she said.
“In addition, in appropriate circumstances, lenders and servicers also should consider forgiving a portion of the principal balance owed.”
Bair noted that servicers should consider situations where borrowers can’t support repayment of the loan, but reducing the principal balance to a sustainable level would be more advantageous than the anticipated loss that would result from a foreclosure.
“Investors should be pushing for these types of modifications. Given current market conditions, servicers who take no action and choose to rely on the traditional loan-by-loan process leading to foreclosure could run a risk of legal liability to investors for their failure to take steps to limit losses to the loan pool as a whole.”
Bair also called for more in-depth reporting from loan servicers to document efforts and better assess the situation.
“In addition, we need more consistent, transparent reporting of loan modification activity,” said Bair. “Just this week, the FDIC and other federal regulators are issuing a statement calling for all servicers and lenders to provide more detailed reporting on their efforts through the Hope Now Alliance.”
“Some servicers continue to express concern about potential legal liability to investors for loan modification activity. We believe that servicers have significant flexibility to restructure loans under current law. Indeed, as previously indicated, there may be litigation risk in failing to modify troubled mortgages.”
“However, to address these concerns, Congress could explicitly affirm that servicers have such legal authority and establish litigation safe harbors for responsible, systematic modifications.”
Building a budget isn’t hard, but it does require time and effort. And once it’s completed, it’s something you should be proud of. Yet, many people have trouble sticking to a budget, essentially throwing all their work out the window as a result of impulse buys, unrealistic expectations, or a lack of discipline. Here’s a look at some of the reasons budgets can fail and tips for making a budget you can stick to.
Understanding the Importance of Budgeting
A budget allows you to organize your money according to your priorities and plays a key role in achieving financial goals. Those goals can be anything from taking a vacation and buying a new car to funding future education and retirement. With a well-crafted budget, you can work on multiple goals at the same time.
A budget is also one of the top tools to help you stay out of debt or rein in any outstanding debt you may already have. In addition, having a budget can help simplify your spending decisions, making it easier to determine which purchases are worth making and which you don’t actually need.
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Overcoming Common Budgeting Challenges
Budgeting usually begins with the best of intentions. However, it’s all too easy to get sidetracked. Temptations and unexpected expenses can cause a budget to go off the rails, leading to overspending, missed bill payments, and debt. Here’s a look at some of the most common reasons why budgets fail.
Lack of Discipline
Though people often get excited about putting their financial house in order, it can be easy to slip back into the lifestyle they led before putting a budget in place. If you already live within your means, that might be okay. But if you’re a habitual overspender, it’s important to recognize that those behaviors have to change to keep your budget on track.
Unrealistic Expectations
Many people think budgeting requires drastic measures. For example, if you’ve been living beyond your means and want to rein in your spending, you may decide you must go from spending more than you make to living off half your income. But that may not be a viable option, at least at first. When you fail, you might give up on budgeting altogether. It’s important to set achievable expectations.
Discounting Irregular Expenses
While building your budget, you probably remember to factor in regular expenses like your monthly electricity bill and grocery shopping. But it can be easy to forget to include expenses that occur on a more infrequent schedule, such as quarterly or annually.
Annual membership fees, homeowners’ association fees, and kids’ camp tuition may come up only once a year, and that can make them easy to forget. Failing to account for these costs can throw your budget off once they come due and you may have to scramble to find the cash to pay them. You can try to account for these expenses by saving a little each month to help cover them.
Recommended: Determining the Right Spending/Budgeting Categories
Getting Lost in the Weeds
While it’s important to take a thorough accounting of your expenses when making a budget, it is possible to go overboard with so many line items that can make your head spin.
A budget with too many line items can be tedious to update and track. It can be more productive to have broad line items that encompass a wider array of expenses, so if you spend a bit too much on one small item, it won’t make much difference.
Your Social Circle
The people you surround yourself with, including your friends, family, and partner, can have a huge impact on your spending. If these people tend to be big spenders, you might be tempted to spend when you’re around them. It would be a shame if one big night on the town threw off a whole month’s worth of budgeting plans.
If you’re saving for a specific goal, like putting a down payment on a home, you might let your friends know that you’re trying to stick to a budget, so maybe they won’t tempt you with expensive sushi dinners or weekends in Vegas. In their excitement to help you achieve your goal, they may be willing to trade nights at the bar for cheaper activities like game nights in.
Creating a Realistic Budget
One of the most important tips for how to stick to a budget is to start with a realistic budget — or, in other words, a budget that is easy to stick with. These three steps are key to starting off on the right foot.
Assessing Income and Expenses
To create a realistic budget, you need to first assess where you currently stand. That means calculating how much, on average, is coming in each month and how much, on average, is going out each month.
You can do this by gathering bank statements from the past several months, then adding up all of your (after tax) monthly income. This is how much you have to spend each month. Next, add up what you are spending each month to come up with a monthly average. If your average monthly spending exceeds your average monthly income (meaning you’re going backwards) or is about the same (meaning you’re not saving), you’ll need to find places to cut back.
Setting SMART financial goals
Whether your goal is to build an emergency fund or go on a great vacation, setting clear, achievable financial goals will help you create — and stick to — your budget. Strong goals serve as reminders for why you’re choosing to spend less in some areas, which can make sticking to your budget feel more rewarding.
Consider using the SMART framework when setting goals. You’ll want your goals to be:
Specific: Rather than saying, “I’d like to save more,” try to be more specific, such as “I’d like to put a downpayment on a car in four months.” Measurable: You want your goals to have a measurable outcome, such as a set amount of money you’d like to save by a certain date. Attainable: If a goal is too hard to achieve, you might give up before you get very far. Strive to set goals that are attainable given your current income, expenses, and time frame. Relevant: It’s key that your goals address your top needs and concerns. Consider what will give you the most security and value to your life right now. Time-based: Having a set timeline to reach your goals can help you stay on track.
Recommended: Smart Financial Strategies to Reach Your Goals
Prioritizing Essential and Non-Essential Expenses
A budget is an opportunity to align your spending with what’s most important to you. You’ll want to have three main categories for spending:
• Essential expenses (“needs”) These are your necessities, such as groceries, housing, healthcare, and transportation.
• Nonessentials (“wants”) These are the expenses that aren’t necessary for survival but enhance your quality of life.
• Savings This is the money you separate from spending each month and allows you to reach the financial goals you established earlier.
A very basic approach to budgeting is the 50-30-20 rule, which divides your net income into the above categories, spending 50% on needs, 30% on wants, and 20% on savings. Those percentages may not be realistic for everyone, however, If you live in an area with steep housing costs, for example, you may need to spend more than 50% on needs and take some away from the “wants” and/or “savings” categories.
Practical Tips to Stick to Your Budget
Once you have a basic budget in place, you’ll need to stick to it — or you won’t see any progress towards your goals. Here are six ways to keep spending and saving on track.
1. Sleep on Big Purchases
Impulse buys can quickly throw your budget off course. To avoid the problem, try the 30-day rule: If you see something nonessential you want to buy either online or in person, put the purchase on a one-month pause. Tell yourself that if, after 30 days, you still want the item, and you can afford it, you’ll buy it. This gives you time to reflect. You may well decide that you don’t need or want the item that badly and forgo the purchase.
2. Aim to Never Spend More Than You Have
Getting into debt can be a vicious cycle that is tough to get out of. Just paying the minimum on your credit card balance, for example, means you’re never getting ahead of your debt. Running a balance also means you’re going to end up paying far more for your purchases than the original price tag.
If you want something you can’t afford right now, plan for it, and start setting money aside for it each month. When you have enough, you can splurge without guilt — or throwing off your budget.
3. Set up Auto Draft for Bills and Savings
To make sure you never miss a payment (and avoid late fees), consider setting up autopay for all of your regular bills. You can apply the same principle for paying yourself (a.k.a saving). Simply set up a recurring transfer from your checking account to your savings account for the same day each month (ideally, right after you get paid). Even small amounts will grow into something larger, which can ultimately buy that vacation or cover an unexpected car repair.
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4. Plan Your Meals to Curb Impulsive Spending
When you’re hungry and there’s no food in the house, it’s hard to resist the call of the drive-through or your fave local take-out spot. You can avoid this temptation by planning your meals (including breakfast, lunch, dinner, and snacks) each week, making a grocery list, and sticking to that list in the store. Meal planning saves you from blowing your weekly food and restaurant budget. Bonus: You’ll probably eat healthier, too.
5. Utilize Technology for Tracking and Managing Your Budget
One of the best ways to stick to a budget is to harness technology. Putting a budgeting app on your phone, for example, can help you keep track of your spending and savings. These apps connect with your financial accounts (including bank accounts, credit cards, and investment accounts), so you don’t have to manually enter your purchases and transactions.
Apps can help you monitor bank accounts, credit card spending, and even keeping track of how much you spend in cash. Some apps allow you to split your spending into your own categories and can send you alerts when you start to max out your budget to help keep you from going over. Even better, many budgeting apps are free (at least for the basic service).
6. Revisit and Adjust Your Budget as Needed
A successful budget is rarely a one-and-done proposition. As your income, expenses, and/or financial goals change, it’s a good idea to revisit your budget and make adjustments.
You may want to check in on your budget every six to 12 months to reflect on your budgeting journey. How well is your budget working to advance your goals? Is it still relevant to your life? Maybe you’re spending more in certain categories and less in others. Perhaps you can siphon off a bit more to savings each month and reach your goals faster. Picking up changes in your financial habits can help ensure that your budget reflects your current priorities.
The Takeaway
Learning how to stick to a budget means starting with a realistic budgeting plan, setting SMART goals, picking the right tools, and keeping a watchful eye on your money as your income and expenses change. Remaining agile and staying disciplined with your budget will allow you to meet your expenses, enjoy extras like travel and entertainment, and achieve your future goals.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.