Congratulations on becoming a homeowner! Embarking on this journey marks a significant milestone in your life. As you step into your new abode, it’s essential to lay down the groundwork for a smooth transition and a happy home. To help you navigate this exciting time, we’ve curated a comprehensive checklist of essential first steps for settling into your new home.
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Change the Locks
Your home’s security should be a top priority. Change all exterior door locks and consider installing a smart lock system for added convenience and peace of mind.
Update Address and Utilities
Notify relevant parties, including the post office, banks, subscription services, and utility companies, of your new address. Set up new accounts or transfer existing ones for essential utilities like electricity, water, gas, internet, and cable. Make sure to receive the key to your community mailbox to access your mail if needed.
Inspect and Clean
Before moving in your belongings, conduct a thorough inspection of your new home. Look for any damages or issues that need immediate attention. Plan a deep cleaning session to ensure a fresh start in your new space.
Familiarize Yourself with Safety Features
Locate fire extinguishers, smoke detectors, carbon monoxide detectors, and emergency exits. Test each device to ensure they are in proper working condition. If your home lacks these safety features, consider installing them as soon as possible.
Organize Important Documents
Keep all essential documents, including mortgage papers, insurance policies, warranties, and home improvement receipts, in a safe and easily accessible place. This ensures that they don’t get lost during your move-in and that they are always there when you need them.
Set Up Home Maintenance Schedule
Create a schedule for routine home maintenance tasks such as HVAC servicing, gutter cleaning, and lawn care. Staying on top of maintenance will help prevent costly repairs down the line.
Get to Know Your Neighborhood
Take some time to explore your new neighbourhood. Locate nearby amenities such as grocery stores, schools, hospitals, and recreational facilities. Introduce yourself to your neighbours and start building connections within the community.
Make It Your Own
Personalize your space by unpacking and arranging your belongings to reflect your style and preferences. Consider adding a fresh coat of paint, hanging artwork, or incorporating decorative elements to make your house feel like home.
Plan for Emergency Preparedness
Develop an emergency plan for your household, including evacuation routes and designated meeting points. Stock up on emergency supplies such as non-perishable food, water, first aid kits, and flashlights.
Celebrate Your New Home
Finally, take a moment to celebrate this significant milestone in your life. Host a housewarming party to share the joy with friends and family, or simply enjoy a quiet evening in your new home, savouring the sense of accomplishment and the beginning of a new chapter.
Are you looking to own a home this spring? Give us a call today! Our real estate agents are more than happy to help you move into your new home!
Embarking on a home renovation to transform your living space is an exciting endeavor. Home improvements are also an investment that can significantly increase the value of your property, so it’s important to track expenses to be prepared for capital gains tax when you sell your home. Tracking home improvement costs can also help homeowners stick to a budget and ensure a greater return on investment.
Let’s take a closer look at how to track home improvement costs, which upgrades qualify for tax purposes, and options for financing a home renovation.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Why Track Home Improvement Costs?
Amid all the work and logistics that goes into renovations, tracking home improvement costs might not feel like a high priority. However, having documented home improvement costs can help reduce potential capital gains tax when it’s time to sell your home.
The IRS allows qualifying home improvement costs to be added to the original purchase price of the property, known as the cost basis, when calculating capital gains on a home sale. The basis is subtracted from the home sale price to determine if you’ve realized a gain and subsequently owe tax. But by adding home improvement expenses to your cost basis, the profit from the sale that’s subject to taxes decreases — lowering or even potentially exempting you from property gains tax.
Besides home improvements, other factors that affect property value, like location and the current housing market, could make a property sale subject to capital gains tax.
Here’s an example of how capital gains tax on a home sale works: A married couple that purchased a home for $200,000 in 2001 and sold it for $750,000 in 2024 would have a $550,000 realized gain. Assuming that the sellers made this home their main residence for two of the last five years, they’d be able to exclude $500,000 of the gain from taxes. The remaining $50,000 would be taxed at 0%, 15%, or 20% based on the sellers’ income and how long they owned the property.
However, the sellers spent $70,000 on home improvements during their 23 years of homeownership, so the capital gains calculation would be revised to: $750,000 – ($200,000 + $70,000) = $480,000. Tracking home improvement costs in this example exempted the sellers from needing to pay capital gains taxes.
Note that single filers may exclude only the first $250,000 of realized gains from the sale of their home. Eligibility for the exclusion also requires living in the home for at least two years out of the last five years leading up to the date of sale. Those who own vacation homes should note that the IRS has very specific rules about what constitutes a main residence. 💡 Quick Tip: A Home Equity Line of Credit (HELOC) brokered by SoFi lets you access up to $500,000 of your home’s equity (up to 90%) to pay for, well, just about anything. It could be a smart way to consolidate debts or find the funds for a big home project.
Qualifying vs Nonqualifying Improvements
The IRS sets guidelines that determine what home improvements can be added to your cost basis for calculating capital gains tax. Thus, not every dollar spent on sprucing up your home’s curb appeal or living space needs to be tracked for tax purposes. Generally, tracking costs is a good idea for any home improvements that increase your home’s value and fall outside general repair and upkeep to maintain the property’s condition.
Qualifying Improvements
According to the IRS, improvements that add value to the home, prolong its useful life, or adapt it to new uses can qualify. This includes the following categories and home improvements:
• Home additions: Bedroom, bathroom, deck, garage, porch, or patio
• Home systems: HVAC systems, central humidifier, central vacuum, air/water filtration systems, wiring, security systems, law and sprinkler systems.
• Insulation: Attic, walls, floors, pipes, and ductwork
• Plumbing: Septic system, water heater, soft water system, filtration system
It’s also important to track any tax credits or subsidies received for energy-related home improvements, such as solar panels or a heat pump system, since these incentives must be subtracted from the cost basis.
Recommended: How to Find a Contractor for Home Renovations and Remodeling
Nonqualifying Expenses
Owning a home requires routine maintenance and occasional repairs — think fixing a leaky pipe or mowing the lawn. And the longer you own your home, the greater the chance you reapproach past home improvements with a fresh design or modern technologies. The IRS considers regular maintenance and any home improvement that’s been later replaced as nonqualifying costs.
For instance, a homeowner could have installed wall-to-wall carpet and later swapped it out for hardwood floors. In this case, the hardwood floors would qualify, but not the carpeting.
Recommended: The Costs of Owning a Home
How to Track Your Costs
Developing a system for tracking home improvement costs depends in part on where you are in the process. Here’s how to get track home improvement costs before, during, and after a renovation project.
Before You Renovate
The average cost to renovate a house can vary from $20,000 to $80,000 based on the size of the home and type of improvements. Given this range in cost expectations, it’s helpful to create an itemized budget that estimates the cost for each improvement. It’s hardly uncommon for renovations to take more time and money than expected, so consider budgeting an extra 10-20% for the unexpected.
Your itemized budget can be leveraged for tracking home improvement costs once the project starts. Simply plug in the completion date, cost, and description for each improvement, and keep receipts, to itemize the expense as it’s incurred.
Recommended: How to Make a Budget in 5 Steps
Keep Detailed Records
Tracking home improvement costs goes beyond crunching the numbers. The IRS requires documentation to adjust the cost basis on a property. As improvements are made, catalog contractor and store receipts and take pictures before and after the work is done to document the improvements for your records. Store these records digitally in a secure and accessible location; the IRS recommends keeping records for three years after the tax return for the year in which you sell your home.
Catch Up After the Fact
Tracking home improvement costs after the work has been completed is doable, but it requires more effort. If your renovations required any building permits, your municipality should have records on file.
For other projects, start by searching your email for receipts and records can help find a paper trail and track down documentation. Reach out to contractors you worked with for copies of missing receipts or invoices. If you paid with a check or credit card, you can browse through your previous statements or contact the bank for assistance.
Consult a Tax Pro
Taxes are complicated. If you have any doubts about what improvements qualify, consult a tax professional for assistance. Homeowners who used their property as a home office or rented it for any duration could especially benefit from a tax pro. Any property depreciation that was claimed in previous tax years may need to be recaptured if the home sale price exceeds the cost basis.
Home Improvement Financing Options
Renovations and upgrades to your home can be expensive. Many homeowners use a combination of savings and financing to pay for home improvements.
• HELOC: A Home Equity Line Of Credit lets homeowners tap into their existing equity to fund a variety of expenses, such as home improvements. With a HELOC, you can take out what you need as you need it, rather than the full amount you’re approved for, which is often 75%-85% of your home’s value. You only pay interest on the amount you draw.
• Cash-out refinance: Some owners take out a new home loan that allows them to pay off their old mortgage but also provides them with a lump sum of cash that they can use for home repairs (or other expenses). How much cash you might be able to take will depend on the amount of equity you have in your home.
• Personal loan: An unsecured personal loan could be a good option for quick funding that doesn’t require using your home as collateral. The interest rate and whether you qualify are largely based on your credit score.
• Credit card: Financing a home improvement with a credit card can help earn cash back or rewards on your investment. However, these perks should be weighed against the risk of higher interest rates. If using a 0% interest credit card, crunch the numbers to ensure you can pay off the balance before the introductory offer expires. 💡 Quick Tip: You can use money you get with a cash-out refi for any purpose, including home renovations, consolidating other high-interest debts, funding a child’s education, or buying another property.
The Takeaway
Tracking home improvement costs from the start can help stick to your project budget and lead to significant tax savings when it comes time to sell your property. A HELOC is one way to fund home improvements, and may be especially useful to borrowers who aren’t sure how much money they will need for home projects. If you’re unsure whether a home improvement qualifies under the IRS rules around capital gains tax on home sales, consult a tax professional.
SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 95% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.
Unlock your home’s value with a home equity line of credit brokered by SoFi.
Photo credit: iStock/Cucurudza
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
²
To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).
All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.
You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.
SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Inside: Discover the secrets to earning $200k a year. Learn to choose industries, negotiate salaries, and balance life with high-income careers.
Achieving a $200,000 annual income is a financial milestone that many aspire to reach, but not everyone knows how to realistically attain.
Whether you’re starting from scratch or looking to elevate your current earnings, the blueprint to a $200K income is within your grasp. It all begins with a strategic approach that leverages both a steady job and an entrepreneurial spirit.
Achieving a $200k salary is not just about luxury—it’s about stability and security. With rising living costs, including student loans, mortgages, and everyday expenses, earning a high income is increasingly vital to maintaining a comfortable lifestyle.
By combining the stability of a well-paying career with the dynamism of a side hustle, you can fast-track your way to this lofty goal.
In this comprehensive guide, we dive deep into a method that suits everyone to make $200000 this year.
You’ll learn how to harness your passions, manage your time and expenses, and create a foolproof plan that caters to your strengths and circumstances.
How to Make 200k a Year
Achieving this level of annual income is a significant financial goal that necessitates a well-devised strategy combining steady employment with entrepreneurial endeavors.
This is possible for anyone to do. You have been making 10k a month for a while now and want to make the leap.
You just must be steadfast in pursuing your goals.
#1 – Identify high-income skills and industries
The first step toward making $200k a year is to recognize the skills and industries that command such salaries. Technology and finance are prime examples where hard work and expertise can lead to impressive earnings right out of college.
Specialized skills in software development, cybersecurity, data analysis, and AI are highly sought after. Additionally, roles in investment banking, private equity, and hedge funds are lucrative but come with intense competition and long hours.
Identifying these prospects involves understanding market needs, so be prepared to continually adapt to the latest industry trends. I cannot stress how important these high income skills are for your income.
Top Skills: Software Development, Cybersecurity, Data Analysis, Artificial Intelligence, Financial Analysis
Top Industries: Tech, Finance, Consulting, Healthcare, Legal
#2 – Degrees and Courses That Could Lead to 200K Jobs
If you’re seeking a high-paying career, focusing your education in specific areas is crucial. Advanced degrees, such as a doctoral degree in medicine, law, business administration (MBA), or specialized engineering can pave the way to high-paying roles.
For those with a penchant for academia, pursuing specialized courses that lead to becoming a medical lawyer, dentist, neurologist, psychiatrist, or gynecologist can be extremely rewarding. However, keep in mind that these paths generally require significant time and financial investment in education before reaping the financial rewards.
However, there are plenty of low-stress jobs that pay well without a degree.
Recommended Degrees: Medicine, Law, Engineering, Business Administration (MBA)
Embarking on entrepreneurship is a thrilling yet challenging path to reach unlimited annual income.
To start a business that prospers, it’s essential to identify a market need and create a clear business plan. Whether you’re selling a physical product, offering a service, or thriving in the digital market through online marketing, e-commerce, or app development, dedication, and strategic growth are paramount.
Investing both time and capital wisely, and adapting to market feedback can help you scale your business to meet and exceed your financial goals.
Investment Tip: Consider start-up costs carefully, and plan for lean operation.
Growth Strategy: Focus on customer satisfaction, scaling smartly, and marketing effectively.
#4 – Advance in your current career
Climbing the corporate ladder within your existing professional environment is a viable route to a higher salary.
To do this, focus on excelling in your current role, continuously improve your skills, and demonstrate the value you add to the company. Seek out leadership roles, ask for challenging projects, and take on responsibilities that align with the company’s revenue-generating activities.
Remember, promotions often come with significant pay raises, and it’s essential to communicate your career goals with your employer to align your trajectory with the available opportunities. Just watch the number of working hours you put in.
Key Strategies: Exceed performance expectations, take initiative, and pursue leadership roles.
Professional Development: Continued education, certifications, and networking are critical for advancement.
#5 – Invest in real estate for passive income
Real estate investment remains a cornerstone strategy for building wealth.
Focusing on location is key; properties in high-demand markets can yield substantial returns through rental income and appreciation. Paying with cash rather than financing can lead to better deals and avoid interest payments, as debt can eat into profits.
Moreover, platforms like Fundrise allow investors to start with as little as $10, which could be a smart move if you’re seeking a hands-off investment with a diverse real estate portfolio.
Investment Insight: Cash purchases may provide better deals, reducing financial risk.
Real Estate Tip: Choose high-demand locations for better rental income and property appreciation.
#6 – Maximize income through stocks or other investments
Investing in the stock market through individual stocks, mutual funds, or exchange-traded funds (ETFs) is another way to potentially earn $200k a year. Dividends from some of these investments can also serve as a consistent income stream.
Consider focusing on industries poised for growth or stable dividend-paying stocks, as these can offer a balance between growth potential and income reliability.
Additionally, alternative investments such as cryptocurrencies or option contracts can offer high returns, but come with high volatility. Always conduct thorough research or consult with a financial advisor before making significant investment decisions.
Learn how to invest in stocks for beginners.
Investment Strategy: Diversify your portfolio, focus on growth sectors, and consider enhancing your investment knowledge.
Cautionary Note: Be aware of market risks and do not invest more than you can afford to lose.
#7 – Gain Relevant Experience in High-Demand Fields
To command a $200k paycheck, it’s essential to gain experience in fields where the demand for your skills exceeds the supply.
Industries such as technology, healthcare, and specialized consulting are in constant need of experienced professionals. Work on projects that showcase your expertise and build a robust professional portfolio.
You can also consider a side hustle like freelancing or consulting to gain a broad range of experiences that can make you an attractive candidate for high-level positions.
Experience Building: Take on varied projects, freelance, or consult in your niche.
Portfolio Enhancement: Document your successes and gather testimonials or recommendations.
#8 – Continuous Learning and Adaptability to Stay Ahead
In the dynamic job market, staying complacent can mean getting left behind. Cultivating a habit of lifelong learning and adaptability is crucial. Did you know you are an appreciating asset?
This may involve updating your skill set to keep pace with technological advancements, attaining new certifications, or attending industry conferences and workshops. Remember that cross-skills, like project management or business analytics, are also valuable and can complement your primary expertise.
Embrace change and be willing to pivot when necessary to maintain your competitive edge and earning potential.
Professional Development: Seek out further education and certifications.
Adaptability: Stay open to industry shifts and be ready to pivot your skills accordingly.
Careers That Make 200K a Year is Common
In certain careers, a $200K annual salary is not an exception but rather a common expectation.
Positions in healthcare such as surgeons, specialists, and anesthesiologists often offer salaries exceeding this amount. Moreover, top-level executives, experienced lawyers, and investment bankers are typically in the higher income bracket due to the high stakes and demands of their industry. In tech, senior software engineers and IT executives with strong track records in hot markets like Silicon Valley can command these salaries, too.
Success in these careers requires a combination of advanced education, considerable experience, and sometimes, the right location.
Within these industries, focus on roles that are crucial to core operations, innovation, or revenue generation.
For tech, this might involve AI, machine learning, and cybersecurity. In finance, investment strategists and financial advisors are in demand. In healthcare, specialized practitioners command higher salaries whereas, in the legal field, corporate lawyers and litigators typically earn more.
Just to note… taxes will take a substantial amount out of your paycheck. So, you want to aim for $200k as net income.
Factor #2 – Climbing the Ladder: From Mid-Level to Top-Tier Positions
Transitioning from a mid-level position to top-tier status demands a proactive career strategy. Aim for roles that impact the company’s bottom line, such as project management or strategic planning, which often lead to executive positions.
Make sure to seek mentors who can offer guidance, and build a reputation for reliability and innovation. Networking within your industry can uncover hidden opportunities and give you a competitive edge.
Strategic Positioning: Focus on profit-impacting roles and responsibilities.
Career Growth: Network, seek mentorship, and demonstrate leadership capabilities.
Always aim to bring value to your organization, as this will be your leverage when seeking promotions and negotiating salary increments.
Factor #3 – Negotiation Tactics for a High Paying Salary
Securing a salary of $200k often hinges on your ability to negotiate effectively.
Begin the negotiation process by researching the standard salary for your position in your industry and region. Articulate your value by enumerating your accomplishments, experiences, and the results you can deliver.
Prioritize non-salary benefits that may be equivalent to a higher income, such as bonuses, commission, stock options, or flexible work arrangements. When discussing figures, aim higher to give room for negotiation.
Research: Know industry salary benchmarks.
Value Proposition: Clearly communicate your potential contribution.
Remember, negotiation is a dialogue, so listen carefully, be respectful, and maintain a professional demeanor throughout the process.
Factor #4 – Building Professional Relationships That Open Opportunities
Fostering robust professional relationships is key to unlocking high-paying roles, as connections can lead to opportunities that aren’t publicly advertised.
Networking is an art. It goes beyond just asking the question, “What do you do for a living?“
Actively engage with peers at industry events, be genuinely interested in others, and offer help before you ask for it. Maintain a positive online presence on platforms like LinkedIn, where you can connect with like-minded professionals and hiring managers.
Networking: Engage in industry events and platforms like LinkedIn.
Relationship Management: Nurture connections and seek meaningful interactions.
Don’t forget to nurture existing relationships – a recommendation from a trusted colleague can provide a significant edge in landing a coveted position.
Factor #5 – Cities and Regions with the Best High-Paying Job Markets
If you’re eyeing a lucrative salary, it’s strategic to consider the geographic landscape of high-paying jobs.
Major economic hubs like New York City, San Francisco, and Boston have dense concentrations of Fortune 500 companies and start-ups that offer competitive salaries, especially in finance and tech. However, these cities come with higher costs of living.
Comparatively, cities like Austin, Seattle, and Denver have burgeoning tech and business sectors with a more balanced cost of living.
Economic Hubs: New York City, San Francisco, Boston.
Balance Seekers: Austin, Seattle, Denver.
Consider looking for cities that have a vibrant job market in your industry, but a reasonable cost of living to maximize your income-to-expense ratio.
Factor #6 – Remote Work: A Gateway Being Global
The rise of remote work has opened a world of possibilities for professionals seeking higher salaries. You can work in a low cost of living country and still get a good income and save the rest.
With remote positions, you’re not limited by location and can work for companies with higher pay scales in stronger economies, practicing geographic arbitrage to your advantage. Sectors like tech, marketing, and design are ripe with remote opportunities that pay well.
Geographic Arbitrage: Tap into stronger economies and work remotely.
Global Accessibility: Utilize online platforms to access high-income roles worldwide.
To capitalize on this, enhance your digital presence, showcase your skills online, and engage with global job platforms. Also, consider the time zones and cultural work patterns of employers to ensure a smooth collaboration.
FAQs About Securing a 200K Job
A salary of $200k is relatively rare, with only a small percentage of U.S. households earning at this level.
According to recent statistics, 11.9% of U.S. households had an annual income over $200,000.1
However, this figure can vary significantly by industry, location, and level of experience.
This is 100% possible with the rise of technology and the internet.
To do this, you must focus on industries that value skills and experience over formal education.
Professions like real estate brokering, high-level sales, business entrepreneurship, or becoming a skilled tradesperson. You just need strong persistence.
The likely answer is typically one needs a grad degree or extensive experience in high-paying fields like medicine, law, engineering, or business.
However, specialized certifications, proven expertise, exceptional skills, or entrepreneurship can also be your ticket to this income level without traditional qualifications.
What Jobs Pay 200k a Year Interest You?
Now that you’re equipped with knowledge about reaching a $200k salary, consider which roles resonate with your skills and passions.
Maybe you’re intrigued by the challenge of a tech startup, or the idea of saving lives as a healthcare specialist is what drives you. Perhaps the strategic element of financial planning appeals to your analytical side, or the autonomy of forging your path as an entrepreneur is a calling.
Remember, selecting a profession that not only offers financial rewards but also aligns with your interests and values is crucial for long-term satisfaction and success. High tech degrees are highly sought after right now.
The great part about making this amount of money is you can increase your savings rate, but that doesn’t mean you should leave beyond your means.
There are plenty of avenues that will have you making over six figures quickly.
Source
Statistic. “Percentage distribution of household income in the United States in 2022.” https://www.statista.com/statistics/203183/percentage-distribution-of-household-income-in-the-us/. Accessed February 28, 2024.
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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn how to utilize a tax advantaged 529 plan to help your or a friend’s children save for future education expenses.
This Week in Your Money: What are the risks of purchasing a home without an inspection? How can you plan for major expenses when healthcare providers can’t tell you how much their services will cost? Hosts Sean Pyles and Sara Rathner share their hot takes on unexpected financial challenges, with tips and tricks on handling surprise expenses, understanding the importance of home inspections, and dealing with healthcare industry inefficiencies.
Today’s Money Question: What are the benefits of a 529 college savings plan? Can you contribute to a friend’s 529 plan to support their child’s future? NerdWallet writer Elizabeth Ayoola joins Sean and Sara to discuss the essentials of 529 college savings plans. They discuss the types of educational expenses covered, the tax benefits associated with 529 plans, and the flexibility of choosing different state plans. They also answer a listener’s question about how to approach the sensitive topic of financial gifts for education with parents, sharing methods for contributing to a loved one’s 529 plan without overstepping boundaries. Then, they discuss the implications of the Secure Act 2.0 on 529 plans, methods for estimating necessary savings for a child’s education, and tactful ways to discuss educational contributions with parents.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sara Rathner:
Hey Sean, has money ever made you mad?
Sean Pyles:
Yeah, it has, especially when I get a bill that I don’t expect to pay but have to anyway. So yeah, why?
Sara Rathner:
Yeah. Yeah, those surprise major expenses are a huge pain. I just had to replace my washing machine because the fun never stops in my house.
In this episode, we are going to let off a little steam about what makes us mad in the world of money.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. Our job today is to help you be smarter with your money, one money question at a time. I’m Sean Pyles.
Sara Rathner:
And I’m Sara Rathner.
So listener, this show is all about you and your money questions. So, whatever financial decision you’re pondering, whatever’s making you mad about your money, let us know.
Sean Pyles:
Leave a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email your questions to podcast@nerdwallet com.
Sara Rathner:
In this episode, Sean and I answer a listener’s question about contributing to 529 accounts for your loved ones. But first, we’re going to yell into the void in our semi-regular Money Hot Takes segment.
Sean Pyles:
So here’s how this works. Sara and I just rail against whatever we feel like in the world of money. And let’s put, say, 100 seconds on the clock. That’s what? A second for every penny in a dollar. I don’t know, it’s just an arbitrary number really.
Sara Rathner:
That works for me. It’s a nice round number.
Sean Pyles:
All right, Sara, are you ready?
Sara Rathner:
Sean Pyles:
I’m starting my timer. Go.
Sara Rathner:
All right. I hate the trend where home buyers feel pressure to completely waive getting a home inspection before buying a property. That’s different from the type of waiver where you’ll still do the inspection, but then you’re assuming the cost of anything you find. It’s when you just do without the inspection entirely.
I live in a block of houses that are like 107 years old, and two houses on my block sold with waived inspections where the buyers had to put tens of thousands of dollars unexpectedly into problems in their house that they didn’t know about. I just had a neighbor text me asking for a roofer because the first time it rained since she moved in her house, it started raining on the inside of her house, which means that the seller just lived with that for however long before selling the house and passing the problem onto somebody else.
So especially if you’re a first-time home buyer, if you are going to drain your savings to buy your house, and then you’re not going to have much money left for repairs, be really careful about this. And as a society, can we just make inspections mandatory? That’s more consumer-friendly, honestly. People need to know what they’re getting into, and frankly, people should feel pressure to keep their houses well maintained before sale. There I said it.
Sean Pyles:
You’ve got 40 more seconds if you want to keep on railing.
Sara Rathner:
Oh man, I do? Well, if you haven’t bought a home yet, what’s nice about getting an inspector involved is they’ll look at all the major systems of the house, the appliances, the roof, all sorts of stuff, the electrical, the plumbing, and they will tell you the lifespan of some of those major things like a furnace or a boiler, your roof, your HVAC system. And even if something is going to go in the next year or two, at least you have this laundry list of things and when they’ll probably need to be replaced, and you can begin to budget for those replacements.
Sean Pyles:
Okay, that’s 100 seconds.
Sara Rathner:
Boom. All right, Sean, you got any reaction?
Sean Pyles:
Well, I totally feel that, because buying a house without knowing what’s wrong with it is very risky financially. Buying a house can be financially risky in and of itself, depending on how expensive the home is. But imagine getting into the house, it’s your first day, you’re super happy to be a homeowner, and then you realize, oh, it’s raining inside the house, or the crawl space is infested with termites. You don’t know what you’re getting into if you don’t have an inspection. And even if it may make you a more competitive buyer, it isn’t worth it, in my opinion, to get yourself into something like that because you just don’t understand the risks you could be taking on. And I’m all about mitigating risks as much as possible.
Sara Rathner:
All right, Sean, I have had my turn, and now it is your turn. I have set my timer for 100 seconds. And go.
Sean Pyles:
Okay. Today I am mad about industries that are designed to extract money from us while making our lives miserable or at least really frustrating. And I have one, maybe two, examples depending on how far 100 seconds takes me.
First step is healthcare. Americans spend far more on healthcare than other wealthy nations. Nearly 18% of our GDP in 2021 went to healthcare. And what are we getting for it? An incompetent extractive industry that exploits nearly everyone that engages with it. Among wealthy nations, the US has the highest rates of infant and maternal mortality and excess deaths, not to mention the daily indignities that come with trying to access healthcare.
I have a recent example that is a microcosm of these larger issues. I recently got a bill in the mail for some regular lab work, and the thing is, I have these labs done every few months, and they’re always covered by my insurance. But this time I got a surprise bill for nearly $200, and I’d already had an expensive month with some car repairs, and I was not excited about the prospect of an additional $200 to cover. So I called my doctor, and they said, “Oh yeah, the company that does the lab work just messed up. Oops, just disregard the bill.”
So if I hadn’t called my doctor, I would have been on the hook for this bill. This was a relatively small bill as far as medical bills go, and it was fairly easy for me to clear up. I’m obviously very fortunate in this case, but for so many people, especially those with chronic illnesses or complex medical conditions, the onslaught of navigating insurance, verifying that you’re being billed correctly and then somehow coming up with the money to cover bill after bill is just totally exhausting and can make achieving financial goals nearly impossible.
So why am I going on and on about things that we already know too much about?
Sara Rathner:
Just so you know, you’re over time.
Sean Pyles:
Oh, God. I’m going to keep going. I’m almost done.
Sara Rathner:
Keep going, Sean. Let’s do this.
Sean Pyles:
All right. I am going on and on about this because I think it’s important to remind people that it does not have to be this way. We are in an election year, people, so I don’t know, let’s try to do something about it.
Okay, Sara, how many seconds was that?
Sara Rathner:
Oh, well I stopped timing it the second it hit the clock, so that might’ve been just an extra 10 seconds, honestly.
Sean Pyles:
Okay. It’s hard to fit so much into such a small amount of time.
Sara Rathner:
You know what? Your rage is such that it cannot be fit into a tiny container and that is valid. It’s okay to let the rage out and give it some more space.
I agree with you. What’s annoying is, for example, this past year I had a baby, and that is expensive to the tune for me of $7,000 out of pocket after insurance. Hi. $7,000 is a lot of money, people.
And what was annoying about that, and this is something for anybody who maybe is facing a planned medical procedure like a surgery or childbirth or anything like that, or who takes medication for chronic illnesses, I tried to call the billing department at the hospital to talk to my insurance company to say, “Can you at least give me an idea of how much money I will be out?” I knew going into it that I would be having a C-section. So I could say, “I’m having a C-section, that means I have to work with an anesthesiologist, which is an extra expense. Can you tell me ballpark, even if you’re off by a grand, how much should I budget for this?” And everyone’s like, “We don’t know.” Shrug emoji.
Then the bills just fly in for months and you think you’re done. So you’re like, “Okay, we’re done paying for the hospital bill. Now we can put our money into other stuff.” And then you get another bill for like, $1,100.
Sean Pyles:
And you have to question, was this billed correctly? Was it coded correctly? You don’t know. And it just flies in the face of all the things that we try to talk about in the personal finance space, which is around anticipating big expenses, budgeting for it, saving up for it if you can. It’s impossible when you don’t know what you’re going to be paying.
Sara Rathner:
Right, and if you’re facing surgery, what, are you just going to not have anesthesia to save money? Do not recommend.
Sean Pyles:
That is not a money-saving tip that we would recommend. No.
Sara Rathner:
No, that’s a place where you should spend good money, get good and numb.
But really it is an extra expense. And that’s so, so frustrating because you are not only out a lot of money, but you’re feeling kind of vulnerable because you’ve just gone through some medical stuff, even if it’s just blood work or something, and you want to take good care of your health, and it’s sometimes financially impossible to do that.
Sean Pyles:
Yeah. Not to mention completely demoralizing.
Sara Rathner:
Yeah, and some people just don’t go to the doctor because of the cost, or the dentist. And then years later, they’re faced with really serious health issues because they’ve been neglecting their health because of the cost.
Sean Pyles:
Yeah. I don’t know, it’s really tough in this space to talk about medical expenses because at NerdWallet and in the personal finance realm, we try to give actionable advice, and a lot of the time the advice is reactive. If you get a medical bill, you do have to ensure that it’s coded correctly. Maybe try to work out a payment plan with your medical office if you can’t cover the bill in one go. But it’s so hard to be proactive like you were just describing and understand what you’re going to have to pay if you want a routine procedure like blood work or something more significant like having a baby, makes me want to yell into the void all day every day.
Sara Rathner:
Yeah. Well, we took more than 100 seconds about this. If you have a body, then this is something that affects you, and it is really hard to deal with those extra unexpected costs.
Sean Pyles:
All right, so that is what we are mad about this week, listener. I know there’s a lot to be mad about in the world of money, so do not keep it in. Let us hear what you’re mad about, and we might just share it on a future episode.
You can text your Money Hot Take to us or leave a voicemail on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email it to podcast@nerdwallet com.
Sara Rathner:
All right, I don’t know about you, but my heart rate is starting to come down from all of that. Ooh, deep breaths, everyone. This episode’s money question is up next. So calm down too and stay with us.
Sean Pyles:
This episode’s money question comes from Lauren, who wrote us an email. Here it is.
“Hi nerdy Nerds. I’m not a parent. I’m never going to be a parent. Because of that, I have made it part of my financial plan to contribute to the 529 plans of kids around me. Because I don’t have nieces and nephews, I’m contributing toward the savings of my friend’s three-year-old. How much needs to go into a 529 starting at age two or three to cover a four-year private college?”
“I got the details on this kid’s 529 plan from his dad and started contributing about $100 a month. We didn’t talk about it. I intend to keep chipping in until the kid is done getting formal education 20 to 25 years from now. How do I talk to the parents? I want to understand if I’m helping enough without becoming privy to their private financial details. I also don’t want to make it seem like I have any vote whatsoever in how the kid charts an educational path. How do I broach this with the parents?”
Sara Rathner:
To help us answer this listener’s question, on this episode of the podcast, we are joined by NerdWallet writer Elizabeth Ayoola. Welcome.
Elizabeth Ayoola:
Hello, and hi.
Sean Pyles:
Elizabeth, so good to have you on.
So let’s start by setting some groundwork. Can you please describe what a 529 college savings plan is, how they work, and why they’re such a big deal?
Elizabeth Ayoola:
A 529 plan is a huge deal indeed to me anyway. I wish I had one when I went to college because I was left with a huge bill. But anyways.
529s are tax advantaged college savings plans, and they allow people to save and invest money for education expenses. So, with that said, the money gets to grow, and it gets to compound, which can mean beneficiaries have a nice education pot to pull from when they need the money. And for those who don’t know what compounding is, it’s essentially when your interest earns interest.
Sara Rathner:
It’s the eighth wonder of the world.
Elizabeth Ayoola:
Sara Rathner:
So you mentioned education expenses and that’s what the purpose of this account is, but what kinds of education expenses can you use a 529 to fund?
Elizabeth Ayoola:
Funds in a 529 account can be used to cover a vast range of qualified expenses, and that can range from tuition to computers and education related equipment. The expenses can also be used to pay for education needs of your beneficiaries. And the good thing that I like is that the beneficiaries can be in anywhere from kindergarten through grade 12. So that said, it’s not only for college students.
Sean Pyles:
Right, that is a really good point because people hear about 529 accounts, and they think they may be specifically for people going through a traditional four-year education, but people can also use the funds in the 529 college savings plan to cover things like trade schools too. So it really isn’t only for that traditional four-year higher education route.
Sara Rathner:
So earlier you mentioned that 529s are tax advantaged accounts. Can you talk a little bit about the tax treatment of them, and what should people know when they’re considering opening a 529?
Elizabeth Ayoola:
Well, one thing that I personally like about these accounts that some people don’t know also is that some states offer a tax deduction if you contribute to their plan. And when I say their plan, I mean the state that you live in. But there is no federal tax deduction for a 529 contribution. So it’s only at a state level. The tax deduction is usually capped. So no, you can’t just deduct your entire contribution. The deduction amount varies from state to state. So it’s best that you check in your state what the amount may be, if they offer it.
And a little bit off-topic, but I also like that the IRS doesn’t set a cap on your contributions to a 529 account, although some states do set a limit.
Sean Pyles:
And I’ll call out two other tax benefits of 529 college savings plans. The first is that investment growth in this account is tax-free, and second, distribution for qualified expenses like tuition or books are also tax-free.
Elizabeth, another important thing to know about 529 college savings plans is that each state has their own, and you don’t have to choose the 529 plan from the state that you live in. And this can all get a little bit confusing because there are so many states to choose from. So, at a high level, can you outline the main differences between a 529 from one state to the next, and how would someone go about choosing which state’s 529 plan to use?
Elizabeth Ayoola:
One of the major differences that people should know and a reason that people may cheat on their state’s 529 plan is lower fees. I personally have a 529 from a different state than my current home state for that very reason. So people should consider shopping around and comparing fees before opening an account. Ultimately, the goal should be to do some math and see whether the deductions and the credits that you’re going to get in the state that you live in are worth more than the lower fees that you could get in another state in the long term.
Also, note that you can open multiple 529 accounts. I have multiple 529 accounts. I recently opened a second one in my home state, Florida, because my son was awarded a grant and it could be transferred to a 529 account, but the catch was it had to be a Florida 529 plan.
Sara Rathner:
So 529s have some flexibility, which we talked about before, not just for four-year educations, but also for trade schools and for K to 12 expenses as well. And interestingly enough, 529s were just made even more flexible. Can you talk about recent changes around the ability to roll 529 funds into a Roth IRA, and what that means for folks who maybe aren’t considering going to college?
Elizabeth Ayoola:
The Secure Act 2.0 was recently passed, and if I can be honest, that’s what motivated me to open up my first 529 account, and I just opened it last year. I was always on the fence and only saved money in a brokerage account because I was afraid of what would happen if my son decided not to go to college in 15 years. He’s six, by the way.
I decided to get off the fence when the Secure Act 2.0 made it possible for people to roll at least a portion of the unused funds into a Roth account. However, you do have to wait until 15 years after you’ve opened the 529 account before you can roll those funds over. And you can also only roll up to a certain limit starting in 2024. It may be ideal to read the IRS’s rules, they have a lot of fine print around the conversion or speak to a finance professional about it.
I think Roths are also awesome because they aren’t subject to required minimum distributions and withdrawals. They’re also tax-free when you meet certain requirements like waiting until 59-1/2, amongst other rules.
Sara Rathner:
All right, well thank you for that great summary of the tax rules surrounding this new change. We just want to let you all know that we are not investing or tax professionals, and if you have any specific questions to your own situation, definitely consult a professional who can give you guidance.
Now let’s turn to the fun stuff. The math, Sean. I know that you are in the midst of your certified financial planner coursework. I have slogged through that myself. It is a lot. It is a lot of math.
Sean Pyles:
Sara Rathner:
And now that you know how to do it, I’m sure you’re eager to show off your chops. So are there any insights you can share that will help our listener figure out how much they need to save every month or every year to help their friends reach their savings goals?
Sean Pyles:
As a matter of fact, yes. And you’re right, I have been waiting for an opportunity to show off what I’ve been learning about because often I’m just doing calculations in silence and this is a time for me to be loud and proud about hitting buttons on a calculator. So let’s do it.
I’ll spare you and our listeners the specifics of the calculation, but I plugged the listener’s situation into a time value of money calculation and got a rough estimate for how much they will need to save.
Sara Rathner:
All right, drum roll. What’s the number?
Sean Pyles:
For our listener to meet the savings goal that they outlined in their question, remember, they want to save for four years of education at a private college starting now-ish and saving until the kid finishes school. They would need to save around $8,000 per year. Obviously, that’s a lot of money to contribute to a 529 account, no less for a kid who isn’t your own. And this is why 529s are often just part of the picture when it comes to paying for college, which usually includes some combination of scholarships, grants and loans and generous gifts from family friends.
Sara Rathner:
That is definitely more than a hundy a month.
Sean Pyles:
Yeah, that’s for sure.
All right, so all of that math out of the way, I want to talk about the other part of our listener’s question. They seem to be concerned about how much they should contribute and also how to talk about this with their friends. I am not a parent, so I would love to hear from both of you who are parents, how you would approach the situation if you had such a generous friend. Would you welcome the money, or say get out of my business? Or if you are going to accept this money, if you want to have this conversation with your friend, how would you want them to communicate that with you?
Elizabeth Ayoola:
Honestly, I would welcome the money, especially because I’m a single mama. So as a matter of fact, my friends always contribute to my son’s savings account in London for his birthdays or holidays and I really, really appreciate it. It can be a better gift to me than toys that stab me in the foot within a few days.
Sean Pyles:
Elizabeth Ayoola:
I would also appreciate a friend asking me what my savings goals are, so they know how to support that goal. However, I do think, for the sake of boundaries, I would like my friend to ask me my comfort level with the topic before they dive in and start trying to give advice.
I think it’s also important to note that not everyone is comfortable discussing money or financial goals. But with that said, here’s an example of maybe how somebody could say it. So you may say, “Hey, I want to help you reach John’s college savings goal. Are you comfortable discussing that target number you have in mind, and can you tell me how I can support that?” Or another option could be you saying, “Hey, would you like to do the math yourself and then let me know how I can support that goal?” So those are just a couple of options.
Sara Rathner:
Yeah, I mean, I’m not going to look a gift horse in the mouth. College is expensive now, and it’s only going to become even more expensive in the future. Even in-state tuition, where I live in Virginia, is often over $20,000 a year. That used to be the economical way to get a four-year degree, and now it’s also very, very expensive. So what’s it going to be like by the time my kid’s in college? I don’t know. A lot.
Sean Pyles:
I think we can confidently say more money.
Sara Rathner:
Confidently, we can say a whole lot more money.
I would want my friends to decide for themselves what they feel comfortable giving, because I don’t feel comfortable telling another person how they should allot their money because they have other competing financial goals and obligations. And I never want to tell another person what they can do with their money unless they specifically ask me to tell them what to do with their money, which nobody ever asks me.
Sean Pyles:
And you also don’t want to give the impression that your friends can’t look after their own family’s finances, right? That’s a bit of the awkwardness underlying the question, is you want to help someone that you care about and this child that you’re seeing grow up in the world, but you don’t want to impose your will upon them. It seems like our listener is being very thoughtful about that. And you don’t want to make it seem like you think they aren’t doing enough.
Sara Rathner:
Right, or you think their kids should go to a four-year private university because that’s what you value, but maybe the parents have other values that they want to impart upon their child as the kid grows up, and then the kid will go off and do their own thing as a young adult.
In my case, we have a 529 for our son. We have family members who’ve contributed money. They’ve just written checks to us, and then we deposit it into our account that is tied to our 529 and then deposit the money into the 529.
Ultimately, when you contribute, you do go through the account owners, and that’s oftentimes parent or guardians. You are going to have to communicate with them because they’re ultimately the gatekeeper of that account. They are the owners, and then the child is the beneficiary.
Sean Pyles:
That actually brings up something that I wanted to talk about, which is who would own this account? The listener could in theory open up a 529 account on their own for this kid. But long-term, it’s probably going to be easier if the parents are the owners of the account, because that way when the kid is eventually ready to go to college or trade school or what have you, the parent can be the one managing those distributions.
Personally, I know as a friend, as much as I love my friends and my friends’ kids, I don’t want to have to manage that down the road. So that’s something else that they should think about when they’re talking about this with their friends.
Sara Rathner:
I definitely agree with talking to the parents and ultimately contributing to an account that the parents or guardians are in charge of.
Sean Pyles:
Well, Elizabeth, do you have any final thoughts around 529s and helping your friend’s kids afford college?
Elizabeth Ayoola:
I think we have given some very juicy tips here and only two more things come to mind, which is one, while it’s noble to contribute to your friend’s kids or loved one’s kids’ 529 account, please take advantage of any state income tax deductions that you might be eligible for. The rules around this can be muddy. And I know the original listener who asked this question lives in a different state than where he’s contributing, but sometimes you’re able to get a deduction depending on the state that you live in. So if you can get money back, I mean, why not?
My second thing that I’ll say is that if your loved one doesn’t have a number in mind, guide them to a college savings calculator or run the numbers together over coffee if they’re open to doing that.
Sean Pyles:
Great. Well, thank you so much for coming on and talking with us.
Elizabeth Ayoola:
I loved it. Thank you for having me.
Sean Pyles:
And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your question at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected].
Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate, and review us wherever you’re getting this podcast.
Sara Rathner:
This episode was produced by Sean Pyles and myself. Kevin Berry and Tess Vigeland helped with editing. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all of their help.
And here’s our brief disclaimer:
We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles:
And with that said, until next time, turn to the Nerds.
Million-dollar homes are the perfect blend of form and function, setting the stage for true elegance and luxury.
Whether it’s the understated minimalism seen in Kim Kardashian’s home or the opulent maximalism of designer high-end houses, the key lies in creating spaces where functionality becomes virtually invisible, contributing to an overall aesthetic that’s both breathtaking and discreet.
You can see this in the prohibitively expensive homes from shows like Selling Sunset and Million Dollar Listing. Those million-dollar homes focus on hiding conventional features and appliances, allowing the eyes to revel in the design without distraction.
The philosophy here is simple yet profound: less is more.
Luxury design hinges on the power of illusion – making the essential elements of a home feel like an integrated, almost indistinguishable part of the overall design.
This invisible functionality transforms living spaces into masterpieces of high-end hospitality and cozy elegance, where every detail is meticulously crafted to elevate the experience of luxury living.
Blend kitchen appliances with the design
Looking at luxury homes and apartments, you won’t find their microwave, stove, or refrigerator glaring out like sore thumbs in the kitchen.
One of the best examples we’ve seen of this is in actor Jesse Tyler Ferguson’s house in Encino, a newly built contemporary house in Los Angeles with impeccable interiors.
The impressive property’s most distinctive interior traits are the warm wood tones used throughout, which serve as both décor elements and provide tons of storage space — particularly in the kitchen, which is clad in cabinets and wood paneling made out of hemlock wood.
The refrigerator is an essential appliance in any home but as we can see in the Modern Family star’s home, it is artfully hidden within the cabinetry.
It perfectly matches the surrounding cabinets, giving a unified and uninterrupted visual flow that exudes sophistication.
Similarly, the microwave is tucked away, out of the direct line of sight, allowing guests to focus on the elegant lines and luxurious finishes of the kitchen without the distraction of appliances.
Strategically concealing appliances amplifies the spaciousness and clean lines that are synonymous with luxury, making the kitchen not just a place for meal preparation but a statement of design excellence.
That’s not because the owners don’t own any and eat out for every meal but because their appliances are expertly designed to be hidden away when they are not needed.
Luxury designs do not break the viewer’s experience of ah and wonderment with the typical microwave or fridge sticking out.
Hide air vents in plain sight with frameless diffusers
When it comes to the interiors of the most coveted million-dollar listings, the devil is in the details—or perhaps, it’s the lack thereof. The luxurious spaces you see have a secret: the art of concealment.
This is particularly true when it comes to the mechanics of comfort, like HVAC air diffusers, which are essential yet often an eyesore.
But not in these homes. Here, they’re incorporated with such finesse that they’re almost invisible, represented by the hardly visible lines blending into the ceilings and walls as seen in the image below.
These aren’t your standard vents; they’re design statements in their own right, albeit in the most understated way.
Frameless diffusers like the ones from Invi Air are installed into the drywall and colored to match the room’s palettes for a nearly invisible finished look flush with the wall or ceiling.
They don’t demand attention. Instead, they support the room’s ambiance in quiet anonymity, allowing the stunning vistas outside the window or the curated art pieces to hold the gaze. Invi Air diffusers are easily customizable with any type of paint, allowing them to blend seamlessly with the color and texture of the surrounding surface.
The TV is almost always out of sight
In the modern luxury home, the television—once the centerpiece of every living room—has found a new role as the hidden gem of the room.
The trend in million-dollar homes is clear: the TV should be felt, not seen until it’s time for it to shine.
This philosophy has created creative solutions that make the TV almost magically appear when needed and disappear when not, maintaining the room’s sleek, elegant aesthetic.
Take Samsung’s Frame TV, for example. This ingenious device takes the concept of ‘hidden in plain sight’ to new heights, doubling as a digital art display when not in use.
It sits flush with the wall, encased in a stylish frame that one might mistake for an actual painting or photograph.
It’s a perfect fit for spaces where the presence of technology needs to blend with the strokes of interior design finesse.
Take this one step further with LG’s latest technological innovation: the transparent TV.
The TV becomes practically invisible when not in use and can even blend itself to look like a live fish tank or fireplace to disguise itself further.
When the TV is revealed, it’s not just about catching up on the latest series or movie; it’s an event. The act of the screen coming to life from its artistic camouflage adds a layer of luxury and technical prowess to the space. It’s a conversation starter, a nod to the homeowner’s taste for elegance and their flair for the dramatic.
The TV in a luxury home is no longer just a piece of technology; it’s part of the home’s dynamic, an indulgent experience that’s there when you want it without compromising the minimalist ethos of the space.
This approach to home entertainment design is yet another detail that sets high-end homes apart, offering a seamless blend of lifestyle and luxury.
As all the posh houses seen on Selling Sunset prove time and time again, a million-dollar home’s aesthetic is a symphony of design and technology where every note is perfectly pitched for an experience that’s both sumptuous and smart.
These homes aren’t just living spaces but canvases for expressing the height of personal luxury, where every hidden feature is a brushstroke in a masterpiece of modern living. And we don’t find it fair that they’re reserved for luxury homeowners, so we hope the above tips might inspire you and you’ll end up implementing them in your own home.
*Featured image credit: R ARCHITECTURE on Unsplash
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What is biophilic design in architecture and home building? Definition and examples
In today’s volatile housing market, ensuring your home is protected against unexpected repairs and replacements is more crucial than ever. As homeowners seek peace of mind amidst the unpredictability of homeownership, home warranty companies have stepped up to offer a buffer against unforeseen expenses.
5 Best Home Warranty Companies
With so many options available, pinpointing the most reliable and value-packed home warranty company can be daunting. To help you choose, we’ve curated a list of the best home warranty companies to ensure your home’s systems and appliances receive the top-tier coverage they deserve. Take the time to discover which provider aligns best with your needs.
#1 Choice Home Warranty
There are plenty of reasons to go with Choice Home Warranty. First, they are a top-rated business according to ConsumerAffairs.com and have an average rating of 4.8 out of 5.
They have a five-star rating from Trust Pilot, and Inc. 5000 has recognized them as one of America’s fastest-growing private companies.
Choice has customer service available 365 days a year, 24 hours a day, 7 days a week. So if you’ve got a problem, don’t be afraid to pick up the phone and call them.
They are more than happy to answer any questions about your home warranty plan or, if need be, put in a request for a repair. A licensed, pre-screened, and continuously monitored technician will come to your house, usually within one or two business days.
The age of your home, its systems, and appliances is not relevant to Choice Home Warranty. They always cover items that have been properly maintained and were in well-working order when coverage was initiated.
If the item in question needs to be replaced but is no longer available on the market, they will give you a cash payment of the item’s replacement cost.
Another plus is that you don’t even have to get your home inspected before Choice Home Warranty will begin offering you coverage.
Choice also has a very reasonable $85 dollar service call, which makes them among the most competitive warranty providers for service calls.
Plan Options
1. Total Plan ($450 a year)
Includes coverage on the following —
AC
Heating
Electrical
Plumbing
Water Heater
Whirlpool
Refrigerator
Oven
Dishwasher
Microwave
Garbage Disposal
Washer and Dryer
Ductwork
Garage Door Opener
Ceiling and Exhaust Fans
2. Basic Plan ($378 a year)
Includes coverage on everything mentioned above, EXCEPT:
AC
Refrigerator
Washer and Dryer
Items that can be added at additional cost include:
Pool
Central Vacuum
Well and Sump Pump
Limited Roof Leak
Stand Alone Freezer
Second Refrigerator
Septic System
Septic Pumping
Read our full review of Choice Home Warranty
#2 Advanced Home Warranty
Advanced Home Warranty offers comprehensive coverage and a 24/7 claims hotline, making it a strong choice for anyone considering a home warranty.
Home warranties are available nationwide, so you can qualify for a plan, no matter where you live in the U.S. Plus, you can try it out without any risk by signing up to get your first month completely free of charge.
Trade service fees are reasonable at $60. If the cost of the repair is less, you’ll pay the smaller amount. This is one of the lowest service fees available among the providers on our list.
While they don’t offer a wide range of plans, you can get coverage on some of the big-ticket items associated with homeownership.
A low monthly fee can be much more manageable than paying for replacements outright every time an appliance breaks. There are also parts of even larger systems that are included in their coverage.
Here’s a breakdown of the two home warranty plans available from Advanced Home Warranty, how much you’ll pay, and what exactly they include.
1. Basic Plan ($370 a year, plus one month free)
Includes coverage on the following:
Heating System
Electrical System
Plumbing System
Dishwasher
Microwave
Garage Door Opener
2. Total Plan ($450 a year, plus one month free)
Includes coverage on everything above, PLUS:
Air Conditioning
Refrigerator
Washer/Dryers
Do read each home warranty plan for details on exactly how each specific item on the list is covered.
Read our full review of Advanced Home Warranty
#3 Liberty Home Guard
Liberty Home Guard offers a high degree of personalization for your home warranty coverage. For example, you can pick the plan and also how often you want to be billed.
You can choose monthly payments, annual payments, or for the most savings, multi-year home warranty plans.
Liberty Home Guard offers a service call fee of $60, which is a competitive service fee. You can also expect your service call to be delivered within 48 hours of making a claim.
You don’t need a home inspection to qualify for coverage with Liberty Home Guard. There’s also no limit to how many claims you can file within a year.
You can file your claims online for your ease and convenience. And with a 60-day satisfaction guarantee on service, you’re sure to be satisfied with the repair or replacement process.
If for some reason, you want to cancel your plan early, it’s entirely possible because there’s no annual contract. You’ll receive a prorated refund for any time you’ve paid for, except for a small administrative fee.
With Liberty Home Guard, there are three different coverage options you can choose from. You can also include optional add-ons in any plan.
1. Appliance Warranty for $39.99 Monthly or $399.99 Annually
Clothes washer
Clothes dryer
Refrigerator with ice maker dispenser
Built-in microwave oven
Dishwasher
Garbage disposal
Range/ oven/ cooktop
Ceiling and exhaust fans
Garage door opener
2. Systems Guard for $49.99 Monthly or $499.99 Annually
Air conditioning
Heating
Ductwork
Plumbing
Electrical
Water heaters
3. Total Home Guard for $59.99 Monthly or $599.99 Annually
This choice offers the most protection of all the plans and includes everything listed in the two plans above.
4. Optional Add-ons
Pool and spa: $17.00 monthly; $195.00 annually
Sump and pump: $3.00 monthly; $36.00 annually
Central vacuum: $3.00 monthly; $36.00 annually
Well pump: $9.00 monthly; $101.00 annually
Additional spa: $16.00 monthly; $188.00 annually
Septic system and septic sewage ejector pump: $11.00 monthly; $123.00 annually
Stand alone freezer: $4.00 monthly; $44.00 annually
Second refrigerator: $4.00 monthly; $44.00 annually
Read our full review of Liberty Home Guard
#4 Complete Protection
Complete Protection is another excellent home warranty company. Servicing all but nine states, this A+ Accredited Business is open 24/7.
Only slightly more expensive, this once small-scale, family-owned business offers some of the most comprehensive home warranties available in North America.
One of the many benefits offered by Complete Protection is their no-fee service call policy. With most quality providers charging at least $50 per service call, having no service call fee at all is a major perk.
They have five plans you can choose from:
Kitchen/Laundry: $32 a month/ $384 a year — covers your dishwasher, oven, refrigerator, and washer and dryer.
Heating/Cooling: $34 a month/ $408 a year — covers your furnace, AC, and water heater.
Basic Built-ins: $40 a month/ $400 a year — Furnace, AC, water heater, dishwasher, and oven.
Full House: $50 a month/ $600 a year — Furnace, AC, water heater, dishwasher, oven, refrigerator, and washer and dryer.
Full House Plus: $60 a month/ $720 a year — Includes everything mentioned in the first four plans, but also includes electrical wiring and in-bound water pipes.
What makes Complete Protection stand out even more:
There are a few other things that make Complete Protection stand out from its competitors. For one, their home warranties don’t have a deductible. As a result, you don’t have to pay any approved repair costs when something happens — this includes the initial service call, parts, and labor.
Secondly, CP pays for all preventative maintenance. Other home warranty companies mandate that their customers undergo preventative maintenance on items such as HVAC systems, but they won’t even pay for it. Instead, they force their customers to do so!
Thirdly, CP home warranties cover all the parts within an appliance. Most home warranty companies exclude parts like ice makers or washing racks within dishwashers. CP does not pick and choose which parts it will cover.
Lastly, Complete Protection allows you to choose your own service contract provider. So, if you have a certified contractor with whom you work, you can go to them whenever home repairs are needed.
They do this because they feel that their customers should always be comfortable with the person working in their house.
Read our full review of Complete Protection
#5: American Home Shield
The accolades American Home Shield has received are many. In addition to being a Better Business Bureau Accredited Business, they also received the Women’s Choice Award from 2014 to 2016.
On top of that, Home Warranty Reviews gave American Home Shield the Best in Service award in 2014 and ranked them as Top Rated from 2015-2017. Last but not least, they are Consumer Affairs Accredited.
Why so much recognition from the industry? For starters, they’re always open. You can always reach them regardless of what day or time it is. And, when you do, expect a local contractor to be at your home within no more than 24 hours. You don’t even have to get on the phone. You can request home repairs directly from their website.
Another reason American Home Shield is recognized as the best among the best is its versatility with its home warranty plans. They have four to choose from:
Systems Plan: Covers the replacement or repair of your home’s key systems, such as: plumbing, electrical, heating, air conditioning, and smoke detectors.
Appliances Plan: Includes coverage on common, everyday household appliances, such as refrigerators, built-in food processors, dishwashers, and washer and dryers.
Combo Plan: Get coverage on all of your primary home systems and appliances. Saves you $14 a month if you were to rather purchase the systems and appliances plans separately.
Build your own plan: Choose only what you want to be covered by selecting 10 or more items from their list of covered items. This way you get the coverage that you care about the most.
Another element of their customized service is their service fees. American Home Shield allows customers to choose from a service fees range of $75, $100 or $125 per service request. This allows you to get the plan you want without having to account for a high service call fee.
The ability to choose your own service call fee regardless of the plan you’re on separates American Home Shield from most other home warranty companies which carry a standard service call fee.
Additionally, American Home Shield can provide coverage for your pool, spa, well pump, and septic system (at additional costs) and can assist you during the moving process by covering your home while it’s listed. If the new owner decides they would like to upgrade service afterward, it’s an easy switch to do so at closing.
Read our full review of American Home Shield
Methodology: How We Chose The Best Home Warranty Companies
When researching the best home warranty companies, we analyzed over 20 of the most popular home warranty companies. Our team spent hours reviewing each home warranty company. We examined many factors, but mainly focused on the following:
Home warranty plans and options
Pricing
Reputation and trustworthiness
Customer reviews
Pros of Home Warranties
Peace of Mind
One of the major benefits of a good home warranty is peace of mind. A home warranty can bring some real financial security against unexpected home repairs. While getting your home in ideal shape can be tough, maintaining that level can be even more stressful. A good warranty coverage can cut away a big chunk of that worry.
Convenience
One of the biggest problems people can encounter when faced with unexpected breakdown at home is finding good help. But a home warranty also reduces some of that stress, as your provider can provide you with a relevant licensed expert within their network.
Potential Savings
In many cases, standard home repairs – such as a new boiler, for example – can be a lot cheaper if replaced under warranty. While home warranties can’t guarantee savings, chances are you will see the benefits speak for themselves over time.
Transferable
Many home warranties are transferable, meaning you could carry your plan to a new home if you decide to move. Be sure to check whether transferability is a feature of any warranty before signing if that’s important to you.
Cons of Home Warranties
Wait Times
Unfortunately, wait times for claims can sometimes keep you waiting. If you need a quick fix or emergency repairs at home, you may have to wait longer than you would like. One thing that can help here is looking for a provider that provides an online claims process. This is because online claims are often processed faster than those done over the phone.
Coverage Exclusions
Home warranties don’t cover everything, and it can be hard in an emergency to remember your exact coverage limits. It’s important to read the details carefully before signing up, and put a plan in place if you need work that falls outside your warranty coverage.
Cost
Home warranty coverage isn’t cheap, especially if you want to secure protection across your property. You won’t necessarily be covered by service fees, even if you choose a plan with a high service fee. And of course, some maintenance and repairs can come with further costs on top of your plan. These high costs can make it difficult to discern whether a home warranty is the right thing for you.
Other Home Warranty Companies to Consider
Here are a few other home warranty companies that didn’t make our top 5 that you may still want to look into.
Like so many things in our lives, a home warranty is something that we don’t often think about until we absolutely need it. Sure, you have home insurance, maybe even flood insurance, but that only covers certain situations.
Homeowners Insurance
Homeowners or renters insurance can cover damage to your home from things like fire, theft, storms, and some natural disasters. In addition to your homeowners insurance plan, you should choose to purchase a home warranty to protect your belongings in a way that insurance lacks.
If you’ve ever purchased a large appliance, a computer, or even a television from a retailer, then you’re probably familiar with the concept of a warranty.
However, those are warranties sold at the time of purchase and cover only one product. The benefit of home warranty protection is that it can cover every product in your home and more.
Choosing a Home Warranty Plan
What a home warranty plan covers will depend on the plan you choose, and there are many to choose from. A home warranty can cover anything from your microwave oven to your plumbing and your electrical systems.
Deciding which plan is right for you will determine what items and systems it covers and how much it will cost. Typically, home warranties charge either a small monthly or annual fee that can save you a lot of money in the long run.
How to Choose the Right Home Warranty
Choosing the right home warranty is key. Let’s run through all the details you need to consider before making your decision.
Determine Your Coverage Needs
At the very least, it’s important to get at least an idea of what sort of coverage you need. Take the time to decide which items in your home you want to protect before comparing offers. You’ll find plans that cover appliances, home systems, and plans that cover both.
Compare Quotes
It’s worthwhile to shop around. Try to acquire at least three different quotes from plans that you’re genuinely interested in. And use this time to also prioritize clearing up any questions you have about the policies you’ve been offered.
Don’t forget to pay close attention to the various prices you’ll see for service call fees. Some companies are much more competitive than others, and some even offer a service fees range which you can choose from depending on your needs and budget.
Review Sample Contracts & Liabilities
The next step is to review any sample contracts carefully. You’ll want to identify the limitations and exclusions in the contract, especially.
Furthermore, be sure to double-check cancellation policy just in case you decide your warranty isn’t working for you later on.
Check Reviews
Finding the best home warranty company for you will require some further research. You can read customer reviews online to find a company that provides great customer service as well as competitive plans.
Be sure to look out for any record of previous legal action taken against the company, too.
Home Warranty FAQ
What is a home warranty?
A home warranty is a type of service contract purchased to cover breakdowns, repairs, and replacements of home appliances and systems. Home warranties are designed to cover normal wear-and-tear damage on covered items and systems.
When a covered item breaks down or otherwise requires attention, you file a claim with your warranty provider. They then send a licensed technician to your home to assess the issue. Instead of paying for the full cost of the repair, being under warranty generally means paying only a small service fee for necessary repairs. The price of service fees varies between providers.
Home warranties are popular because they offer homeowners maintenance coverage and emergency repairs without having to rely on savings. The home warranty market today is huge and can provide terms for homes and budgets of many shapes and sizes.
What does a home warranty cover?
Home warranties can cover a whole range of systems and appliances within your home. You can decide how much you want to spend and determine what items will be covered by your home warranty.
Most home warranty companies break down their offerings into good, better, and best options. The good option, and least expensive, is one that covers most if not all of your appliances.
Major Home Systems
More expensive on an upfront basis are plans that cover major home systems. These home warranty plans cover the systems within your home. If you’re renting, this may not be of concern to you. However, if you own your home, you know that a plumber or electrician can cost a lot more than replacing your refrigerator.
If you’re less concerned with appliances and worried about what keeps your home humming along, then you may want to consider a system plan.
Appliances
Appliances like your microwave, washer and dryer, dishwasher, and often a lot more are covered by the best home warranty companies. These are great options for those who are renting or want to spend the least amount of money.
Systems & Appliances
The most expensive plans, of course, offer the most coverage. The best plans cover both systems and appliances. So while they’re the most expensive, they’re also the best value. Covering your systems and appliances together will typically save you around 20% to 30% of your total bill.
Basic plans from the best home warranty companies will cover the majority of systems and appliances in your home but don’t cover everything. If you have a pool, for instance, you may have to choose additional coverage.
Some home warranty companies even allow you to add coverage to cover your homeowners’ insurance deductible. Combining appliance and system coverage may also include these additions.
There are exclusions to what a home warranty will cover. Unfortunately, no plan is a blank check to have every item in your home replaced. These are repair plans and not replacement plans.
What is not covered by a home warranty?
The extent of your warranty coverage will vary greatly between companies and plans available. Having said that, however, here is a list of the ideas that are usually not covered by a home warranty:
Structural issues, paint and flooring
Commercial-grade equipment or systems
Pre-existing conditions
Rust, corrosion and sediment problems
Improper maintenance, installation, design, or manufacturer defect
Detection and removal of asbestos and mold
Building and zoning code violations
How much does a home warranty cost?
Home warranty pricing varies greatly depending on the coverage you choose, the home warranty company, and the area in which you live. In general, though, if you’re just covering appliances, expect to pay around $30 a month.
If you’re looking for only system coverage, you’ll probably pay around $35 a month. However, if you combine your coverage to include both systems and appliances, expect to pay around $45 per month.
Adding things not covered by a typical home warranty plan can also increase your monthly bill. If you have an atypical appliance or system, it’s possible that basic plans do not cover it. Not everyone has a swimming pool, a septic tank, a whirlpool tub, or a spa.
Check with your individual plan to ensure that all systems and appliances you want to have covered are actually included. If they aren’t, see if you can add them separately.
Service Fees
In addition to your monthly fee, you’ll also need to pay service fees for a service call. This cost can vary greatly.
The best home warranty companies offer plans that will cost you around $50 to $125 per repair. This is based on the home warranty company, the plan, and the item that needs to be fixed. While this may seem like a lot, consider the cost of the average repair without a warranty.
What can you expect to pay without a home warranty?
The average repair cost of a refrigerator is $275 to $325. The igniter on an oven or range may only cost $110 to $200 to repair, but a control board could cost you more than $260.
Replacing a rubber gasket on your washer will set you back between $200 to $300. These expenses can quickly add up compared to the fee home warranty companies charge for a visit.
Bottom line: They’ll address the issues with your current item but won’t give you a new one.
Pre-Existing Conditions
Pre-existing conditions are not covered either. Unfortunately, if one of your major appliances breaks, you can’t just sign up for coverage and expect to have it fixed.
Most home warranty companies will cover an unknown pre-existing condition. However, you can’t have an appliance covered if you or the home warranty provider knows that it’s already broken. This is why it’s a good idea to think about purchasing home warranty coverage before your appliances break.
Coverage Waiting Period
Most companies impose a 15 to 30 day waiting period before coverage can begin. There are, however, exceptions to this rule. For instance, if you have a home warranty that is ending soon, you may be able to begin on the date your coverage stops.
It’s important to read the fine print of your service contract. Each home warranty company will have very specific coverage details.
While all will most likely cover your refrigerator, not all of them will cover wear and tear on the gasket that seals it. Typically, the more expensive the plan, the more it covers, but this is not always the case.
What is the process for having an item repaired?
When something breaks, especially if you have a home warranty, you’ll want it fixed as quickly as possible.
Going without a microwave for a week or two may be acceptable, but if it’s your refrigerator, you may not be so patient. When an item malfunctions or breaks, you’ll need to contact your home warranty company’s customer service and explain the issue.
Make sure you report the problem as quickly as possible. The faster you make the call, the faster you’ll get an appointment and have your issue resolved.
Independent Contractors
The home warranty provider will most likely assign an independent contractor to inspect and repair the item. Obviously, system repairs can take longer and be more labor-intensive.
For example, replacing a part on your furnace will be a lot easier than repairing electrical wiring or plumbing inside your walls.
Depending on what is wrong, the contractor may have to order parts or return with specialized equipment. You’ll be required to pay a service fee for each item you wish to have repaired. However, the contractor should ensure that the item returns to working order.
Workmanship Guarantee
Once you’ve had an appliance or system repaired, that item is covered under a workmanship guarantee. Think of it as a warranty within your warranty.
The home warranty provider guarantees the parts and labor of that particular repair for a specified amount of time. This is usually around 90 to 180 days after the repair. So, even if you cancel your plan, they will still cover the repair during that time.
Who should pay for a home warranty?
Many times the seller will buy a home warranty to make the purchase of the home more appealing. Sometimes a real estate agent will even purchase a home warranty as a courtesy to the clients they’re representing. However, buyers, sellers, real estate agents, and current homeowners can all buy a home warranty. It’s also important to note that buying a home warranty can be done at any time, before or after closing.
What should you look for in a home warranty company?
A home warranty can save you a lot of hassle and headaches, not to mention money, down the road—as long as you do your homework and think it through.
A home warranty covers many things that homeowners insurance does not. Having peace of mind knowing that costly home repairs won’t spring up unexpectedly is a great feeling.
Choosing the right type of coverage for you is the next step. When you think about the type of coverage you want, think about the items you want to protect in your home.
Renters
If you’re just renting, then plumbing and electrical work is not a concern for you. Your homeowners insurance should cover things like theft and fire, but you still want to be covered when something breaks that you actually own. Choosing an appliance plan is probably the right option for you.
If you live in an older home that you own, a more comprehensive plan may be the right choice for you. It’s comforting to have your home inspected before purchasing, but things can still go wrong. You can avoid costly maintenance as long as you plan ahead.
Are home warranties worth it?
The answer to this question will depend largely on your unique circumstances. Two of the biggest factors are the age of your home and the quality of your appliances. In addition, your own ability and comfort with repair and maintenance is a factor.
Almost every home appliance and system will eventually require significant repair or even replacement. Depending on your own DIY skills, you might be comfortable taking responsibility for most repairs. Others might want more comprehensive coverage. But even still, there could be plenty of reasons why you would prefer to have a home warranty.
How do I cancel my home warranty?
Your first step should be to review your contract and make sure you understand the cancellation policy. Most companies will charge a cancellation fee that can range from 5% to 10% of the outstanding fee.
Thereafter, you can contact the company and tell them you’re considering cancelling your warranty. If possible, try to speak to a sales rep with whom you’re familiar.
Some companies require you to send a written notice of termination. Remember to cancel any automated payments from your credit card or bank account, if necessary. It might also be a good idea to request a written confirmation of the cancellation for your records.
Which home warranty company has the lowest service call fee?
Service call fees can vary widely between companies, but it’s important to try to find the most competitive service call fee available to you. Service fees generally range from $50 to $150 per service call.
The trick with finding a competitive service fee call is making sure you don’t sacrifice the quality of service calls. Some of the top-rated home warranty companies charge a higher service fee. However, it could be worth it to have the security and confidence of quality home service.
Final Thoughts
To find the best home warranty company, you will need to read the contract thoroughly. Every company that you investigate will have a contract. In that contract, they’ll spell out exactly what they do and do not cover.
They’ll also explain the cost, who will fix your items if they break, and more. Comparing two or more home warranty companies can give you a sense that you’ve made the right decision. Always make sure you do your homework.
Furthermore, check to see if a home inspection is required before qualifying for a home warranty with a specific company. Many don’t require this extra step, but it’s wise to be prepared in case they do. You definitely want to consider both cost and convenience as part of your ultimate decision.
Full Reviews of Home Warranty Companies
Looking for more options? Check out our other home warranty reviews below.
Tony Anderson/Getty Images: Illustration by Issiah Davis/Bankrate
If you’ve never owned a home before — or it’s been a while since you have — you might qualify for a first-time homebuyer loan or assistance. First-time buyer loans typically have more flexible requirements, such as a lower down payment and credit score. Many help buyers with closing costs and the down payment through grants and low-interest loans. Here is our comprehensive guide to both first-time homebuyer loans and programs.
What is a first-time homebuyer program?
First-time homebuyer programs help make homeownership more affordable for people who haven’t ever owned a home (or haven’t owned a home in some time). These programs come in a variety of flavors, but usually include a mortgage with a better interest rate, lower down payment requirement and other upsides like down payment and closing costs assistance.
Types of first-time homebuyer programs
Low-down payment conventional loans: Conventional loan programs that require just 3 percent down
Down payment assistance (DPA) programs: Loans, grants and matching programs to help you with your down payment
Federal first-time homebuyer programs: Loans and programs backed or offered by the federal government
State, non-profit and employer-sponsored programs: Homebuying assistance at the local level
Along with these, first-time homebuyers who are students or in a certain profession might qualify for a special type of loan, as well. Below, we’ll break down what each of these programs entails:
Low-down payment conventional loans
Conventional loans are the most popular type of mortgage, and only require 3 percent down. This makes them an attractive option for first-time homebuyers who might not have considerable savings to draw from. These low-down payment loans include the:
Conventional 97 mortgage: This conventional loan, backed by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, requires just 3 percent down and a minimum credit score of 620. It also requires you to pay for private mortgage insurance (PMI), a type of policy that protects your mortgage lender should you stop paying back your loan. You’ll pay these premiums until you pay down your balance to 80 percent of the value of your home.
HomeReady mortgage: Similar to the Conventional 97 program, Fannie Mae’s HomeReady mortgage program also requires just 3 percent down (with PMI, although it might be less expensive).
Home Possible mortgage: Freddie Mac’s Home Possible mortgage program is the counterpart to the HomeReady mortgage, with a 3 percent minimum down payment requirement.
HomeOne mortgage: This Freddie Mac-backed mortgage also allows for just 3 percent down with PMI, but is available only to first-time homebuyers.
You won’t get your low-down payment conventional loan directly from Fannie Mae or Freddie Mac. Instead, you’ll work with a mortgage lender of your choosing, which might be a bank, online lender or credit union, for example.
Through state housing finance agencies (HFAs), Fannie and Freddie also back another set of 3 percent down payment programs, called HFA Preferred and HFA Advantage, respectively.
Down payment assistance (DPA) options
There are many types of down payment assistance, including:
Down payment assistance loans
Many first-time homebuyer programs offer a lower-cost first mortgage to help you buy the home, then a second mortgage to help you cover your down payment and closing costs. These second mortgages are commonly structured as either:
Low-interest loans: A low-interest second mortgage you’ll repay over the course of a few years
Deferred-payment loans: A no-interest second mortgage you’ll repay when you sell the home, refinance or pay off your first mortgage
Forgivable loans: A second mortgage you won’t have to pay back so long as you stay in the home for a certain amount of time (the exact period depends on the program) and stay up-to-date with your mortgage payments
Down payment savings match
Down payment savings match programs provide matched funds up to a certain amount. The money can only be used for your down payment and closing costs.
One type of matched savings program is an Individual Development Account (IDA). If you qualify, you’ll work with an assigned counselor to deposit funds into an IDA over a set period of time. If you follow the savings plan, you’ll receive the match when you close on the home.
Down payment grants
A down payment or first-time homebuyer grant is essentially free money to help you cover your down payment or closing costs. The grants are usually awarded to low- or moderate-income borrowers, typically defined as those earning no more than 80 percent of the median income in their area. They might have other requirements, too, like a minimum credit score and maximum home purchase price.
Federal first-time homebuyer programs
Government-backed mortgage loans
The Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and Department of Agriculture (USDA) back mortgage programs that are often an option for first-time homebuyers. These loans aren’t created or funded by these agencies, however; they’re offered through approved mortgage lenders throughout the U.S. Some lenders even specialize in certain types. Here’s an overview:
FHA loan: Insured by the Federal Housing Administration, FHA loans allow you to buy a home with a minimum credit score of 580 and as little as 3.5 percent down, or a credit score as low as 500 with at least 10 percent down. If you put down less than 20 percent, you’ll pay FHA mortgage insurance premiums (MIP), similar to the insurance you’d pay for a low-down payment conventional loan. The difference, though: You can’t stop paying FHA MIP unless you refinance out of an FHA loan entirely.
VA loan: The VA guarantees home loans for eligible U.S. military members (active duty, veterans and surviving spouses). These don’t require a down payment, though there is a funding fee.
USDA loan: USDA loans don’t require a down payment, but you’ll need to purchase in a designated rural area and all under area-specific income limits to qualify.
Good Neighbor Next Door
The Good Neighbor Next Door program, overseen by the U.S. Department of Housing and Urban Development (HUD), is geared toward law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th grade teachers. If you work in one of these professions, you could buy a home in a “revitalization area” for 50 percent off, provided you live in the home for at least three years. You can search for properties available in your state on the program’s website.
HomePath Ready Buyer Program
Fannie Mae’s HomePath ReadyBuyer program is geared toward first-time buyers interested in a foreclosed home. After taking a required online homebuyer education course, you can receive up to 3 percent in closing cost assistance toward the purchase of a property that’s been foreclosed and is now owned by Fannie Mae.This program isn’t for everyone, however: Not only are you limited in your choice of properties, but the options (like many foreclosed homes) might need lots of repairs.
Energy-efficient mortgage (EEM)
Making green upgrades can be costly, but you can get an energy-efficient mortgage (EEM) (either a conventional loan or one backed by the FHA or VA) to help finance them. This type of mortgage allows you to tack the cost of energy-efficient upgrades (think new insulation, a more efficient HVAC system or double-pane windows) onto your primary loan, without requiring a larger down payment.
However, EEMs come with larger mortgage payments (since you’re borrowing more), and there are certain requirements, including an energy assessment. Those larger payments might be worth it, though, as you could wind up saving on your utility bills in the long run.
Native American Direct Loan (NADL) and Section 184 program
The Native American Direct Loan (NADL), guaranteed by the VA, and Section 184 loan, guaranteed by HUD, provide financing to eligible Native American homebuyers. A Section 184 loan requires just 2.25 percent down. The NADL program has no down payment requirement, but is only for Native American veterans and their spouses.
First-time homebuyer programs by state
Each U.S. state operates a housing finance authority (HFA) that serves to encourage homeownership, among other responsibilities. Here are these HFAs and other first-time buyer resources by region:
Nonprofit programs
Nonprofit programs can offer exceptional value to first-time homebuyers seeking an affordable mortgage. These options tend to be reserved for homebuyers with paychecks that are significantly smaller than the median income in their area and distinguish them as a low- or moderate-income buyer, or buyers who fit certain demographic or other criteria.
Neighborhood Assistance Corporation of America
The Neighborhood Assistance Corporation of America (NACA) is a nonprofit that provides low-rate mortgages to low- and moderate-income borrowers without requiring a down payment or closing costs or any mortgage insurance. The nonprofit doesn’t use credit scores to qualify you, either: Instead, it looks at other factors such as rent payment history.
Habitat for Humanity
If your annual income is 60 percent or less of the median income in your area, you might qualify for Habitat for Humanity’s homeownership program. Along with not exceeding the income threshold, you’ll need to contribute sweat equity — in other words, help build the home or a home for another applicant — to qualify.
Employer-sponsored programs
Employer-assisted housing (EAH) programs help employees with housing needs, usually in neighborhoods near the workplace. This assistance can come in many forms, such as a forgivable loan coupled with required homeownership education.
EAH programs are often limited to certain occupations, and there could be other restrictions, such as a first-time homebuyer or specific tenure requirement, or income limits.
First-time homebuyer programs for students
If you recently graduated from college, you might be eligible for help buying your first home. For example, the state of Ohio offers a Grants for Grads program with up to 5 percent down payment assistance for anyone who finished an academic program in the last 48 months. These programs typically come with a requirement to stay put for a given time (in Ohio, it’s five years), or else you’ll need to repay the funds.
Next steps: How to apply for a first-time homebuyer program
Your mortgage lender can help you determine whether you qualify for a first-time homebuyer program, as well as apply for one if you do. You can also check out your state’s housing finance agency (HFA) website to learn eligibility criteria and take next steps to apply.
First-time homebuyer FAQ
A first-time homebuyer refers to a homebuyer who hasn’t owned a home previously. However, in terms of qualifying for a first-time buyer program, it often doesn’t have to be your very first time. Many programs define “first-time homebuyer” as a buyer who hasn’t owned a home within the last three years.
First-time homebuyer programs are geared toward people who have never owned a home. With some programs, this means people who haven’t owned a home in the past three years. Depending on the program, the qualifications might also include not exceeding a certain income or buying a home above a specific price point.
The best type of mortgage for a first-time homebuyer (or any borrower) is one that’s affordable. This might mean a loan that has a lower interest rate, lower down payment requirement, low or no mortgage insurance and other ways to save.
That said, many first-time buyers go with a 30-year, fixed-rate mortgage because the monthly payments are lower and more predictable. Two popular 30-year fixed-rate choices: conventional loans and FHA loans.
First-time homebuyer education programs are designed to help you understand the various aspects of owning a home. To qualify for many first-time buyer loan programs, you’ll need to take a course. If you’re obtaining a conventional loan, you might be able to take the Fannie Mae HomeView online class to satisfy this requirement. Check with your loan officer to learn your options.
Now that we’ve been working from home for a while, everyone has more or less figured out what works. But there are still a few basic pieces of Zoom etiquette that people need to master.
Whether you’re hosting a video call or attending one, here are some Zoom etiquette tips to keep you from being “that guy” on your calls.
1. Mind the background noise
Be mindful of the background noise on your end. Things you might have grown accustomed to and don’t notice are noisy and distracting for those on a Zoom call with you.
Think about appliances that are running, like the dishwasher, washing machine and dryer, and fans and HVAC units can make noticeable noise. Consider either turning them off or moving well away from them during your call.
And one of the most obvious, yet overlooked, pieces of advice is to close the door while on a call. If you’re working where other people live or work, a closed door is a respectful signal to not bother you and keep noises from outside the room from being heard.
2. Clean up your background
What’s going on behind you during calls? Can others see cars passing by the street through your front window or the sink full of dirty dishes in your kitchen? Your visible background can say a lot about you and leaves an impression on Zoom calls. Try to keep a neutral background when possible and keep it clean so you don’t show off your messes.
Zoom does offer virtual background options, but unless you’re desperate, try not to use it all the time. Virtual backgrounds are fun and quirky at times, but they can create distrust or seem improper if overused. It’s alright to use them in an emergency when you’ve got a couch full of laundry behind you, but if it’s not necessary, it’s best to let everyone see you in your work environment at home.
As a word of warning, it’s appropriate to show everyone where you’re working in your home, but do it with caution! Yes, your bed is comfortable, but do you really want people seeing your bedroom? Instead, try setting up your camera in such a way that it doesn’t look like you’re lounging in your bedroom, like positioning yourself so only a wall is visible.
3. Check the lighting
Especially when working in a small space, lighting is challenging. An overhead light can create harsh or awkward shadows on your face. Natural light always shows up best through your webcam, but if you don’t have natural light that adequately highlights your face, you might want to consider alternative options like a ring light.
4. Use a dedicated office space
It’s important to have a specific office area in your home in general, but it’s especially helpful for taking calls. It can help you minimize distractions and avoid potential mishaps.
If you’re always taking calls from the same spot, you’ll know what parts of your house show in the background, how to minimize noise and adjust lighting and keep messes and distracting items out of the way. Or, if you have a pet, consider having a bed next to your Zoom location, so they know there’s a place for them and won’t jump into your lap mid-call.
5. Dress to impress
When you’re at home and have your closet only steps away, it’s tempting to change into comfortable clothes for work. When on camera, it’s best to have slightly more professional attire. This doesn’t mean you need to wear a suit and tie or a dress, but it’s best to put on something other than your sweats and an old hoodie. Try setting timers a few minutes before calls so you know when to change.
And just because people are only seeing the top half of your body doesn’t mean you should skip the pants — we all know that some Zoomers are flying fast and loose with pants, which is a dangerous game to play. If for some reason you do need to stand up or move during your meeting, you don’t want everyone seeing your unmentionables in a professional environment.
6. Watch the chat
Zoom’s chat function is a great tool for sending comments while other people are speaking and for sharing links. Sometimes, these comments are important or someone is sharing a link to a document you need to view. Check the chat throughout your meeting so you aren’t completely lost and others don’t think you weren’t paying attention.
7. Mute yourself
Even if there’s no background noise where you’re working, mute yourself when you’re not speaking. Unexpected things happen, like a doorbell ringing or noise you’re unaware of.
8. Turn off your camera when appropriate
While it’s nice to show everyone your face, turning off your camera is sometimes appropriate. If you’re getting up from your desk to grab something from another room, turn off your video. Seeing someone get up and leave for a minute may cause others to wonder what’s going on, and it can distract from the actual meeting at hand.
Or, if you’re moving yourself during the call from one room to another, you should also turn off your video. Your coworkers don’t need to feel like they’re on a roller coaster or traveling through hyperspace while you’re walking through your home.
Finally, turn off the camera if you’re eating, even if it’s just a quick snack. It’s poor Zoom etiquette and, frankly, gross to others if you’re eating while on a call.
9. Be careful while screen sharing
We’ve all had someone inadvertently show a confidential or personal message in a Zoom meeting, whether it was via notifications or poor planning when sharing their screen.
If you’re showing your screen to others on a call, make sure the screen you share is free from messaging platforms or other irrelevant windows. It’s also smart to mute your notifications while screen sharing, too. If you have difficulty remembering to turn off your notifications, try installing something like Muzzle that will silence your notifications for you when you share a screen.
10. Look into the camera
Many of us are using more than one monitor and are on a zoom call while viewing other documents on different screens. Even if what you’re viewing on another screen is relevant to the meeting, it’s better to look into the camera so people know you’re actively present in the meeting and not distracted.
11. Test video, microphone beforehand
Do a quick test of your audio and video before your meeting starts. It only takes a minute or two and can help you avoid awkward moments of realizing you have a mess behind you or wasting time at the beginning of the call to figure out why the sound isn’t working.
12. Use reactions
Zoom has a few reactions you can use when you don’t want to unmute yourself or make too much noise. These are emojis that you can click that will show on your video window for a few seconds. It’s much easier when you have a large meeting to show you understand something by giving a visual “thumbs up,” rather than verbally saying “I got it” and everyone wondering who said what.
13. Try multiple windows
In your Zoom settings, you can set it to display on two windows. This is especially helpful for meetings where people are sharing a screen because you can see the gallery view for people’s faces, as well as a screen share. That means no more scrolling through everyone on the top or side of the screen during calls!
14. Ask for permission to record
One of the greatest benefits of using Zoom for meetings is that you can record entire meetings and refer back to them later or send them to people who couldn’t attend. But, before you hit the button to record, make sure you’ve asked those in the meeting if it’s OK. Chances are, everyone will be fine with it, but it’s still good Zoom etiquette to ask so that others are aware.
15. Beware of taking calls from your patio
When the weather is good, it’s nice to take calls from outside. When you’re working from your balcony or patio, be aware of your noise level as neighbors might have opened windows to let fresh air in and they can hear you. This is bothersome to the neighbors who are trying to work or take calls themselves, and it could give away information about your company that shouldn’t be shared.
You should also monitor the noise in your background. It’s relaxing to hear birds chirping or feel a breeze, but it’s annoying to everyone else on your Zoom call.
16. Take precautions with common areas
Whether you’re in a conference room, business center or other shared common space, take precautions and be considerate of those around you. That means practicing social distancing, wearing a mask and being as quiet as possible — including when using the printer and coffee machine. No one wants to be interrupted in their meeting by someone printing out a 100-page document nearby.
Practice good Zoom etiquette
Most of us have had something unexpected happen during a Zoom call — and that’s OK! The great part about this pandemic is that it has shown us we’re all human. Even the CEO of the big company is dealing with pets, unexpected doorbells or visits from their little ones while they’re working. Life happens.
That being said, it’s still a work environment and we want to avoid being too unprofessional. Be conscious of Zoom etiquette and you’ll (hopefully) avoid being the distraction during calls!
Are you thinking about downsizing your home? Whether you’re an empty nester looking for a more manageable lifestyle or starting a family and seeking a change, transitioning from owning a house to renting an apartment can offer a ton of benefits. In this guide, we’ll answer the question of how to downsize your home, from decluttering and preparing for the move to finding the perfect apartment and making it feel like home.
Know your why: understanding the motivation behind downsizing
Before setting off on the downsizing journey, it’s important to understand why you want to make this change. There are plenty of reasons why homeowners choose to downsize, like retiring, embracing a minimalist lifestyle, saving money or moving to a smaller house in a new city. By keeping your motivation in mind, you’ll be better equipped to navigate the challenges that come with figuring out how to downsize your home.
Embracing the positives of downsizing
Downsizing your home doesn’t have to be viewed as a loss. Instead, focus on the positives that come with this transition. Consider the financial benefits, like lower mortgage payments, property taxes and maintenance costs. Downsizing can also offer newfound freedom and flexibility, allowing you to pursue other interests and experiences. By shifting your mindset and embracing the advantages, you’ll be more prepared to downsize successfully.
Planning the move in advance
To make the moving process easier, make sure downsizing your belongings ahead of time is on your to do list. This includes not only getting rid of unnecessary items but also evaluating your furniture and larger possessions. Determine what will fit into your new apartment and what you can live without. By downsizing your stuff before the move, you’ll have a clearer idea of what to expect and can make the transition to a smaller area more seamless by finding ways to save space while you save money.
Buying vs. renting: determining the best option for you
Once you’ve decluttered and prepared for the move, it’s essential to decide whether buying or renting an apartment is the right choice for you. Owning a home offers long-term stability, but it also comes with additional costs like mortgages, insurance and maintenance. On the other hand, renting provides flexibility and fewer responsibilities. Consider your financial situation, lifestyle preferences, and long-term plans to make an informed decision.
Hidden costs
When downsizing from a house to an apartment, it’s crucial to be aware of the hidden costs that might not be immediately apparent. Moving expenses, like hiring movers, purchasing packing supplies and potentially paying for a storage unit, can add up quickly.
While the apartment’s rent might seem more affordable compared to a mortgage, you have to consider the security deposit, pet fees, parking fees and any amenity fees that apartments often charge for extras like a personal on-site storage unit. These costs can significantly impact your budget, making it important to thoroughly research and factor these expenses into your financial planning.
If your new apartment requires any furnishings or renovations to make the space work for you, these are additional costs that need to be considered ahead of the move.
Utility bills
Utility bills in an apartment can differ significantly from those in a house, often leading to significant savings. Apartments typically have small rooms and less square footage than houses, which can result in lower heating and cooling costs. Many apartments offer utilities included in the rent, like water and trash services, which can simplify monthly budgeting and potentially save money.
It’s important to understand exactly what utilities are covered and what you’re responsible for paying. Some buildings may have less efficient HVAC systems or lack individual unit controls, leading to higher electricity or gas bills than expected. Researching and asking for average utility costs from the apartment management can provide a clearer picture of your monthly expenses.
Finding the perfect apartment
When searching for an apartment, it’s important to consider your specific requirements and preferences. Think about the location, amenities and size that will best suit your needs. If outdoor spaces or certain amenities are essential to you, prioritize only those things first in your search.
Consider potential future needs, like extra storage space, square footage for expanding your family or large windows for natural light. By carefully evaluating these factors, you’ll find an apartment that aligns with your downsizing goals.
Multipurpose rooms
Adapting to small rooms when moving from a house to an apartment requires creative use of space, making a multipurpose room not just a great idea, but often a necessity. A living room or guest room can double as a home office or a dining area with the right furniture and layout.
Investing in versatile furniture pieces, like a sofa bed, floating shelves, extendable dining tables or a functional storage unit, can maximize versatility without sacrificing style or comfort. Using room dividers or open shelving units for storage areas can help delineate spaces for different uses while keeping the apartment feeling open and airy. The key is to prioritize what functions are most important and design the new space around those needs, ensuring that every inch of your apartment works hard for your lifestyle.
Reviewing lease agreements and moving in
Before finalizing the lease agreement, thoroughly review all the terms and conditions. Pay attention to the rent price, security deposit, utilities and any maintenance policies.
Ensure that everything is as agreed upon and ask any necessary questions. Once you’re ready to move into your current home, you may choose to hire professional movers or handle the move yourself. Whichever option you choose, make sure you’re well-prepared and organized for a smooth transition.
Making your apartment feel like home
Once you’ve moved into your new apartment, it’s time to make it feel like home. Furnishing and decorating a smaller space requires careful consideration. Focus on selecting furniture that fits the apartment’s dimensions and serves multiple purposes in one room. Measure the rooms and furniture to ensure a proper fit. Personalize your space with colors, textures and accessories that reflect your style and create a warm and inviting atmosphere.
Decluttering
Decluttering is a critical step in downsizing from a house to an apartment. It involves carefully evaluating your possessions to decide what truly adds value to your life. Luckily, it also results in less stuff and, often, extra cash. This process not only makes the move easier and potentially cheaper but also helps in adapting to a smaller home.
Start by categorizing items into what to keep, sell at a garage sale, donate, get rid of or discard. Be realistic about the space limitations of your new apartment and prioritize items that are necessary or hold significant emotional value. Decluttering can be an emotional process, but a yard sale also offers an opportunity to refresh and simplify your lifestyle, making your new apartment feel spacious and organized.
Professional organizers
Hiring a professional organizer can be a worthwhile investment when downsizing to an apartment. These experts can offer invaluable advice and tips on how to efficiently use your new, smaller space, suggest ways to reduce clutter, and help you decide what to keep, donate or dispose of. They can also assist with the physical aspects of decluttering and organizing before the move, making the transition to a smaller home smoother and less stressful.
While the cost of hiring a professional organizer may seem like an unnecessary additional expense, their expertise can save you time and money in the long run by helping you avoid mistakes and make the most out of your new living situation. Their services can be particularly beneficial for those who are overwhelmed by the downsizing process or unsure where to start.
Embracing a minimalist lifestyle
Downsizing your home provides an opportunity to embrace a minimalist lifestyle. Prioritize what truly matters to you and let go of excess possessions. Adopting minimalist principles will not only help you maintain a clutter-free environment but also promote a sense of peace and simplicity. By using storage spaces, focusing on quality over quantity and reducing material possessions, you can create a space that feels spacious and organized.
Managing the transition and settling in
Transitioning from owning a house to renting an apartment may come with some emotional challenges. It’s important to be patient with yourself and allow time to adjust to the new space.
Take advantage of the amenities and community offered by your apartment complex to connect with neighbors and feel a sense of belonging. As you settle into your new, smaller home together, you’ll discover the benefits of downsizing and enjoy the freedom it brings.
You can live large with fewer square feet
Downsizing to a smaller home can be a transformative experience. By understanding your motivation, decluttering your belongings and carefully considering your options for your new small space, you can successfully navigate this transition.
Embrace the positives of downsizing, find the perfect apartment and create a space that reflects your style and values. With the right mindset and preparation, downsizing can lead to a simpler, more fulfilling lifestyle.
Do you know the return on investment (ROI) of your renovation project?
Some renovations can make your home more valuable. However, other projects may provide very little or no return. If you’re investing in a home renovation in hopes of recouping that money when you sell, it’s important to research and plan ahead before you begin to ensure you’re spending your money wisely.
Home renovation projects of all types are on the rise. In a recent study, 55% of homeowners reported renovating a part of their home in the past year.
But how many of these homeowners will see a return on their investment?
It depends. Getting a full recoup of remodeling costs isn’t very likely. And while smaller DIY projects probably won’t break the bank, homeowners should address whether a project is worth its weight in salt — especially before diving into large-scale remodels.
Keep in mind, though, that you can still potentially increase your home’s equity even if you don’t fully recoup the cost of certain improvements. Equity is the difference between your home’s current market value and the amount you owe on your mortgage. A home upgrade that doesn’t fully pay for itself dollar-for-dollar in terms of increased home value may still boost your home’s overall market value, thereby increasing your equity.
10 Home Improvements That Add Value
A way to determine whether a home improvement makes sense is to look at a project’s cost vs. its value assessment. This resulting renovation-to-resale value assessment number, “cost recouped,” can then be used to rank the financial benefit of comparable projects across the country.
Take a look at these popular home improvement projects and their ROI values. You may be surprised at what tops the list.
HVAC Conversion | Electrification
Job Cost: $17,747
Resale Value: $18,366
Cost Recouped: 103.5%
Garage Door Replacement
Job Cost: $4,302
Resale Value: $4,418
Cost Recouped: 102.7%
Manufactured Stone Veneer
Job Cost: $10,925
Resale Value: $11,177
Cost Recouped: 102.3%
Entry Door Replacement | Steel
Job Cost: $2,214
Resale Value: $2,235
Cost Recouped: 100.9%
Siding Replacement | Vinyl
Job Cost: $16,348
Resale Value: $15,485
Cost Recouped: 94.7%
Siding Replacement | Fiber-Cement
Job Cost: $19,361
Resale Value: $17,129
Cost Recouped: 88.5%
Minor Kitchen Remodel | Midrange
Job Cost: $26,790
Resale Value: $22,963
Cost Recouped: 85.7%
Window Replacement | Vinyl
Job Cost: $20,091
Resale Value: $13,766
Cost Recouped: 68.5%
Bath Remodel | Midrange
Job Cost: $24,606
Resale Value: $16,413
Cost Recouped: 66.7%
Window Replacement | Wood
Job Cost: $24,376
Resale Value: $14,912
Cost Recouped: 61.2%
Source
Pre-Renovation Checklist
Long before you start tearing down walls or ripping up floors, you should consider the following:
Have you budgeted for the renovation costs?
Is the remodel a temporary fix or a long-term lifestyle change?
How long do you plan to live in the home?
Can you afford the renovation without recouping a full or near-full ROI?
How long will the renovation last?
Will the improvements add value to your home equity?
Still unsure if your project is worth the cost? Here’s a more in-depth look at the questions above.
Don’t Guesstimate Your Renovation Budget
No matter how much you try to nail down a renovation budget, there will likely be unforeseen costs along the way. Plan ahead by getting a clear view of how much you can spend.
Talk to contractors, compare their rates and get your priorities in check. It’s easy to spring for granite countertops over laminate when you’re visiting the showroom, but if you need to rewire your electrical system to install the new kitchen appliances later, you might need more funds.
Quick Fix or Lifestyle Upgrade?
While the size of a project is largely dependent on budget, in some cases, a quick-fix repair may cost more money over time than a large-scale renovation that solves a major headache.
For example, if mold is growing on your first-floor ceiling due to a leak in an upstairs shower, you may consider replacing the grout as a short-term, low-cost solution. However, you should have the house inspected to determine the best way to address the issue — mold can be a more extensive problem than first meets the eye. Depending on the damage, you may need to completely redo the tile, drain and pipes and you could require professional mold remediation.
Getting professional advice now will help you pass an inspection later in case you decide to sell.
Will You Stay — A Forever Home or Prepping for a Sale?
If you’re preparing to put your home on the market, ensure your renovations appeal to buyers. One of the biggest misconceptions among homeowners is that major home improvements equate to more money in the final sale. That’s not always the case. If you’re planning to stay in your home for several years, make sure you can realistically live with the changes long term.
Research Your Project’s Regional ROI
It’s essential to consider the value of renovations in your region — not just on a national scale. In colder climates, energy efficiency projects may reap more value, while a swimming pool may dissuade buyers. On the other hand, in warmer regions, a pool may attract buyers to your home.
Adding additional rooms or square footage is one of the most impactful ways to increase your home’s value. An appraiser will be able to compare your home to those in your area who fall into the larger square footage category. Additional space can be used as an office, playroom or entertainment area, making it a worthwhile investment.
Considerations of Living Onsite While Renovating
Home improvement projects can get stressful and can’t always be completed over the weekend. Be sure to plan a realistic project timeline and make arrangements to get through the renovation chaos. With major renovations, it’s often pragmatic to set aside funds. If you’ll have to spend several hours away from home while the contractors complete their work, you may need to stay overnight in a hotel or plan a fun day out.
Also, be aware that when renovating or doing major construction on your home, you will be unable to refinance during that time. This is because an appraisal is typically required, and the home must be in safe and functional condition.
Increased Home Equity Benefits
Sometimes, home improvement projects solely benefit you — and that’s OK! Increasing your home’s value has several benefits. If you’re staying in your home, you might be able to apply the equity to secure a home equity line of credit (HELOC), a home equity loan (HEL) or even a cash-out refinance to help pay off debts, pay for college tuition or purchase a new car, for example.
If your home is on the market, your home improvements could help it sell faster and for more money. However, keep in mind that if you want to attract investors, most require a home listing to be off the market for a certain period of time before they can consider investing in it. Typically, this time ranges anywhere from six months to a year, even if the home was only listed on the market for one day.
Remodeling Mistakes to Avoid
When it comes to making home improvements, too often, homeowners rely on instinct rather than research to decide which projects to embark on. So, while converting the garage to an extra bedroom might seem like a good idea, the inconvenience of street parking isn’t likely to entice a potential homebuyer anytime soon.
Some other remodeling mistakes to avoid:
Underestimating project costs. It’s important to fully understand your project’s size, scope and complexity. Consider the supplies, skilled professionals, inspections and permits that may be required, and any systems, such as electrical or plumbing, that will be affected and impact your costs.
Not anticipating issues. Things don’t always go according to plan. Ensure you have a buffer of funds to manage unexpected issues that may arise.
Having an unrealistic timeline. Major gut renovations can take months to design and build, which leads to higher labor costs. Can you live in your home through the renovation if it takes longer than anticipated? Do you have a contingency plan?
Not doing your research. If you want to enhance your home’s resale value, do your homework to ensure your upgrades will help you maximize your investment.
Don’t Rely on Reality TV for Ideas
Did you know that one of the most valuable home investments is adding fiberglass insulation to a home’s attic?
Probably not. But watching contractors stuff the ceiling with insulation on popular home improvement shows just isn’t as interesting as watching designers discuss the layout of a total kitchen overhaul, complete with high-end fixtures, granite countertops and top-of-the-line commercial-grade appliances.
An overly pricey, sophisticated kitchen may backfire once a home is back on the market. A minor kitchen remodel, on the other hand, such as painting the cupboards or replacing laminate flooring with ceramic tiling, not only provides a more cost-effective solution for homeowners, but may also yield a higher return on their investment. Painting kitchen cabinets is an inexpensive cost to a homeowner because they can be painted on-site instead of at a warehouse and then shipped.
Make Your Home Improvement Plan
Whether you’re a first-time homebuyer with a growing family or a near-retiree looking to sell and downsize, it’s important to understand which home improvement projects make the most sense for you.
If you’re renovating with ROI in mind, consider how prospective homebuyers will view your interior, exterior, outdoor space and landscaping. Focus on projects that improve your home’s functionality and appeal to a wide range of buyers. And remember, even relatively small renovations can still increase your home’s value and equity.
Talk to a real estate agent to get their guidance on which projects may have the biggest impact on your home’s value. If you’re ready to begin your next exciting remodeling project, inquire about a home equity loan that turns your current home equity into cash. Reach out to a Pennymac Loan Expert and find the option that’s right for you.