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How to Avoid Outliving Mortgage

While reverse mortgages are sometimes advertised as providing a secure source of income for the rest of your life – and they can, under the right conditions – running out of proceeds sooner than you expected to is one of the major risks of taking out this type of loan. There are several different ways to receive reverse mortgage proceeds, and the one you choose will affect how quickly and how easily you can use up your ability to borrow against your home. Here is a look at the circumstances under which you could run out of reverse mortgage proceeds too early – and how to avoid that scenario.

Payment Plans That Put Borrowers at Risk

There are six ways you can receive reverse mortgage proceeds (see How to Choose a Reverse Mortgage Payment Plan for details). These payment plans pose varying levels of risk to borrowers.

♦ Fixed-Rate Lump Sum

Only one reverse mortgage payment plan, the single disbursement lump sum, has a fixed interest rate. Taking out a fixed sum with a fixed interest rate is normally a low-risk way to borrow in the sense that you know exactly how much you will have to repay. But with a reverse mortgage, this loan structure has unique risks.

Homeowners often take out reverse mortgages when their home equity is their only asset and they have no other options for getting the money they need. However, people who take out these loans but aren’t good with money – or aren’t as mentally sharp as they once were due to age-related problems – can easily mismanage a large sum. Once they’ve used up that money, they might have no other monetary sources to draw upon. In an ideal world, mandatory reverse mortgage counseling would deter risky borrowers from choosing this option, but in the real world, that doesn’t always happen. For more information on getting help before making this decision, see Find the Right Reverse Mortgage Counseling Agency.

The Consumer Financial Protection Bureau (CFPB) has identified the increasingly popular lump-sum option as potentially risky, especially for younger borrowers with longer lifespans who don’t have other retirement resources. They’re at risk of using up the equity early in retirement. A reverse mortgage makes it possible to stay in your home for life even after you’ve exhausted the proceeds. However, with no money left, the borrower will not only have trouble paying living expenses, but might end up getting foreclosed on. That’s because continuing to pay homeowners insurance and property taxes – and keeping the home in good repair – are conditions of being able to have a reverse mortgage. The CFPB has found that fixed-rate borrowers do, in fact, default on their reverse mortgages more often than adjustable-rate borrowers for not meeting these expenses.

Taking out a lump sum also puts reverse mortgage borrowers at greater risk of being scammed, since the large sum they’ve borrowed is an attractive target for thieves. (Learn how to protect yourself and your loved ones in Beware of These Reverse Mortgage Scams.)

♦ Line of Credit

Your chances of running out of money with a line of credit payment plan – whether used alone or in combination with a term plan as described in the next section – depend on how you use it. Unlike a regular home equity line of credit, a reverse mortgage line of credit is irrevocable, meaning it can’t be canceled or reduced because of changes in your finances or home value. That means you aren’t in danger of losing access to the money. In addition, your available line of credit only goes down as you draw upon it, and you only pay interest and mortgage insurance premiums on the money you borrow. What’s more, with a line of credit, you gain access to additional funds over time because the unused portion grows each year whether your home’s value increases or not. The unused part of your reverse mortgage line of credit grows at the same interest rate you’re paying on the money you’ve borrowed.

You can access up to 60% of your available principal limit in the first year you have your line of credit. Starting in the second year, you can draw on the remaining 40%, plus whatever you didn’t use in the first year. Of course, if you use up your entire available credit line early on, you’ll have little to nothing left to use in future years unless you repay some or all of what you borrowed, which will increase your principal limit. Yes, you can make payments on a reverse mortgage to reduce your loan balance during your lifetime, and there’s no prepayment penalty for doing so. Your lender is required to apply any partial repayment first to the interest you owe, then to any loan fees and last to your principal.

♦ Term and Modified Term

Of the five payment plans with adjustable interest rates, the term and modified term plans also put you at risk of outliving your reverse mortgage proceeds. Term payment plans provide equal monthly payments with a predetermined stop date. Modified term plans give you a fixed monthly payment for a predetermined number of months, plus access to a line of credit. The monthly payment will be smaller than if you choose a straight term plan, and the line of credit will be smaller than if you choose a straight line of credit plan.

With a term payment plan, you reach your loan’s principal limit – the maximum you can borrow – at the end of the term. After that, you won’t be able to receive additional proceeds from your reverse mortgage. You will be able to stay in the home, with the caveats mentioned earlier in the lump-sum section. With a modified term plan, you’ll only receive monthly payments for a predetermined period, but the line of credit will remain available until you’ve exhausted it. You can avoid running out of money with this plan if you use your line of credit carefully. You can also run out of money quickly if you exhaust the line of credit early on. A safer choice is to rely primarily on the term payments until the term ends, letting your line of credit grow, and then to rely on your line of credit later. If you never use the line of credit, you might have enough equity to give you future flexibility to sell your home, pay off the loan and move.

Adorable Starter Homes Across the Country

A great home of one’s own—is it an achievable dream or a crazy, far-off fantasy for today’s first-time home buyers? Sure, it can seem like the latter in this red-hot housing market.  But we’re here to tell you that an awesome single-family home may be within reach. Really.

There are plenty of options if you know where to start. As in, starter homes. If you narrow your search to homes with less than 1,500 square feet with two bedrooms, and perhaps put aside those dreams of glam rooms and personal fitness centers, there are plenty of tempting choices around the country.

And remember, starter homes aren’t considered “forever” homes, so a location outside a major metro area might be a trade-off you’ll have to make. Who knows, you might grow to love the burbs—and be happy for your next home to be the one down the road with a wine cellar and a backyard waterslide.

In fact, according to a National Association of Realtors® survey, 79% of first-timers bought single-family homes over condos and townhouses. And it’s no wonder: These pads we pinpointed (all priced under $300,000!) are cozy and cute—and they offer entry-level home owners a cool place to start.

3429 Fitch St, Jacksonville, FL

Price: $265,000
Adorable attributes: This charmer built in 1925 has been updated, including a renovated kitchen that opens to the dining room. Features of the Spanish-style bungalow include rounded doorways, inlaid wood floors, and a fireplace. There’s also a sunroom, master suite with walk-in closet, and large patio.

2921 Hermina St, Madison, WI

Price: $139,900
Adorable attributes: Here’s a cute cottage in a prime location in the Atwood area right on a bike path that’s close to restaurants and shopping. Features include hardwood floors, a master bedroom, and a fenced-in backyard.

1667 Washington Ave, Portland, ME

Price: $227,500
Adorable attributes: Perfect in Portland. This gem includes two bedrooms, two bathrooms, hardwood floors, living room with built-in shelves, finished basement, attached garage, patio, and large backyard. It’s close to shopping, restaurants, and public transit.

1217 Snyder Ave, Ann Arbor, MI

Price: $225,000
Adorable attributes: Go atomic with this ‘50s rancher, which was recently updated with a slate entry, refinished floors, and newer roof and windows. The living room has a picture window and fireplace, and the dining room has french doors overlooking a rear garden. The home is within walking distance to schools, parks, and Michigan Stadium.

1217 Snyder Ave, Ann Arbor, MI

Price: $225,000
Adorable attributes: Go atomic with this ‘50s rancher, which was recently updated with a slate entry, refinished floors, and newer roof and windows. The living room has a picture window and fireplace, and the dining room has french doors overlooking a rear garden. The home is within walking distance to schools, parks, and Michigan Stadium.

Benefits for Veterans and Military Buyers

Veterans, service members, and their families believe in homeownership. In fact, the homeownership rate among veterans far outpaces that of civilians.

But the financial toll of military service can make it tough for some veterans to get a financial foothold, let alone land a home loan.

The good news is those who serve have access to a host of home-buying benefits and protections, from what’s arguably the most powerful home loan on the market to financial safeguards and more.

VA loan program

Since the VA loan program’s inception in 1944, the Department of Veterans Affairs has backed more than 21 million loans for veterans, active-duty military members, and their spouses. This program has made buying a home more accessible to those who most deserve the American dream they helped build and protect.

VA loans feature many benefits that help make home buying possible, including the following:

  • No down payment requirement
  • No mortgage insurance
  • Lower average interest rates
  • Limits on closing costs
  • More lenient credit requirements

VA home loans have boomed in recent years, attracting many veterans and military members who may not qualify for conventional loans, which have stricter credit requirements.

Still, many eligible buyers are unaware of the benefits of VA home loans and the protections they offer. Some buyers also make the mistake of assuming a government-backed loan comes with endless red tape and miss an opportunity to benefit.

Typically, veterans and active-duty service members are eligible for a VA home loan if they served in the following capacity:

  • 90 consecutive days on active duty during wartime
  • 181 consecutive days on active duty during peacetime
  • 6 or more years in the National Guard or Reserves

Some spouses of military members who died in the line of duty or of a service-related disability may also be eligible for a VA loan.

Talk with a VA lender about obtaining your Certificate of Eligibility and getting a sense of your purchasing power.

Occupancy & power of attorney

VA loans are focused on getting buyers into homes they’ll live in full time. But the program makes exceptions for some veterans and active-duty service members.

For example, a spouse or children may be able to fulfill the occupancy requirement on behalf of a VA buyer. Also, a VA buyer who is deployed or otherwise unable to manage the loan process can typically assign a power of attorney to a spouse or family member to manage the loan process and sign documents.

There are two types of power of attorney: general and specific. The type needed depends in part on what loan-related documents the VA buyer can sign.

The occupancy and power of attorney options mean an eligible VA buyer’s spouse and children could buy a home during a deployment or unaccompanied assignment, helping alleviate the emotional toll of multiple moves on military families.

Basic allowance for housing

Many active-duty military members who receive a monthly housing allowance are surprised to learn that they can use this money to qualify for a home loan. Lenders can count Basic Allowance for Housing (BAH) as effective income. That can help service members make the leap from renting to owning, especially in higher-cost areas.

BAH is based on several factors, including the location of your duty station, your pay grade, and your family size. The housing allowance can change on an annual basis. To calculate your BAH, refer to the BAH calculator on the Defense Department’s website.

Financial protections

Even after becoming homeowners, active-duty service members can face unique financial challenges. Deployment and changes of station can strain a family emotionally and financially.

The Servicemembers Civil Relief Act (SCRA) provides active-duty military personnel and their families financial protection involving interest rates, income tax payments, eviction, foreclosure, and more.

For example, military personnel can ask creditors—including their mortgage lender—to cap their interest rate at 6% during their term of service. The SCRA also forces lenders and servicers to seek a court order to foreclose on active-duty military members during their time of service and up to nine months afterward.

Veterans Affairs also offers foreclosure avoidance protection assistance for homeowners. The VA has a team of experts who work with lenders and servicers on behalf of struggling homeowners to find alternatives to foreclosure. Their efforts have helped nearly 500,000 veterans and service members avoid foreclosure in the past six years alone.

Check with your local Armed Forces Legal Assistance office for more information regarding the Servicemembers Civil Relief Act. VA homeowners in jeopardy of defaulting on their mortgage can contact the VA loan program at 877-827-3702.

A Trusted Guide Who Will Help You Find a Home

Ready to house hunt? It’s a jungle out there: Prepare for a flurry of paperwork, stampedes of buyers competing for the same digs, and other challenges before you get your hands on those house keys. We won’t lie: The process can be complex and stressful—which is why having a pro by your side can make all the difference.

You might have heard of buyer’s agents, seller’s agents, listing agents, and so on. You’re a buyer, so what is a buyer’s agent? True to their name, buyer’s agents assist home buyers every step of the way; they can also save you tons of time and money on the road to homeownership.

Read on to learn how a buyer’s agent can help, and how to find the right one for you.

Benefits of using buyer’s agents

“A buyer’s agent will guide you through the home-buying transaction and be at your disposal for any questions or concerns,” says Shane Wilcox, a Realtor® with Partners Trust. Here are some of the things a buyer’s agent can do:

  • Find the right property. After determining what clients are looking for and what they can afford, the agent will schedule appointments to tour homes that fit the bill. The agent can also explain the ins and outs of various properties and neighborhoods to help buyers decide which home is right for them by explaining the pros and cons of various options.

  • Negotiate the offer. The buyer’s agent will advise clients on an appropriate price to offer and present it to the seller’s agent. “Then they will negotiate on your behalf and write up the contracts for you,” says Matt Laricy, a Realtor with Americorp Real Estate in Chicago. This is where the agent’s experience in negotiating deals can save you money and help you avoid pitfalls like a fixer-upper that’s more trouble than it’s worth.

  • Recommend other professionals. A buyer’s agent should also be able to refer you to reliable mortgage brokers, real estate attorneys, home inspectors, movers, and more. This can also help expedite each step of the process and move you to a successful sale all the faster.

  • Help overcome setbacks. If the home inspector’s report or appraisal brings new issues to light, a buyer’s agent can advise you on how to proceed, and then act as a buffer between you and the sellers or their agent. If negotiations become heated or hostile, it’s extremely helpful to have an experienced professional keeping calm and offering productive solutions.

Buyer’s vs. listing agent: What’s the difference?

Buyer’s agents are legally bound to help buyers, whereas listing agents—the agent representing the home listing—have a fiduciary duty to the home seller. “That’s why it’s in your best interest as a buyer to get an agent who is there to represent you,” explains Alex Cortez, a Realtor with Wailea Village Properties LLC in Kihei, HI. “Think about it this way: If you were getting sued, would you hire the same attorney as the person suing you? Of course not. You need someone who will diligently fight for your interests and rights.”

Let’s say, for instance, you walked up to the listing agent at an open house and gushed about how you love the home and want to buy it, but you will need to move soon because you’re expecting your second child and need to decorate the nursery pronto, or the lease on your rental is up in a couple of months. A seller’s agent could then use this information against you by informing the seller that your clock is ticking, so they shouldn’t budge too much on their asking price—or at all.

Yet make this same confession to the buyer’s agent you’re working with, and it’s all fine—this professional would know to keep this info private from sellers (and their agents) so it can’t be used against you.

What is The Renovation Blunders Say

Thinking of remodeling your house? Hey, welcome to the club (and quite a club it is): An impressive 62% of homeowners are making upgrades to their properties this year. It’s a group bound together by optimism, hard work, planning—and the ever-present potential for complete disaster.

Yes, mistakes can be costly in more ways than one, so before you hire a contractor or break out a hammer, read on to learn from homeowners who’ve been there, done that, and sometimes paid the price. What did they regret the most? We set out to find out.

Let these homeowners’ stories be your road signs for what to skip, stop, or stand firm on, so you won’t rue the day you ever wondered, “Wouldn’t that backsplash look better with new tile?”

Don’t splash out on custom upgrades

How much is too much? “We definitely overcustomized and overimproved our home,” admits Kim King, who invested $60,000 in landscaping and an additional $70,000 for a theater room, among other things, in her New Hampshire home. “We added lots of features that of course we love, but having recently sold the property, I now know that buyers don’t want to pay what we paid to get them. It wasn’t possible to get all of that money back. Not even close, in fact.”

But don’t cheap out on appliances you love, either

Lindsay Powers Eichmann’s previous apartment in Brooklyn, NY, came with a “beast” of a professional oven that she had to learn to cook on. But Eichmann says she had no idea how lucky she was to inherit it until she was renovating the kitchen in her new brownstone and looked into buying a similar range.

“I was shocked to see how expensive DCS ranges are, and instead opted for a Viking range that was a third cheaper,” she says. “Unfortunately it had a ton of issues and we needed to have it professionally repaired twice within the first two years. I love to cook almost every day, and I wish I’d just spent the extra $1,500 and bought the oven I really wanted.”

Don’t race the clock

When Melissa Gleason sold her Brooklyn, NY, condo, she says that her move-out date determined how she remodeled the apartment she was moving into. Got that? In other words, she wound up cutting corners.

“I really regret not having more time to complete the project,” she says of the overhaul of her bathroom and parts of the kitchen. “We were hustling to finish it before we could move in. This led to a rush job from the contractor, and we sacrificed on quality in a few different areas.”

Her advice? “Build in an extra two weeks of flexibility into whatever timeline the contractor gives you,” Gleason says. “It’s better to take the extra time to get it done right.”

Investing in Real Estate is The Great One

The housing market is well on the mend, with prices steadily rising in much of the country. It may be a good time, then, to think about adding real estate to an investing portfolio.

True believers say there’s nothing like owning a second, third or fourth property. Of course, true believers tend to be those who survived catastrophes like the housing meltdown about a decade ago. Ask those who were hammered and you get another view.

One thing is clear: for a beginner, real estate is a different game. The lessons you learned with stocks, bonds and mutual funds aren’t much of a guide.

“The biggest thing someone should understand is that a real estate investment is more than an investment when compared to stocks and bonds. It should be viewed as a business,” says Donovan Ryckis, financial advisor at J Donovan Financial in Florida. “It will require time, management and due diligence above and beyond most investments.”

While that can be daunting, it has its upside, says Eric Workman, senior vice president of marketing at Chicago-based Renovo Financial, a lender to real estate investors. Unlike with stocks, you’re not casting your lot with executives you’ve never met.

“As an investor, you have complete control over all of the decisions related to the property – level of finish, items replaced and or repaired, standards of tenant quality, rentals rates, etc.,” Workman says.

Over the past year, single-family home prices have grown by 5.3 percent, while the stock market has been nearly flat, according to the Case-Shiller index of home prices. Studies have shown that, nationwide, homes appreciate at just over the inflation rate for the long term, and that stocks do better. But nationwide averages don’t mean much to the investor looking for a property in one local market.

Also, most real estate investors hope to earn income from rents as well as profit from appreciation.

“Prices have risen for the past seven-plus years, and part of what has driven that growth is the (low) cost and availability of debt and equity,” says David Becker, managing director of the equity division at Time Equities, a New York City-based real estate firm. “Interest rates remain at all-time lows, which is fueling certain asset classes like multi-family (buildings).”

Among real estate’s appeals: it often marches to a different drummer. If your stocks are down, perhaps your real estate will be up. That’s not always true, as homes and stocks plunged in tandem in the financial crisis, but it’s true often enough for many advocates.

Real estate prices tend to be less volatile than stock prices, because homes, stores and offices cannot be bought and sold with the click of a mouse.

Because real estate can be used as collateral, it’s cheaper to borrow to pay for real estate than for many other investments. And if you borrow, say, 80 percent of the purchase price, selling for 10 percent more than your purchase price means a 50 percent gain.

Buying a vacation property has an added bonus: using it yourself.

Still, there are drawbacks. That same leverage that turned a 20 percent down payment into a 50 percent gain can quickly turn into a loss if the market sours. The stability that looks so appealing when you buy can turn into a nightmare if you cannot quickly attract a buyer when you want to sell.

And the benefit of a small down payment may be offset by mortgage interest payments, taxes, and insurance and upkeep costs, while carrying costs are little or nothing for stocks, bonds and funds. The vacation “benefit” can get stale if you feel it’s a waste of money to go somewhere else. On top of all that are the headaches of dealing with renters.

“Unforeseen events are always a risk when it comes to real estate investing,” Becker says.

If interest rates rise, for example, prospective buyers won’t have as much to spend, undercutting property values. “I do not see interest rates rising overnight, but a market can quickly be turned sideways by a major negative event,” Becker says.

With those warnings in hand, here are a few options for a real estate investment.

Buy a vacation home. You get to use it yourself while hoping to make some money. Though rental income may not cover all your costs, especially at the beginning, you may profit from appreciation over the years.

“I would advise to start with vacation property rather than a fixer-upper,” says Peter Anadranistakis, president of Caliber, The Wealth Development Company, in Scottsdale, Arizona. “Get a property in a dense neighborhood, close to cafes, museums, restaurants, attractions and public transportation.”

In addition to the costs mentioned above, you may have to pay a rental manager. In some markets, commissions gobble 25 percent of the rent. If the property is not near your main home, you’ll probably have to pay a professional to deal with maintenance and repairs, even little things you would do yourself at home, such as squeaky hinges and blown light bulbs.

Vacation home markets can be especially volatile, with prices and rental income plunging in a weak economy when people shun luxuries.


Buy a full-time rental. Buying a home or condo for full-time renters means you are not limited to a vacation area like the beach, lake or mountains. You can get a property near where you live, cutting some of the maintenance costs. And you won’t have to find a new renter every week or two, though you could lose plenty of sleep with a bad renter who’s not going anywhere.

Flipping. Buying a home, fixing it up and quickly selling is reality-show staple, but most experts warn this is a risky way to get started in real estate. It takes a lot of knowledge, time and tolerance for setbacks, and it’s very hard to make money without contributing sweat equity. If you’re not handy and don’t enjoy construction work, stay away.

“It is becoming harder to find deals to flip, as spreads (between purchase and sales prices) are becoming smaller with appreciation,” says Than Merrill, CEO of FortuneBuilders, a San Diego-based training firm for real estate investors.

Invest in your own home. Remodeling, renovating and expanding can add value to the home you live in, and have an immediate payoff in enjoyment. If your home has serious need for improvement and is in a healthy market, this is probably the smartest real estate investment for a beginner nervous about being a landlord.

Be careful though, because most improvements do not add as much value as they cost, according to the annual surveys by Remodeler magazine. To make improvements pay financially, you need to choose carefully, not get carried away with personal preferences, and probably do a lot of the work yourself.

Buy real estate investment trusts. REITs are like mutual funds that own real estate instead of stocks or bonds, and they can be bought and sold in an instant. Though each REIT specializes in a certain type of property – strip malls, apartment buildings, office complexes and so on – REITs spread the risk among a number of properties and use professional management, says Wilson Magee, director of Franklin Global Real Estate and Infrastructure Securities.

“Investors can build a real estate portfolio that has geographic and sector diversification by investing in a few selected REITs,” Magee says.

With a REIT, he says, you can buy into a big property you could never afford with a direct investment, and REIT management minimizes costs with economies of scale.

Whatever approach you take to real estate investing, most experts recommend dipping a toe rather than plunging in, so you’ll survive if things go wrong or the hassles become intolerable.

Find the cheapest to buy home

Soaring cliffs, towering redwoods, and turquoise waters have made Big Sur, CA, an epic travel destination ever since Beat poet and writer Jack Kerouac published “Big Sur” in 1962, based on his sojourns.

Today, the region just south of Monterey along Highway 1, hugging the Pacific Ocean, attracts campers and luxury travelers alike—and those who want to immerse themselves in natural beauty year-round by snapping up a house. But that beauty comes with a cost.

“Prices for any home in the area start at a minimum of $1,000,000,” says Nancy Sanders, a listing agent with Sotheby’s International Realty’s Big Sur office. “The number of properties sold in a year along (these) 100 miles of coast is usually less than 10. Sometimes only two to three homes are sold in one year.”

“There really isn’t anywhere to expand or grow, so the inventory for special and unique properties is extremely limited and finite,” says Tim Allen, an agent with Coldwell Banker in nearby Carmel who works with properties in Big Sur.

The housing stock is varied in this exclusive enclave with a population of around 700. A $28.8 million estate on 95 acres bumps up against a $3.3 million one-bedroom, one-bathroom log cabin.

“All of the Monterey Peninsula is undervalued when compared with other areas similar to ours, including Northern and Southern California, the East Coast, parts of Florida, and prime locations in Colorado,” says Allen.

But heed this warning: “value,” a popular buzzword when talking about real estate, isn’t just about square footage in this region.

“The Big Sur market is unique,” explains Allen. “So many of the potential buyers place different value on various aspects of the properties, including location, views, accessibility, style, and quality. Some buyers want to be remote, and others want the Big Sur feel but want easier access to the various amenities Big Sur has to offer.”

Who typically buys these homes? It’s a mixed bag made up of “wealthy folks from many different industries … and those who can purchase the more modest-priced house in Big Sur but want to live closer to the land and at a slower pace,” says Allen.

“There are a few world-class properties in Big Sur that will always be ‘priceless’ and the ultrawealthy will pay for them because they are among the best of the best anywhere and rare to find,” he says.

Real estate met real life this summer as the Soberanes wildfire struck the area, burning 105,000 acres to date. The blaze isn’t expected to be fully contained until the end of September.

Says Allen, “The fires will certainly have an impact on the market in the near term. However, in the long term I don’t anticipate much of a lasting effect as nature is always something to deal with in these unique types of properties and as we move forward fire awareness and measures are incorporated to mitigate future impacts. Big Sur is, and always will be, one of the most scenic, rugged, and majestic places accessible to the general public.”

Right now, there are a few opportunities to score a majestic deal in Big Sur. We spotted three spectacular homes with recent price cuts.

55471 Highway 1

Price: $4.45 million

Set on 18 acres along Highway 1 (cue ocean views)—and designed by Mark Mills, a Frank Lloyd Wright apprentice who worked at Taliesin West—are these three accommodations: a two-bedroom main house, another two-bedroom house, and a studio. Custom woodwork and seamless unity with nature are the home’s hallmarks. On the market since September 2015, the price on this 32-year-old home dropped by $545,000 in late July.

46480 Clear Ridge Road

Price: $2.75 million

Just over the ridge from the shoreline, this octagon-shaped home is elevated enough (1,110 feet to be exact) to afford views of the Pacific Ocean from many interior spaces, as well as the terraces. It measures only 900 square feet and has just one bedroom and two bathrooms, but it sits on 20 acres. Listed just under a year ago for $2,995,000, the price was cut by $245,000 in July.

48280 Highway 1

Price: $1,675,000

Since this three-bedroom, 3.5-bathroom home was listed in March, its price has dropped twice—$100,000 each time—for a total of $200,000. The 4-acre compound is located near the famous Post Ranch Inn. Check out that outdoor soaking tub! Other charms include a wood-burning stove and cathedral ceilings. A 400-square-foot studio on the property can provide rental income.

Attractive home to stay

It may feel like you’re short on space at home. After all, you had to rent a storage unit to keep all the items that don’t fit in your place. But a new study indicates we have very little to complain about in terms of how much space our homes actually have.

“U.S. homes have shown a steady and quite remarkable rate of growth in size over the past 100 years,” according to the study, conducted by real estate information site PropertyShark. “The average new home in America, be it condo or house, now spreads over 2,430 square feet.”

The study, which set out to analyze the evolution of new home sizes for each decade since 1910 in 32 of the largest U.S. cities, found that homes built in the last six years are 74% larger than those built in the 1910s. People have a lot more personal space now, too, as the average household has decreased from 4.5 to 2.5 people. That gives each person 211% more living space in those new homes.

The cities bucking the trend and building even larger homes are San Antonio; Orlando, Florida; and Nashville, Tennessee.

“All of these can boast a median home that spreads over more than 2,600 square feet, a generous space by any account,” according to the study. Homes built in San Antonio and Dallas are virtually mansions compared to a century ago — about twice as large, the study reports.Boston is the city with the smallest new homes, only spanning an average of 909 square feet. The next smallest cities were San Francisco, at an average of 1150 square feet, and Miami, at 1,179 square feet.


To establish this list, PropertyShark looked at the square footage for all single-family nomes, condos and co-ops built in each of the 32 cities during each decade. This was limited to the city limits and was gathered from public sources, except in Chicago and Austin, where researchers used square footage found in for sale listings. All information represents the median value and national averages used all 50 states.

But, it still feels small

Despite what this study shows, you may still feel like you need a bigger home. If that’s the case, it’s a good idea to save as much cash as you can for a down payment so you’re not nagged by a high monthly mortgage for longer than necessary. It’s also prudent to get your credit score into great shape before applying for a mortgage, because doing so may help you land a lower interest rate.

Tips Before You Buy A Home

“Every morning at 4 a.m. a low—and very, very loud—jetliner arriving from China roars overhead my house,” says Murray Suid, who lives in Inverness, CA. He wouldn’t go so far as to say he would have backed away from buying his home if he’d known this in advance, but he has come to a firm conclusion: “Different times of day really change the reality of a home.”

The neighborhood might feel charming and laid-back during a warm Saturday morning open house, but what is it like when you’re driving to work? Or waiting for Sunday church traffic to clear out?

That’s why David Feldberg, broker/owner of Coastal Real Estate Group in Newport Beach, CA, advises his clients to spend some time at their would-be house at all hours of the day and night to find out what it would really be like to live in the neighborhood.

Let’s check out some of the times during the day and night buyers might want to visit a home they like, paying extra attention to local goings-on.

8 a.m.: Is your commute a slog?

“It’s just 10 miles to work as the crow flies,” Lea Jacobson heard about a home she had her eye on in Portland, OR. But Jacobson was skeptical.

“I am not a crow; I don’t fly,” she says. So she decided to see for herself by driving around the area at rush hour. While her commute ended up being doable, she definitely recommends doing the test drive. Track the actual time it takes to commute from your driveway to your office to determine how long those red lights are and how bad the backup is on the on ramp—and if you can stand it. If you’re planning to take public transportation, give that a try, too.

10 a.m.: Do you hear what I hear?

Glenda Cook of San Antonio gets literally rattled by noise coming from the quarry a mile from her house.

“I wish I had known how badly it would shake my house when they detonate rock in the middle of the day. The home builder never said a word during the buying process, and it still startles me when I’m working in my office.”

Sussing out crazy noise from construction, traffic, or barking dogs isn’t the only reason to visit your home midday.

“I would also drive my street on a weekday and see how many people have cars in their driveway. Are there other neighbors around, or does it look like a ghost town?” Feldberg says. For safety’s sake, it’s nice to know that neighbors might be keeping an eye on your house if you’re at work all day, and maybe even accepting your UPS shipments.

3 p.m.: School’s out

Is the home near a school? If so, you might want to hang out and see if the schoolchildren are going to be cutting through your yard and trampling your flowers—or if the traffic is so busy you don’t feel comfortable having your own kids walk home.

5:30 p.m.: Happy hour or sad hour?

Now’s the time to check for traffic returning home—yours and everyone else’s. If you are envisioning sitting outside relaxing with a glass of lemonade watching your kids ride bikes, you don’t want to find out too late that Waze is redirecting traffic through your quiet neighborhood. And, adds Feldberg, you can check to see if other kids are out; it’s impossible to underestimate the allure of built-in playmates.

Another less-likely eventuality might concern your neighbors’ cooking habits—if dinnertime brings odors you find unpleasant, you might want to stay away.

9 p.m.: Time to par-tay?

It’s a good idea to find out if your neighbors like to live it up, advises Liane Jamason, broker associate at Smith & Associates Real Estate in Tampa Bay, FL. Her client drove by for a week and discovered his potential next-door neighbor liked to have loud, wild parties nearly every night. “Since my client worked in TV broadcasting and had to be up at 3 a.m. daily, he opted for a more peaceful neighborhood,” she says.

Feldman recommends that his clients park their car in front of the house and roll down the windows to check the noise level, whether it’s urban commotion or suburban parties. A late-night visit can also give you an idea of how safe the streets feel after dark.

If you can go in the house, do. Tyler Hanway, who recently bought a house in Fairhope, AL, didn’t realize until his first night in the home that his neighbors’ outdoor lighting shines into his master bedroom windows, filling the room with an orange glow.

3 a.m.: Planes, trains, and automobiles

And to return to the transportation theme that we started with, it’s not just airplanes that can disturb your sleep. Shawn Steen of Madison, WI, wasn’t the least bit concerned about the train tracks behind her house: As a kid, her grandparents lived near train tracks, and her previous apartment was just two blocks away from a track.

“I barely notice trains and thought, ‘no big deal’—until the train behind my house started coming through every night at 3 a.m., blowing its horn less than 100 yards from my bedroom window. It was ludicrously loud.”

Is Mortgage a Good Idea

The main reason to take out a reverse mortgage is that your home equity is your biggest asset, you’re short on cash and you don’t have any other viable way to get the money you need for the expenses of daily life. This is not a decision to make lightly, though. It’s likely taken you years of hard work to accumulate your home equity and taking out a reverse mortgage means spending a significant part of that equity on loan fees and interest. Also, reverse home loans are more complex than regular, “forward” home loans – the kind you get when you buy or refinance a house.

3 Reasons to Say “Yes”

If the following five criteria describe your situation, a reverse mortgage might be a good idea for you.

1. You’ll get enough proceeds to solve your financial problems long term.

To qualify for a reverse mortgage, you must either own your home outright or be close to paying it off. In other words, you need to have enough equity that a reverse mortgage will leave you with a reasonable lump sum, monthly payment or line of credit after paying off your existing mortgage balance, if you have one.

Getting quotes from three reverse mortgage lenders and going through reverse mortgage counseling should give you a good idea of whether a reverse mortgage can provide a long-term solution to your financial problems. (Learn more from Picking The Right Reverse Mortgage Lender.)

Explore how much you could get with each of the payment options. If none of them can provide the liquidity or the large up-front sum you need, you’re probably better off avoiding this complicated loan and its high up-front costs and looking for another way to fix your money troubles. Selling your home, for example, would let you cash out all of your equity instead of just a percentage of it. Renting or moving in with a family member might be a better solution. It would be a waste of your hard-earned home equity to take out a reverse mortgage only to find yourself facing the same financial problems in just a few years.

2. You don’t want to move and staying in your home is your long-term plan.

Staying put can make taking out a reverse mortgage worth it. Not so, if you plan to move in the near future, thanks to those high up-front costs. There are lender fees such as the origination fee, which can be as high as $6,000, depending on your home’s value; up-front mortgage insurance, which is either 0.5% or 2.5% of your home’s appraised value, depending on the reverse mortgage payment plan you choose; and closing costs such as title insurance, a home appraisal and a home inspection. If you move, you’ll have to repay the reverse mortgage, and you don’t want to spend thousands of dollars on a loan you’re not going to keep for a long time. (For considerations in finding a reputable lender, see Find The Top Reverse Mortgage Companies.)

3. You can afford ongoing property taxes, homeowners insurance and home maintenance.

Keeping up with your property taxes, homeowners insurance and home maintenance is essential if you have a reverse mortgage. If you fall behind, the lender can declare your loan due and payable. Here’s why:

• If you don’t pay your property taxes for long enough, the county tax authorities can place a lien on your home, take possession and sell it to recoup the taxes owed. The tax authority’s claim to your property supersedes the lender’s, so if you don’t pay your property taxes, you’re putting the lender’s collateral (your house) at risk.

• Not paying your homeowners insurance premiums also puts the lender’s collateral at risk because if your house burns down, there’s no insurance to pay the costs of rebuilding. Your lender doesn’t want to get stuck with a burnt-out shell of a home that isn’t worth nearly what you owe on the reverse mortgage.

• Not keeping up with home maintenance also causes your home to lose value. If you don’t replace a failing roof, for example, your home could end up with extensive water damage after it rains or snows. Anyone who might consider buying your house would pay much less than what similar houses in good repair recently sold for in your neighborhood because they’ll have to spend a lot to replace the roof and fix the water damage in order to return the home to good condition.

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