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Your Home Ownership Myths BUSTED!

Home Ownership Myth

MYTH #1: I should pay down my mortgage early.

FACT: Paying off your mortgage doesn’t change your monthly payment. Unless you’re aiming to pay off your entire mortgage early to avoid further interest costs, there are wiser places to put your money. You can’t get that money back unless you sell or pay to refinance, so first consider putting it in an account in case of an emergency, such as home repairs or a job loss. If you are in a healthy financial position, your money may be better off in the stock market or another real estate investment. You want to remain flexible, rather than having all your funds tied up in one asset. Now, if your goal is to be mortgage free in less than 30 years, then by all means, put all your money into your mortgage, but for various reasons, that’s not necessarily the best advice for every homeowner.

MYTH #2: Remodeling is always a good investment.

FACT: Many people expect that they will get back every penny they spend in a remodel. This depends on what you remodel, how much you spend and where you live. For instance, converting an attic may return more than adding a sunroom. Also, taste varies. If you plan to sell, the next person interested in buying your home might not like the renovations that you absolutely love. There are home investments that yield a return, but you should contact an agent before you make any major decisions, so we can tell you what to expect from a resale perspective. Bottom line – home maintenance is important, but a remodel is tricky. No matter what, a return on your money is not guaranteed.

MYTH #3: Rates are low so I should refinance.

FACT: A refinance loan is completely different from a purchase loan. When you refinance, banks want to see at least 20% equity, if not 25% or even 30%. There are costs with refinancing, typically around 1% of the loan amount, so deciding whether the refinance is worth the required investment really depends on how long you plan to stay in your home. You usually have to stay in your home for a while to realize the savings. We can show you how to do the math to make sure you plan on being in your home long enough to break even on the upfront costs and monthly savings.

MYTH #4: My homeowner’s insurance policy covers flood damage.
FACT: This is a common mistake for many homeowners. Most homeowner policies don’t cover flooding. You’ll need to take out a separate policy to protect against all types of flooding, manmade or natural. It completely depends on what type of homeowner’s insurance you have, and even if you have coverage, it may not cover everything. Also, if you live in a condo, you can purchase flood insurance that just covers your possessions. For more information on dealing with a home flood and insurance claims, see: How Not to Get Soaked.

MYTH #5: I don’t have to be involved in the condo association, that’s for the property manager to do.

FACT: By purchasing a condo, you are legally agreeing to be “involved”. And, vice versa, the condo association is agreeing to provide certain services. Just because you pay a fee doesn’t mean you can opt out of everything else when it comes to keeping your building in great shape. The resale value of your condo will depend a great deal on the management, decision, and finances of the building, so you should really take an active roll in the association, whether that means being on the board, a committee or attending meetings to voice your opinions. Don’t leave these important decisions to someone else who may not know the implications of their choices with YOUR investment.

MYTH #6: My    (fill in the blank   is new, so I don’t need to do anything to maintain it for a few years.

FACT: No matter what it is (gutters, HVAC, hot water tank, etc.), structures or pieces of equipment need to be maintained on a regular basis. If you don’t follow the specific instructions on when to have them serviced, the quality will degrade over time and you run the risk of them breaking, even if they’re new. And, if they come with a warranty but aren’t maintained by you, fixing it may not be covered. For instance, heating and air-conditioning units need their filters replaced monthly, hot water tanks should be drained yearly, windows should be caulked yearly, etc. Also, always keep an eye on your utility bills, because any major change might mean there’s a maintenance issue.

As you can see, there is a lot of misinformation out there, so don’t believe everything you hear or read! Your home owning experience should let you thrive both financially and emotionally, so feel free to contact us if you have any questions about anything at all, as you live in your home.


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