Shall I Pay Off My Mortgage Early?

 Dear Monica:  I have received some money from a relative that I was not expecting and am thinking I might use it to pay off my mortgage.  Do you think this would be a good use of my small windfall?  Karen L.
Dear Karen: Paying off one’s mortgage can feel very good but it varies whether it makes economic sense to do this.   It’s a good thing that you would not be taking money from retirement or other savings accounts.  The gift was unexpected and doesn’t alter the financial plan you have set for yourself and your family.   You can save the money you would be paying each month and add it to your portfolio.
If you are financially stable with adequate cash reserves for contingencies, paying off your mortgage seems like a good thing.  If however you need the gift to build up your reserves, then it would be best to keep the mortgage in place and strengthen your financial assets.  Talk to your accountant to understand the tax implications of paying the mortgage and to your financial planner to see if it makes sense for you.

The Fires Will Affect How We Do Things in the Future

Dear Monica: I never thought as much about fire danger as I have this week with the Napa and Sonoma fires raging.  I live in town but Santa Rosa’s fires show that being in town doesn’t mean you are protected.  How do you think counties and cities will respond to increased fire danger?  Carol C.
Dear Carol:  It is too soon to know what the response of local and state governments will be but there is no doubt that changes in building, zoning and general codes in response to fire dangers are coming.  Individuals will be much more alert to creating defensible space around their homes.   While the homes in Coffey Park in Santa Rosa burned so quickly that it didn’t matter whether they had more fire-safe materials, there will certainly be an analysis of what building materials should and shouldn’t be used.
There will be emphasis on establishing an warning system any time the fire danger is high.  Citizens will take these alerts seriously, especially after this week.  So many people had almost no time to escape.  Expect forestry rules to be affected too.  We all need to stay informed so we can protect ourselves and our property in a disaster.

Choose the Right Lender

Dear Monica: I made an offer on a property recently and even though I made the highest offer, I was rejected. I was also told that the seller didn’t feel comfortable with my lender, an internet bank.  Do you think this was reasonable?  Darren T.
Dear Darren:  Many sellers prefer working with a buyer who has a bricks and mortar bank over one who has an internet based lender.  This is a common response.   For one thing the traditional bank should have a local office and your agent can talk directly to the lender’s representative or mortgage broker.  Also there is a high probability the seller’s agent knows the lender and can vouch that they are very effective and good to work with.  An internet bank, on the other hand, seems remote and their performance is hard to predict.  For these reasons many sellers feel more comfortable with accepting an offer when the funds are coming from a traditional lender.

Should I Buy Flood and Earthquake Insurance?


Dear Monica: As I watch the news of recent hurricanes and the aftermath in the southeast U.S., I am shocked to hear that few residents who were flooded had flood insurance.  In California we have floods and earthquakes. Do you recommend homeowners get flood and EQ insurance here?  Barbara T.

Dear Barbara:  Many homeowners do not buy earthquake insurance because it is expensive, has a high (10%) deductible and they are not required to have it.  Flood insurance is required if you have a federally-backed mortgage.  But many people who live in flood zones don’t know they do (because the maps have been recently revised) and many don’t have mortgages.    
In California one’s home is often the largest asset owned.  The prudent thing to do to protect it is to carry insurance that would cover events that are likely to happen.  Earthquakes happen in California and are expected in the future.  Floods too are expected to happen more frequently in the future as seas rise and storms are stronger.   Assess your own situation and budget and decide whether you could afford to be uninsured if an event occurs.  If the answer is no, you should buy the insurance.

Transferring Your Property Tax Base Under Props. 60/90

Dear Monica:  My husband and I are ready to cash out of the home we have owned for many years and move to a less expensive one either in the county in which we live, or to another county.  We want to keep our property taxes the same as they are now.  What are the rules on this?   Frances G.


Dear Frances:  You are referring to Propositions 60 and 90.  If you are 55 years of age or older you may transfer the base year value of your principal residence to a newly purchased or constructed replacement residence within the same county (Prop. 60).  Prop 90 allows you to transfer the base year value under the same rules to one of 11 other counties: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolomne and Ventura.  It is a huge advantage for seniors to be able to do this, especially as many have reduced incomes due to retirement. 


Out of the 58 total counties in California, only these 11 allow Prop 90 transfers.  All counties allow Prop. 60 transfers, that is, transfers within the same county.  On the State of California’s website, and on each county website, there is an explanation of the guidelines for these transfers.  

Metal Roofs Are Coming into Style

Dear Monica: I see several new homes being built in my community and many have metal roofs.  What are the pros and cons of using this type of roofing material?  Richard H.


Dear Richard:  Metal roofs are coming into style and have many advantages over shake and composite roofs.  They last much longer than other roofs, are non-combustible, and because they reflect sun and heat, they can keep your home cooler.  The best roofs are aluminum or copper, the latter being the most expensive.  Metal roofs don’t crack, warp, leak or wear out, although they can be dented by hail stones or by walking on them.  Metal is a first rate roofing material and can even be recycled at the end of its life.


The most common reason many homeowners have for not installing a metal roof is the cost.  Metal roofs are much more expensive than other types and make economic sense if one is going to live in a house for a long time.   However buyers like the fact that they don’t have to reroof so there is value added even if you sell the house.  If installation costs come down you will likely see metal roofs on many more homes.


How to Succeed When There Are Multiple Offers

Dear Monica: We recently made an offer, our first one in this market, and we lost.  We thought we would have a chance to revise our bid but our agent didn’t get a call from the listing agent until it was too late to do anything about it, and we would have bid higher.  What could we have done to succeed?  Sara B.


Dear Sara:  The first rule when there are multiple offers is to put forward your best bid and never expect a second chance because you probably won’t get one.  If you do this then even if you lose you know that you did your best.


It is important as well to know how many other offers there are so you can act accordingly.  If there is only one other offer, you may not bid as high as you would if there are several offers.  Most listing agents share this information but some can’t answer this question because they don’t track it.  You end up more or less “shooting in dark” with your offer.


If you have good financing and a very good agent to advise you, your chance of success, while not guaranteed, is much greater.

Cameras in Homes

Dear Monica: My agent was showing me property recently and I saw that some of the houses had cameras installed and knew that owners were probably watching us view their house.  It made me uncomfortable and mindful of not making any negative comments about the property while in the house.  Are cameras now a fact of modern life?  Bonnie C.


Dear Bonnie:  Cameras are indeed a fact of modern life and you should expect to see them in many properties on and off the market.  Generally property owners with hidden cameras inside their homes do not have to give any notice that a visitor is being recorded on video.  The cameras should not be in bathrooms and bedrooms where there is an expectation of privacy.  Audio recordings, however, whether taken by video cameras or audio recorders, do require the consent of all parties in California, unless the event is public.


If you are installing a video camera in your own home, you should research the laws in your state to be sure you comply.  And if you are touring homes for sale, be aware that you may be on camera.

Buying Property Using Retirement Funds

Dear Monica:  I would like to use some of my retirement funds to invest in real estate and don’t know how to do this.  Can you give me some recommendations?  Sandy D.


Dear Sandy: You can use your Individual Retirement Account funds to invest in assets other than stocks.  This is called a self-directed IRA and there are several asset classes that you may invest in, as well as some you may not, such as property for your personal use and life insurance.  You will need to choose a custodian to help you understand what you can and cannot do.


There are many companies that do this and you should look for one that is reputable, accredited, and experienced in the kind of investing you want to do.  The custodian will handle the paperwork required to comply with IRS rules and generally guide you in the process.  Consult with a custodian company and decide if you are comfortable with a self-directed IRA.

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