Realty Times January 10, 2007

Resolve To Protect Your Household's Bottom Line
by Broderick Perkins

You procrastinated again.

More than a week into the New Year and you still haven't made up your mind what you'll resolve to improve, change, accomplish or take a stab at.

A home owner advocacy group is here to help.

The American Homeowners Foundation (AHF), a consumer research and education group and it's lobbying arm, the American Homeowners Grassroots Alliance, have some pretty good ideas.

They think you should get your financial house in order.

Considering the housing boom has taken a turn and the economy isn't certain which way is up, making sure your home economy isn't headed for a recession is a good idea.

"We think you should look at things from the point of your economic best interests," said Bruce Hahn, president of the dual efforts.

Here's how.

Resolve to:

  • Get your home finances in order. Adjustable rate mortgages are adjusting. Home prices are flat and falling. Review your finances. Look for ways to save money, reduce risks, and lock in long term financial planning.

    The AHF says if your mortgage is more than a few years old there's a pretty good chance you can get a lower mortgage interest rate, lower your monthly mortgage payments and, over the long haul, reduce your interest costs. Because most of your mortgage payments in the early years consist of interest, you may also end up with a larger tax deduction.

    A recent Harris Poll found that the majority of home owners don't put their equity to work. An equity loan, by nature, is an equity depleting loan, but if you use the cash for necessary capital improvements or investments that provide a decent return (education, business start-up, home improvements, etc.), you can earn back the equity spent, with interest. Professional financing planning can help you visualize the possibilities.

  • Stop lending interest-free money to Uncle Sam. He's loaded -- if only on paper. Refunds feel good but only because it's like stuffing cash into the mattress and making it softer. Your tax withholding should be designed, as much as possible, so that come tax return time, you owe the feds nothing and they owe you zip. Otherwise you are simply loaning your money to the government interest free or borrowing it at exorbitantly high rates.

    Get a tax professional to help you set your tax withholding levels to the zero refund/taxes-due level and use your money during the year to pay off high interest rate credit cards, pay some principal on your interest-only or option-payment loan, to pull deferred maintenance on your home or otherwise invest the cash, say, in a retirement fund with employer-matched contributions.

  • Increase your savings and reduce or eliminate high interest rate credit. Keep the resolutions mentioned above and this one is easy. Shop around for the best interest rates both to consolidate loans and for savings, especially those federally insured Internet banks and other institutions that offer the best rates on both ends.

  • Review your homeowners and other insurance to maintain adequate coverage, raise deductibles and other wise adjust your coverage to optimal levels -- not too much, not too little.

  • Save money and the planet by reducing home energy costs. Get a home energy audit to determine where you need to batten the hatches or install new, more energy efficient appliances and materials.

  • Be a smart home buyer or seller. Virtually every real estate cost (except taxes) are negotiable. Negotiate tough. Use discount or rebate services when they supply the level of service you need. In softer markets, sell before you buy so you are not left holding the bag. By moving into a short term rental until you find your new home, you'll maintain some leverage on the selling end and be able to concentrate on negotiating when it's time to buy. The strategy can easily offset the cost of a few months of renting.

  • If you've decided to stay put through the softer real estate market, it's a good time to pump up your home's value with home improvements, energy improvements and even cosmetic improvements. Building material costs have dropped and in some markets refugees from the home building industry are looking for work and are willing to deal. Just make sure you pick a licensed contractor skilled in the work you want performed and not just a down on his or her luck home building laborer.

  • Get involved in the political process to influence issues including, retaining and increasing the tax benefits of home ownership; new home defects; mortgage fraud; questionable title industry practices; kick-backs; anti-competition practices; global warming that hits home and other issues that affect your bottom line at home.

  • Resolve to be resolute about these resolutions.

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