After the technology bubble burst back in 2000 the stock markets suffered a bleak period of decline and investors chose to place their focus on bricks and mortar rather than falling share prices and they began investing heavily into real estate.
As a result the second home and the buy-to-let real estate markets in many countries around the world such as in the UK, US and Australia boomed. However, as the real estate affordability gap continues to widen in these nations and fewer first time buyers can even get onto the first rung of the real estate ladder, property price increases have begun to cool off and the ability to generate impressive rental yields and strong capital appreciation has slowed right down for at least the short term.
At the same time the stock markets around the world remain volatile and so now many more investors are looking overseas for alternatives to cooling domestic housing markets and bumpy rides on the stock market. Many are finding that there's an abundance of real estate opportunity in emerging countries around the world which has created a strong demand for real estate finance overseas.
For those considering joining the jet-to-let real estate investment set here are the three main options available when it comes to raising real estate finance, loans or mortgages to buy property abroad.
1) In many of the nations that were the first to boom the property markets are now stagnant and because lenders have fewer customers to provide finance for they are actively targeting those who have yet to upsize, release equity or take out a second mortgage and offering them increasingly favourable terms, conditions and interest rates.
For anyone thinking about buying real estate overseas in a country where they believe it will be difficult for them to secure local finance or where interest rates are unattractive, the option may exist for them to re-mortgage their existing property or take out a loan secured against the equity in their primary residence.
The negative side of this option to raise real estate finance to buy overseas property is that the purchaser's primary residence will be the security against the loan and naturally this introduces an element of risk.
2) The second option available to buyers looking for real estate finance overseas is getting a mortgage locally in the country in which they want to buy. Some countries such as Spain, Germany and France for example offer attractive interest rates and payment schedules to buyers from other European nations and many countries offer mortgages to international purchasers who can provide a decent sized deposit.
Anyone thinking about buying abroad would do well to also research which banks and lending institutions exist in that country, whether they are allowed to lend to foreign buyers and if so, are the criteria for getting a loan and the terms and conditions of the loan favourable?
3) The final option available to the majority of real estate investors looking to finance the purchase of a property abroad is an international mortgage provided by an international lender who usually has experience in the country from which the borrower heralds and also in the country in which they wish to invest which can make the whole finance process so much simplerbut the downside is that arranging such mortgages can be far more expensive than the first two options available to those contemplating their real estate finance options.
The availability or applicability of any type of mortgage or finance raising scheme discussed in this article is something that needs to be determined on an individual basis therefore this article does not constitute advice. Anyone hoping to raise finance to purchase real estate overseas should seek expert financial advice.
By Rhiannon Williamson , http://www.articleworld.net
8/24/07
Secured Loans: Use the Equity in your Home.
If you are a homeowner in the UK, you can use your home for borrowing a significant loan amount. A home is considered a good asset to be kept as collateral. The lenders also prefer to offer a loan amount to those who have their own home.
The lenders assess the value of the home and then offer the loan amount according to the equity present in your property. The higher the value of your home, higher would be the loan amount you can borrow. Usually, the lenders can offer you a loan amount up to 90 percent of the equity present in your home. But some lenders can even offer you as high as 125 percent of the equity. The entire process takes around one week’s time to get the loan amount.
Usually, the lenders offer a variable APR (Annual Percentage Rate) with the secured loan type. The interest rates can go up and down during the entire loan tenure with the base rates of the Bank of England. The base rates keeps on changing in order to keep the inflation under control.
People with adverse credit history can also seek a secured loan type. A bad credit secured loan will not only help you in availing a loan, but it can also give you an opportunity to improve your credit record.
You can approach high-street banks, building societies and the private lenders to avail a secured loan type. You need to do a comparison analysis in order to avail the loans on better terms and conditions.
Author: Adam Jaylin , http://www.articlesbase.com
The lenders assess the value of the home and then offer the loan amount according to the equity present in your property. The higher the value of your home, higher would be the loan amount you can borrow. Usually, the lenders can offer you a loan amount up to 90 percent of the equity present in your home. But some lenders can even offer you as high as 125 percent of the equity. The entire process takes around one week’s time to get the loan amount.
Usually, the lenders offer a variable APR (Annual Percentage Rate) with the secured loan type. The interest rates can go up and down during the entire loan tenure with the base rates of the Bank of England. The base rates keeps on changing in order to keep the inflation under control.
People with adverse credit history can also seek a secured loan type. A bad credit secured loan will not only help you in availing a loan, but it can also give you an opportunity to improve your credit record.
You can approach high-street banks, building societies and the private lenders to avail a secured loan type. You need to do a comparison analysis in order to avail the loans on better terms and conditions.
Author: Adam Jaylin , http://www.articlesbase.com
Home Equity Investments.
Home equity stands for the capital of the house, and it is the over all price of a house. The equity is an equivalent of the capital and a home equity refers to the capital that is equivalent to the price value of the house. The home equity investment is the investment that is made in constructing the house and making it value appreciate. This investment allows you to take up loan from the financial institutions depending on the rate of appreciation of the value of the house.
Home equity loan is also referred to as second mortgage. There are different types of equity loan depending on the loan amount you receive. One of the equity loans allows a borrower to opt for a fixed loan amount which is provided on a monthly basis. This loan amount is decided considering the value of the house. Hence constructing the house and making its price is an investment that allows you to obtain a loan.
The home equity investment is a wise choice as in most cases the price of a piece of land and the constructed house only increases with time. There are a number of ways by which one can make a better investment. The home equity loan amount is provided on a credit earn basis. The borrower has to earn credits which are allocated depending on the earning capacity, the history of the credit of a borrower and the value of the house. If a person is able to get a good score the equity loan is provided. If the credit history of a person is not good then the loan is denied.
There is a latest type of equity loan where in an investor is not required to show any documents related to the income. There are no verifications made but one has to compromise in terms of the loan amount that is calculated. This is not a bad option for those who do not earn a very good income.
The equity loans are generally opted for, for renovation purposes, or to pay the medical bills. A person who is not capable of paying of the bills related to renovations made or the medical bills can opt for the equity loan to pay of he bills. Making use of these simple concepts a person can generate income and thus keep away from taking high interest loans.
When the equity loan is applied for a small amount of fees is levied which includes the assessment and the other costs incurred by the company to decide for the loan amount. The loan money borrowed against a home equity loan may be used for getting rid of the debts, or to pay for some medical services availed.
These are one of the frequently used loans for consolidating the debts or to make urgent payments. Thus home equity should be considered as a source of investment. A person can get a loan against the home equity. This loan can be put to use for the general as well as specific expenses.
Author: Robert , http://www.articlesbase.com
Home equity loan is also referred to as second mortgage. There are different types of equity loan depending on the loan amount you receive. One of the equity loans allows a borrower to opt for a fixed loan amount which is provided on a monthly basis. This loan amount is decided considering the value of the house. Hence constructing the house and making its price is an investment that allows you to obtain a loan.
The home equity investment is a wise choice as in most cases the price of a piece of land and the constructed house only increases with time. There are a number of ways by which one can make a better investment. The home equity loan amount is provided on a credit earn basis. The borrower has to earn credits which are allocated depending on the earning capacity, the history of the credit of a borrower and the value of the house. If a person is able to get a good score the equity loan is provided. If the credit history of a person is not good then the loan is denied.
There is a latest type of equity loan where in an investor is not required to show any documents related to the income. There are no verifications made but one has to compromise in terms of the loan amount that is calculated. This is not a bad option for those who do not earn a very good income.
The equity loans are generally opted for, for renovation purposes, or to pay the medical bills. A person who is not capable of paying of the bills related to renovations made or the medical bills can opt for the equity loan to pay of he bills. Making use of these simple concepts a person can generate income and thus keep away from taking high interest loans.
When the equity loan is applied for a small amount of fees is levied which includes the assessment and the other costs incurred by the company to decide for the loan amount. The loan money borrowed against a home equity loan may be used for getting rid of the debts, or to pay for some medical services availed.
These are one of the frequently used loans for consolidating the debts or to make urgent payments. Thus home equity should be considered as a source of investment. A person can get a loan against the home equity. This loan can be put to use for the general as well as specific expenses.
Author: Robert , http://www.articlesbase.com
Is It Time To Grab Your Home Equity?
If you bought a home in the past few years the odds are overwhelming that your equity increased. According to the National Association of Realtors, the value of a typical home grew by 12.6 percent last year. That means a house worth 184,100 at the end of 2004 was likely to be valued at 207,300 at the start of this year -- an increase of 23,200.
No doubt a lot of owners are looking at higher home values and wondering if now is the time to get a home equity loan. For three reasons, at least, it's a question that should be asked.
First, home equity financing is typically available at rates far below the cost of credit card financing and most other forms of consumer borrowing. By getting a home equity loan and paying off old consumer debts it's likely that you can substantially reduce monthly costs.
Second, unlike consumer loans, the interest paid for up to 100,000 in home equity financing is generally tax deductible. However, the rules regarding interest write-offs are not straight-forward, there are circumstances where some or all home equity interest may not be deductible. For details, speak with a tax professional.
Third, you can often get a home equity loan without paying any fees or charges. This does not mean there are no costs, rather the lender will pay such expenses under certain conditions.
So there you have it: Home equity financing is cheap, the interest is likely to be deductible and you don't need a lot of cash -- or maybe any cash -- to sign up.
But despite all the good news regarding home equity loans, such financing is a form of debt. Just like a regular mortgage, if you don't pay you can lose your home and that's a very good reason to be careful.
What do you need to know about home equity loans? Here are the basic questions to ask:
How much can I borrow? Loan programs differ, but many mortgage lenders will provide enough home equity financing so that total mortgage debt equals 80 to 100 percent of the property's value.
If you have a home worth 550,000 and a current loan balance of 300,000, you might be able to get a home equity financing ranging from 140,000 to 250,000. In this example, 80 percent of the home's equity would be 440,000. This amount, less current debt (300,000), means that 140,000 would be available to you with a home equity loan. At the 100 percent loan-to-value level, 250,000 would be available -- 550,000 in equity less 300,000 in existing debt.
How much should I borrow? The fact that you can borrow big sums does not mean it always makes sense to obtain the largest possible loan. When looking at potential home equity loans be certain that the payments will be comfortable, both now and in the future. Since most home equity loans are adjustable-rate products, you need to consider that rates and monthly costs can go up.
What type of home equity loan is best? There are two basic forms of home equity loan, the cash-out refinance where you receive a lump sum at closing and the home equity line of credit (HELOC). The cash-out refinance is simply a fixed- or adjustable-rate second loan on the property, while a HELOC is much like a credit card -- you draw money as needed and interest is charged on the balance. As you pay down HELOC debt, more money is available to borrow up to the original credit limit.
There is no "best" choice between a simple second loan and a HELOC. Instead, go with the option that makes the most sense given your finances and preferences.
How can I avoid the debt monster? If your reason to get a home equity loan is to pay down consumer credit, that's fine -- as long as you do not go out again and rack-up more consumer debt for credit cards, car loans and other expenses.
Combine home equity payments with a new set of hefty consumer bills and your financial position can get worse so plan ahead: Part of every home equity loan should be a plain commitment to establish a budget and avoid additional consumer debt.
Is there a catch to those home equity loans that require no cash to close? Such financing often comes with a pre-payment penalty if the loan is terminated within a given period, say two or three years. The logic here is fairly sensible: The lender had cash costs up front to close the loan and wants a reasonable period of time to recover such expenses. As a borrower you want to make sure the prepayment period is limited to just a few years, the shortest period possible.
You also want the best rates and terms, but beware of loans with low rates up front for a few months -- and then far higher rates and payments in the future. As always, shop before you settle.
Peter G. Miller is a syndicated real estate and personal finance columnist who appears 70 newspapers. For more information about mortgages, please visit Mortgage Lenders Plus.com
By Peter Miller ,http://www.articleworld.net
No doubt a lot of owners are looking at higher home values and wondering if now is the time to get a home equity loan. For three reasons, at least, it's a question that should be asked.
First, home equity financing is typically available at rates far below the cost of credit card financing and most other forms of consumer borrowing. By getting a home equity loan and paying off old consumer debts it's likely that you can substantially reduce monthly costs.
Second, unlike consumer loans, the interest paid for up to 100,000 in home equity financing is generally tax deductible. However, the rules regarding interest write-offs are not straight-forward, there are circumstances where some or all home equity interest may not be deductible. For details, speak with a tax professional.
Third, you can often get a home equity loan without paying any fees or charges. This does not mean there are no costs, rather the lender will pay such expenses under certain conditions.
So there you have it: Home equity financing is cheap, the interest is likely to be deductible and you don't need a lot of cash -- or maybe any cash -- to sign up.
But despite all the good news regarding home equity loans, such financing is a form of debt. Just like a regular mortgage, if you don't pay you can lose your home and that's a very good reason to be careful.
What do you need to know about home equity loans? Here are the basic questions to ask:
How much can I borrow? Loan programs differ, but many mortgage lenders will provide enough home equity financing so that total mortgage debt equals 80 to 100 percent of the property's value.
If you have a home worth 550,000 and a current loan balance of 300,000, you might be able to get a home equity financing ranging from 140,000 to 250,000. In this example, 80 percent of the home's equity would be 440,000. This amount, less current debt (300,000), means that 140,000 would be available to you with a home equity loan. At the 100 percent loan-to-value level, 250,000 would be available -- 550,000 in equity less 300,000 in existing debt.
How much should I borrow? The fact that you can borrow big sums does not mean it always makes sense to obtain the largest possible loan. When looking at potential home equity loans be certain that the payments will be comfortable, both now and in the future. Since most home equity loans are adjustable-rate products, you need to consider that rates and monthly costs can go up.
What type of home equity loan is best? There are two basic forms of home equity loan, the cash-out refinance where you receive a lump sum at closing and the home equity line of credit (HELOC). The cash-out refinance is simply a fixed- or adjustable-rate second loan on the property, while a HELOC is much like a credit card -- you draw money as needed and interest is charged on the balance. As you pay down HELOC debt, more money is available to borrow up to the original credit limit.
There is no "best" choice between a simple second loan and a HELOC. Instead, go with the option that makes the most sense given your finances and preferences.
How can I avoid the debt monster? If your reason to get a home equity loan is to pay down consumer credit, that's fine -- as long as you do not go out again and rack-up more consumer debt for credit cards, car loans and other expenses.
Combine home equity payments with a new set of hefty consumer bills and your financial position can get worse so plan ahead: Part of every home equity loan should be a plain commitment to establish a budget and avoid additional consumer debt.
Is there a catch to those home equity loans that require no cash to close? Such financing often comes with a pre-payment penalty if the loan is terminated within a given period, say two or three years. The logic here is fairly sensible: The lender had cash costs up front to close the loan and wants a reasonable period of time to recover such expenses. As a borrower you want to make sure the prepayment period is limited to just a few years, the shortest period possible.
You also want the best rates and terms, but beware of loans with low rates up front for a few months -- and then far higher rates and payments in the future. As always, shop before you settle.
Peter G. Miller is a syndicated real estate and personal finance columnist who appears 70 newspapers. For more information about mortgages, please visit Mortgage Lenders Plus.com
By Peter Miller ,http://www.articleworld.net
8/11/07
Introduction to Loans
With so many financing choices available today, it's easier than ever to find a home loan that meets both your budget and future plans. But before you sign on the dotted line, it pays to be familiar with some of the most common types of loans. You should also get advice from your real estate agent and speak with several lenders about your options.
Fixed-rate Mortgages
Fixed-rate mortgages carry the same interest rate for the life of the loan. These types of loans have traditionally been the most popular choice for homeowners because their steady payments are easy to budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but may also be available for 20-year and 40-year mortgages.
Adjustable-Rate Mortgages
Adjustable-rate mortgages (or ARMs) are the most widely accepted alternative to fixed-rate mortgages. The primary difference is that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. To protect homebuyers from dramatic rate increases, most ARM loans have "caps" that limit the rate from rising above a certain amount between adjustments (e.g. no more than 2 percent a year), as well as a "ceiling" on increases over the life of the loan (e.g. no more than 6 percent).
Hybrid Loans
Hybrid loans get their name because they combine features of both fixed-rate and adjustable-rate mortgages. For example, a typical hybrid loan may start with a fixed-rate loan for several years, and later convert to an adjustable-rate mortgage. (Some hybrid loans do not have interest rate caps for the first adjustment period, so be sure to check with the lender). Another type of hybrid loan may start with a low introductory fixed interest rate, and then change to another (usually higher) fixed interest rate for the remainder of the loan term.
Using Time Wisely
The length of time you plan to live in a house should be an important factor in your choice of financing. If you plan to stay for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for less than 5 years, then the low introductory rate of an adjustable-rate mortgage or hybrid loan might make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.
F.H.A. and V.A. Loans
If you find it difficult to qualify for a conventional loan, U.S. government loan programs from the Federal Housing Authority (F.H.A.) or the Department of Veterans Affairs (V.A.) may be helpful. Designed to promote home ownership by offering lower qualifying ratios and reduced down payments, F.H.A. and V.A. loans are not issued by the government, but instead are made by private lenders who are protected by government insurance in case the borrower defaults. Unlike conventional loans, both F.H.A. and V.A. loans have maximum allowable amounts and may require additional paperwork and inspections before the loan can be approved.
by Jonathan Lammers
Fixed-rate Mortgages
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Fixed-rate mortgages carry the same interest rate for the life of the loan. These types of loans have traditionally been the most popular choice for homeowners because their steady payments are easy to budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but may also be available for 20-year and 40-year mortgages.
Adjustable-Rate Mortgages
Adjustable-rate mortgages (or ARMs) are the most widely accepted alternative to fixed-rate mortgages. The primary difference is that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. To protect homebuyers from dramatic rate increases, most ARM loans have "caps" that limit the rate from rising above a certain amount between adjustments (e.g. no more than 2 percent a year), as well as a "ceiling" on increases over the life of the loan (e.g. no more than 6 percent).
Hybrid Loans
Hybrid loans get their name because they combine features of both fixed-rate and adjustable-rate mortgages. For example, a typical hybrid loan may start with a fixed-rate loan for several years, and later convert to an adjustable-rate mortgage. (Some hybrid loans do not have interest rate caps for the first adjustment period, so be sure to check with the lender). Another type of hybrid loan may start with a low introductory fixed interest rate, and then change to another (usually higher) fixed interest rate for the remainder of the loan term.
Using Time Wisely
The length of time you plan to live in a house should be an important factor in your choice of financing. If you plan to stay for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for less than 5 years, then the low introductory rate of an adjustable-rate mortgage or hybrid loan might make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.
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F.H.A. and V.A. Loans
If you find it difficult to qualify for a conventional loan, U.S. government loan programs from the Federal Housing Authority (F.H.A.) or the Department of Veterans Affairs (V.A.) may be helpful. Designed to promote home ownership by offering lower qualifying ratios and reduced down payments, F.H.A. and V.A. loans are not issued by the government, but instead are made by private lenders who are protected by government insurance in case the borrower defaults. Unlike conventional loans, both F.H.A. and V.A. loans have maximum allowable amounts and may require additional paperwork and inspections before the loan can be approved.
by Jonathan Lammers
What You Should Look for in New Homes
Communities, neighborhoods and modern conveniences are just a few of the reasons homebuyers choose new homes. But before deciding on your new dream house, make sure to do your homework and find the right builder for your needs and budget.
Finding a Builder
Summary Points
1. Look for an experienced builder with a good reputation.
2. Use your budget and how long you plan to stay in the home as helpful guides.
3. Find out what options are available for your home.
4. Choose a location that fits your needs and budget.
Look for an experienced builder with a reputation for quality workmanship and customer satisfaction. A great way to find a builder is to ask your real estate agent for a recommendation. Your agent can also guide you through tours of homes in new subdivisions, and help you make notes about your favorite houses and who built them. Once you've made a list, try contacting homeowners who previously worked with the builder and find out how satisfied they are with their homes.
Remember, too, that the model homes builders use to showcase their work may differ from other homes in the same development. For this reason, speak with the builder early on so you can find out exactly what options you'll have for appliances, cabinets, trim work, landscaping, paint colors, etc. Your builder will want you to enjoy your new home, so don't be afraid to ask about adding personal touches to get exactly what you want.
Choosing the Location or Lot
Try to find a location that suits both your lifestyle and budget. While factors like access to work and shopping are important no matter where you live, bear in mind that even lots within the same development can have drastically different prices. For example, a lot overlooking the 18th hole of a championship golf course will likely cost more than an interior lot a few blocks away. It's also important to find out whether your location is subject to any restrictions, homeowner's covenants or special assessments such as sewer and road fees.
Important Factors for Choosing the Right Location
1. Access to employment, shopping and transit
2. Convenience to recreation and parks
3. Quality of the local schools
4. Fire, police and utility services
5. Nearby zoning
6. Covenants, restrictions and special assessments
Negotiating a Price and Upgrades
When it comes to negotiating a price for your new home, it's wise to have a real estate agent representing you. Though deals can sometimes be found at the beginning or end of a new development, it takes an experienced agent to help evaluate different prices and handle the negotiation. One area where you may have the most room to negotiate is for construction upgrades. For example, you might agree to pay the full asking price in exchange for a custom fireplace and higher quality kitchen cabinets.
Your Warranty
Virtually all new homes come with warranties covering structural defects and major systems such as the plumbing, heating, cooling and electrical systems. Make sure to speak with the builder beforehand about exactly what is covered and for how long. Another good idea is having the house inspected by a professional before construction is complete. Even the best builders occasionally make mistakes, but an experienced inspector can help identify problems during construction when they're easier to fix. To find a new house inspector, ask your agent for a recommendation.
by Jonathan Lammers
What to Look for in an Online Listing
Online real estate listings have revolutionized the way buyers locate property, compare prices and find real estate professionals. But before you log on, make sure you have all the tools to get the most from your search.
Getting Local
You may have heard the old saying: "the three most important rules of real estate are location, location and location." To be sure, the first step in any online search is locating the specific area you're interested in. And with the convenient Find a Local Magazine search tool at Homes & Land, you'll be able to focus in on properties across town or across the country without ever leaving your chair.
Golf Course, Waterfront or Historic?
Another important consideration is being able to find the kind of property you want. Always dreamed of a house by the water? Or maybe you're looking for a little mountain hideaway? No matter what kind of property interests you, Homes & Land makes it easy to find. Just remember that once you've located the magazine for your area of interest, you'll be able to choose from a list of all the different property types that are available. Just check the box, hit the search button, and you're done!
And if you're working with a budget, make sure to take advantage of other features like setting a price range and selecting the number of bedrooms and baths.
Seeing is Believing
It's hard to get excited about a property if you don't know what it looks like. So to help save time and effort finding exactly what you want, all Homes & Land listings come with a photo and detailed property description. Some properties even have virtual tours so you can enjoy 360 degree views and feel as though you're actually standing inside the house or on the lot.
How to Get the Most from a Homes & Land Listing
1. Use the Find a Local Magazine search tool to locate the area you're interested in
2. Select the price range, property type and number of bedrooms and baths to focus on specific properties
3. Browse listings matching your criteria by viewing thumbnail photos and brief descriptions
4. Get more information by clicking on the photo of any property that interests you.
5. Contact the agent via their phone number or email address shown in the "Offered by" section at the bottom of each listing
6. Make an appointment to see your favorite properties!
Talk to the Expert
If you want learn more about a property, the next step is getting in touch with the listing agent. They'll be able to answer any questions you might have, and also provide details about the neighborhood, the city--even the local schools. All Homes & Land listings include the agent's contact information in the "Offered by" section beneath the property description. You can call them at the office, view their website, or send them an email. Don't delay when you find the right property--talk to the expert!
by Jonathan Lammers
Insuring Your Home
When purchasing a home, most mortgage companies require the buyer to have homeowners insurance as a condition for receiving the loan. According to the Insurance Information Institute, the average cost per year for a standard homeowners policy in 2004 was $608. While standard homeowners policies will cover the structure of the home and its contents against fire, theft, and some natural disasters, (excluding floods, earthquakes, landslides, mudslides or sinkholes), the amount of coverage varies. Even if you’re not in the market for a new home, it’s a good idea to review your policy to make sure your coverage is in line with your home’s current appraised value.
The declared value of your home should not take into account the price of the land that it sits on, since the land would generally not need to be rebuilt after a catastrophic event. Insurers approximate the land price to be about 25 percent of the full home price. For example, if your home is appraised for $200,000, the amount your home should be insured for is about $150,000 or 75 percent of the full appraised value.
If you live in an area that is subject to earthquakes, you should consider adding an endorsement on your policy for coverage in the event of a quake. For California residents, the California Earthquake Authority (earthquakeauthority.com) underwrites the coverage. If you live in a flood-prone area, additional insurance must be purchased for protection against loss associated with flooding as well. Standard homeowners policies do not cover these perils and will not pay out for damage associated with earthquakes or floods without the necessary coverage being added to the policy.
The Insurance Information Institute also suggests that homeowners who live in areas frequently hit by major storms should speak with their insurer about an “extended or guaranteed replacement cost” policy. This policy will provide a certain amount over the current policy payout if building costs rise unexpectedly due to high contractor and supply demands.
Your homeowners policy also covers your personal belongings. You should make a detailed inventory list of your property. When estimating the full replacement value of your personal belongings, 75 percent of the home structure’s value or $50,000 per person living in the home is a general rule of thumb to use for coverage. Even with content coverage of $100,000 or more, there are payout limits on various goods like jewelry, art, computers, coins and firearms which usually cap out at $1000. To properly insure items over the $1000 limit, you should obtain a separate policy for each item that extends beyond the cap. The separate policy covers those items if they are lost or stolen and can cost as little as $30 per year for a piece of jewelry appraised at $3000.
While there are many factors that go into the cost of a policy premium, the deductible accounts for a significant portion. In fact, the higher the deductible, the lower the premium.
Lowering Your Premium without
Minimizing Your Coverage
1) Get at least three bids – The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company.
2) Raise your deductible – Most insurance companies recommend a deductible of at least $500. Raising it to $1,000 can save as much as 25 percent on your annual premium.
3) Consider using the same insurer for your automobile – Many companies offer discounts if you have at least two policies with them.
4) Add a home security alarm system – Smoke detectors, burglar alarms and dead-bolt locks can save the insured as much as 5 percent annually.
5) Ask about additional discounts – If applicable, inquire about senior discounts. Some employers or professional associations also have negotiated discounts for their members.
by Kathy Scott
Source: Federal Citizen Information Center
The declared value of your home should not take into account the price of the land that it sits on, since the land would generally not need to be rebuilt after a catastrophic event. Insurers approximate the land price to be about 25 percent of the full home price. For example, if your home is appraised for $200,000, the amount your home should be insured for is about $150,000 or 75 percent of the full appraised value.
If you live in an area that is subject to earthquakes, you should consider adding an endorsement on your policy for coverage in the event of a quake. For California residents, the California Earthquake Authority (earthquakeauthority.com) underwrites the coverage. If you live in a flood-prone area, additional insurance must be purchased for protection against loss associated with flooding as well. Standard homeowners policies do not cover these perils and will not pay out for damage associated with earthquakes or floods without the necessary coverage being added to the policy.
The Insurance Information Institute also suggests that homeowners who live in areas frequently hit by major storms should speak with their insurer about an “extended or guaranteed replacement cost” policy. This policy will provide a certain amount over the current policy payout if building costs rise unexpectedly due to high contractor and supply demands.
Your homeowners policy also covers your personal belongings. You should make a detailed inventory list of your property. When estimating the full replacement value of your personal belongings, 75 percent of the home structure’s value or $50,000 per person living in the home is a general rule of thumb to use for coverage. Even with content coverage of $100,000 or more, there are payout limits on various goods like jewelry, art, computers, coins and firearms which usually cap out at $1000. To properly insure items over the $1000 limit, you should obtain a separate policy for each item that extends beyond the cap. The separate policy covers those items if they are lost or stolen and can cost as little as $30 per year for a piece of jewelry appraised at $3000.
While there are many factors that go into the cost of a policy premium, the deductible accounts for a significant portion. In fact, the higher the deductible, the lower the premium.
Lowering Your Premium without
Minimizing Your Coverage
1) Get at least three bids – The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company.
2) Raise your deductible – Most insurance companies recommend a deductible of at least $500. Raising it to $1,000 can save as much as 25 percent on your annual premium.
3) Consider using the same insurer for your automobile – Many companies offer discounts if you have at least two policies with them.
4) Add a home security alarm system – Smoke detectors, burglar alarms and dead-bolt locks can save the insured as much as 5 percent annually.
5) Ask about additional discounts – If applicable, inquire about senior discounts. Some employers or professional associations also have negotiated discounts for their members.
by Kathy Scott
Source: Federal Citizen Information Center
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