Sunrise Homes & Renovations, Inc.

Paying Rent And Mortgages With A Credit Card

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Using a credit card for mortgage or rent

When people purchase a house, they usually set up their mortgage payments as a direct draft out of a checking account. The same is typically true of rent payments; however, many people have wondered if there was another way to pay rent or mortgage. After all, there are credit cards out there that have fantastic rewards. It would be great to take advantage of these rewards by placing rent and mortgage payments on a card.

Sadly, there is no way to pay rent or mortgage with a credit card without a fee. There are bank interchange fees that would lead to a surcharge for banks and landlords. This prevents them from readily accepting credit cards without a fee. What if there was a better way?

Possibilities For Credit Card Payments

It is rare to find an apartment complex that accepts a credit card. It is even harder to find a bank that does this. It is helpful to ask about the different ways to pay rents and mortgages when talking to banks and landlords. It can be helpful to do the math on any fees that are charged and compare them to rewards. For example, if a credit card gives five percent cash back on rotating categories, it might be beneficial to take advantage of this five percent back and pay a two percent fee to use the card. This would still net three percent in savings.

Using Third-Party Payment Options

There are also third-party service providers that will allow someone to pay nearly any bill online with a debit or credit card. This includes rent and mortgage payments. These third-party sites still charge fees. Sometimes, it is a flat rate. Other times, it is a percentage of the total.

When To Use Credit And Debit Cards

The most appropriate time to use a credit or debit card to pay this bill is when a minimum spending requirement is needed to trigger a significant bonus. For example, if a card requires someone to spend $5,000 to trigger a bonus, it is easier to reach this number by using the card to pay rent. Otherwise, it is better to calculate the fee versus and points and see which option makes the most sense.

Should I Pay Off My Mortgage Or Invest the Money?

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Should I Pay Off My Mortgage Or Invest the MoneyTo understand what to do with a windfall or extra disposable income when it comes to paying down a mortgage or investing the money, we need to discuss and understand the concept of opportunity cost.

What Is Opportunity Cost?

The concept of opportunity cost takes into consideration the total financial impact of the use of funds when applied in different ways, to be able to compare the effectiveness of how it is best to use them. The opportunity cost considers the risks involved, the potential reward, as well as the tax implications of the choices.

Risk Versus Reward Evaluation

All investments have risks. When comparing the potential earnings from an investment against the savings of mortgage interest, only the investment side has any downside risk. If you pay down the mortgage, there is a 100% certainty that the loan will reduce and the interest paid will go down. You can calculate the saving on the interest and know the exact amount.

If you invest those same funds, there is always a risk that the investment money can be lost or the investment returns are lower than expected. Moneywise did a comparison of using money to lower a mortgage versus investing in the S&P 500 stock market index over 43 years from 1971 to 2013. For 26 of those 43 years (60% of the time), paying down the mortgage was a better financial move.

Tax Implications

The tax implications involve the impact of the mortgage interest deduction, and its effect on reducing federal income taxes, and the cost of paying capital gains tax on investment profits.

The Tax Cuts and Jobs Act of 2017 reduced the possibility for many people of benefiting from an itemized mortgage interest deduction because the standard deduction increased. For comparative purposes, most Americans pay capital gains at the current rate of 15%.

Take the tax savings from the mortgage deduction, if you can use it, and compare this to the investment income, less the applicable capital gains taxes. Ask your tax accountant to do the calculation for you if you cannot do this yourself.

Summary

For some, paying down a mortgage is more beneficial than investing. Paying down a mortgage certainly has less risk. Be sure to consider paying down high-interest credit card bills first. That is always a wise idea because the interest rate charged on credit cards is so high.

Every person’s financial circumstances are somewhat different so there is no standard answer when comparing paying down a mortgage to investing the same amount of money. Each person needs to do this calculation of the opportunity costs, to be able to apply their extra funds in ways that are most beneficial for them.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional to discuss current financing options.

The Long-Term Toll Of College Costs

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The Long-Term Toll Of College CostsTaking out enormous student loans to get a college degree may be a terrible idea for some. The burden of paying off this debt can make it far more challenging to do other important things like buying a home.

Here are some common problems that come from taking out large student loans:

  • Not Worth It: The college degree may not help you land a high-paying job. Even high-paying jobs like being a dentist have extremely high educational costs as well. Aspiring dentists borrow, on average, over $500,000 to go to dental school and spend multiple decades paying it back.
  • Tuition Hyper-Inflation: Colleges and universities saw the easy money from student loans as a great reason to increase tuition. In many institutions, tuition increases, over the past 42 years, went out of control, especially for trade schools and private universities. College costs rose by 1,400% since 1978. That is five times more than the inflation rate over the same period.
  • Over–Borrowing: The easy ability that students have in many cases to over-borrow for living expenses on top of college costs means that they take bigger loans than they need and wastefully spend the money.

In the olden days, they had a phrase for a person who sold themselves into a kind of work-slavery. They called these people “indentured servants.” By taking out student loan debt that may take decades to pay back, this is a form of indentured servitude, especially because it is difficult, if not impossible to get out of paying the student loans back. Even bankruptcy does not discharge student loan debt.

If your student loan goes into default, there is the possibility of a wage garnishment, which means up to 25% of your take-home pay will be deducted from your checks and used to pay off the student loan debt. This is like a modern version of being an indentured servant.

But You Need A College Degree To Succeed, Right?

For many, earning a college degree that teaches skills and knowledge, which help get a high-paying job, is a reasonable idea. However, not all degrees are equal in their influence over getting a job. Many degree certificates are not worth the paper they are printed on. Moreover, some do better than those who have degrees.

Conclusion

What do Bill Gates, Coco Chanel, Ralph Lauren, Rachel Ray, Mark Zuckerberg, Sean “Diddy” Combs, James Cameron, Steve Jobs, Steve Wozniak, Richard Branson, Simon Cowell, Larry Ellison, Ted Turner, and Wolfgang Puck all have in common? They all do NOT have a college degree and still became immensely successful. Many are billionaires, who simply started their businesses and did not have time to finish college, so they dropped out.

Before you saddle yourself with student debt for a huge portion of the rest of your life, think carefully about the ramifications. Then, if you must borrow, borrow as little as possible and make sure you get a degree that helps get a high-paying job.

If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.

Most Renters Are Paying Far More Than Their Landlord’s Mortgage

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Most Renters Are Paying Far More Than Their Landlord's MortgageIn the overwhelming majority of the 50 largest cities across the U.S., monthly rent is more than the mortgage payment for single-family homes. In several cases, much more. 

Global answering service and chat support company Moneypenny compiled data from Zillow on median rent and mortgage payments from July 2014-July 2019.

In order to calculate the monthly mortgage payments, Moneypenny took the median home sale prices during the same time period and in the same major cities and then used nationally-average mortgage terms: 30-year fixed rate at 4% with approximately 6% down. 

Once the two figures — median monthly rent and median monthly mortgage — were calculated for each city, they were compared side-by-side. The data may surprise you. 

From Less Than Half To More Than Triple

In just seven of the 50 cities analyzed, tenants pay less rent than the owner’s mortgage payment each month. In 28 of the cities — well over half, tenants are paying more than 150% of their home’s mortgage. The city with the highest rent-to-mortgage ratio, Miami, shows that renters pay more than 300% of their landlord’s monthly mortgage payment on average.

Rounding out the top five are New York (276%); Riverside, California (231%); Boston (230%); and San Diego (221%). At the opposite end of the spectrum is New Orleans, where tenants pay just 49% of their home’s mortgage each month, followed by Richmond, Virginia (57%), and Kansas City, Missouri (82%). 

An interesting data point is that the median monthly mortgage payment in Miami is $720, while in New Orleans it’s $2,857. 

Not-Necessarily-For-Profit

While it makes perfect sense that rent prices in hot real estate markets are higher, some may still be surprised by the disparity between rental amounts and monthly mortgage payments. However, it’s important to note that even in the cities with the biggest gap, landlords are not necessarily pocketing the excess and enjoying a nice profit. While it’s certainly possible that they may be, homeowners are more likely putting some of that money back into the house in the form of improvements and maintenance, as well as setting some of it aside for large emergency repairs. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

Considering A Reverse Mortgage? Understand These Important Points First

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Considering A Reverse Mortgage Understand These Important Points FirstThere are many individuals who end up on a fixed income once they reach a certain age; however, their expenses aren’t always fixed. Sometimes, there is a large medical expense. In other cases, someone might need money for a new car or a home repair. In the event that someone needs cash quickly, one option is called a reverse mortgage.

Those who have equity built up in their home can draw upon this to help with unexpected expenses. This is a quick source of cash that many people overlook. At the same time, it is important to think about the pros and cons of a reverse mortgage.

The Pros Of A Reverse Mortgage

Taking out a reverse mortgage does have several benefits that everyone should know. First, there are no required monthly payments for any reverse mortgage loan. In addition, the money that people get from a reverse mortgage is not taxable. For many, this acts as a tax shield against any income that results from a reverse mortgage.

Next, nobody can ever owe more money than the value of the home when the building is sold. This prevents people from getting buried by potential interest payments. Finally, nobody will ever have to leave their home with a reverse mortgage. The owners retain the rights to the property.

The Cons Of A Reverse Mortgage

On the other hand, there are a few cons that people need to keep in mind as well. First, reverse mortgages are regulated by the federal government, which means that everyone needs to read the rules and regulations carefully. In addition, not everyone who owns a home will qualify for a reverse mortgage. They need to have enough equity built up in the home before the lender will consider it.

In order for someone to take out a reverse mortgage, a lien is going to be placed against the property. In the eyes of some, a lien must be paid off in the event the property is to be sold. Finally, in order to prevent a reverse mortgage from resulting in foreclosure, the building needs to be both maintained and insured.

Thinking about the pros and cons carefully can help someone decide if a reverse mortgage is right for them. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

Ensuring Home Contractors Are Following The Rules Under HICPA

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Ensuring Home Contractors Are Following The Rules Under HICPAThere are many homeowners who hire contractors to make repairs or upgrades on their homes. It is critical for home improvement contractors to follow all rules and regulations set forth by the law. These regulations have been set forth under the Home Improvement Consumer Protection Act, or HICPA. 

An Overview Of The Home Improvement Consumer Protection Act

The Home Improvement Consumer Protection Act was put forth to ensure that homeowners and contractors come to an appropriate agreement. Some of the rule and regulations that are included in the Home Improvement Consumer Protection Act include:

  • All contractors need to obtain a registration number
  • Home contractors are required to register with the Office of the Attorney General
  • All home contractors need to pay the required registration fees

Finally, the Home Improvement Consumer Protection Act also specifies the various terms that need to be included in each agreement set forth by homeowners and contractors. Any contractors agreed to by contractors and homeowners need to comply with the Home Improvement Consumer Protection Act. The purpose of this act is to protect homeowners against fraudulent contractors. 

What Happens If An Agreement Does Not Follow The Rules?

If an agreement does not abide by the regulations included in the Home Improvement Consumer Protection Act, then there might be liability in a civil court. Furthermore, there could even be criminal charges that result. 

In the event that a homeowner enters into civil litigation against a home contractor, the first item that lawyers will look into include the regulations under the Home Improvement Consumer Protection Act. If the contractor violated any of the regulations, the HICPA may also specify penalties that might be levied against the contractor.

When Does The Home Improvement Consumer Protection Act Apply?

There are only a few exceptions where the HICPA would not apply to a home improvement job. Even though the definitions under the HICPA are very broad, this act does not apply to contractors who earn less than $5,000 of taxable income in a given year. Finally, the HICPA applies only to home improvements. It does not apply to the construction of a new home. The act also does not apply to the sale of any home appliances.

If you are in the market for a new home or interested in listing your current property, be sure to consult with your trusted real estate professional.