A lot of costs beyond price of your home

This was originally published on Monday, July 17, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Once you decide to purchase your home, there’s more to consider than just the purchase price or your monthly mortgage payments. It’s easy to let emotions get in the way of reality, especially if it is something we want.

There may be some things you need to consider before signing for that dream home. Some of concerns may be financial, while others require a little investigating on your own.

Down payment. The amount you contribute to your home will determine how much your total mortgage loan will cost. Depending on the type of loan you get, you can pay anywhere up to 20 percent of the home’s sale price.

Private mortgage insurance. Depending on how much of a down payment you make, you may be required to purchase private mortgage insurance. In most cases, it will be rolled into your monthly mortgage payment. Your loan provider usually requires you to have private mortgage insurance to protect lenders against loss if a borrower defaults.

Homeowner’s insurance. Many banks require a homeowner’s insurance policy be purchased before closing on the home. The policy covers personal liability and hazard insurance to cover the home and the contents within it. It may also cover special conditions to which your house may be exposed, such as flood or earthquakes. Ensure you read your policy carefully and understand exactly what it covers.

Title insurance. On Guam, it’s common for property to be passed down from generation to generation without being recorded or going through the proper legal channels. Title insurance ensures the property you are buying is free and clear of any claims, taxes or property disputes.

Appraisal fees. Lenders will require a potential buyer to hire an appraiser to determine the value of the home. They take into account similar properties in the area, market trends, house amenities, square footage, defects and structural concerns. The fee is usually paid by the buyer prior to the sale being finalized.

The appraised value could greatly impact your down payment, loan terms, monthly payments and, in some cases, even your ability to buy that particular house.

Home inspection fee. Although not common on Guam, you may decide to hire a home inspector to look at electrical wiring, plumbing and cooling systems to determine if there are any defects. As a buyer, you can request the price be lowered or that the seller fix the defect before you purchase the home.

Escrow fees. An escrow is a third-party that will hold the money while the buyer and seller finalize the contract. Generally you’ll have a portion of the monthly mortgage payment held in escrow to pay for property taxes and insurance.

Credit report fees. Some loan institutions will charge a fee to check your credit worthiness.

Survey fee. A survey is a drawing or map showing the precise legal boundaries of a property and other details. If an existing survey of the land can’t be obtained, a new survey will have to be conducted. Your lender may require you to have the land surveyed to ensure the boundaries are where they are supposed to be and there are no legal issues.

Loan origination fee. This fee covers the lender’s administrative costs of preparing the required documents for the loan and the closing paperwork. Average cost of the fee is usually 1 percent to 2 percent of the loan amount.

Recording charges. The state and local governments charge this fee to record your deed, mortgage and loan documents regarding the sale.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.


New year offers chance to adjust insurance

This was originally published on Monday, December 15, 2014, in the Pacific Daily News. Click here to subscribe to the PDN.

There are just a few more weeks before the New Year. There may be many items on your holiday to-do list, but have you set some time aside to review your financial status? Reviewing your financial status will help you know where your finances need tweaking for the upcoming year. Your insurance policies should be on your end-of-the year review checklist. Last week, I covered some points to look at when reviewing your life and car insurances. Here are other insurance policies to review:

Homeowners insurance
• Do you have enough coverage to fully replace your home? Inflation can cause gaps in the price to rebuild your home. For example, if you purchased and covered your home at $250,000, it may now cost you $400,000 to rebuild your home. You will not have enough insurance to rebuild your home.

• Have you made upgrades to your home? If you made upgrades to your home, such as an extension, a pool or remodeled your kitchen, you may want to get your house re-evaluated. Making upgrades to your home will cause the value of your home to increase. You want to ensure that you are covered for the full price of your home.

• Do you need special coverage for certain items in your home? Did you recently purchase expensive jewelry, art pieces or new electronics? Do you have antique furniture or items? The value of what is in our home is just as important as the value as your home. Check with your agent/broker if any of your high-valued items need extended coverage. After assessing your home, you may need to increase the coverage for your possessions.

• Did you add a home security system? Did you install typhoon shutters or anti-theft grills on your windows? Adding these items to your home may give you an added discount.

• What perils does your policy cover? Know what perils are listed on you policy. It may include theft or fire. Does your insurance cover earthquakes, floods or typhoon? If not, you may need to buy extended coverage.

• Do you rent instead of own? Just as homeowners need insurance so do those who rent their home or apartment. Many people feel that their landlord’s insurance will cover them. In actuality, a landlord’s insurance will cover only the dwelling and any accidents around the property. It will not include your possessions. Renter’s insurance will cover your possessions in case of theft and fire. Talk to your insurance agent/broker.

Health insurance
• Were there any changes in your household? Did you welcome a new baby in your household? Did you have a child become of age? Did you get a divorce?

• What does your plan cover? Review your summary of benefits and coverage. Are you covered for ER visits, urgent care, immunizations, maternity, laboratory testing or prescription medications? How much is your co-payment?

• How much are you paying? If you pay a higher premium upfront, most likely you will pay less when you need medical attention. If you have extensive medical conditions, you may want to consider a plan with a higher premium that will cover more of your treatments. If you are in good health, consider a lower premium plan, but not too low in case of an emergency or unforeseen illness.

• Who is in your network of providers? Does your insurance cover the doctors or hospitals/clinics that you want to see? Does your health insurance cover off-island treatment?

Insurance is something we must have but the coverage we choose depends on income, lifestyle and life situations. As we change, our insurance policies will have to change with us. An end-of-the-year review of insurance policies will ensure that your needs are covered to have a healthy and prosperous new year.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.