When selling your home go step by step

This was originally published on Monday, March 2, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I will be leaving island soon and I want to sell my home. I am a bit anxious about this since I have never sold a home before. I would like to use the money from the selling of my home to help finance my move and to purchase a new home. Do you have some financial tips that could help me out?

Answer: Selling a home is just as stressful as buying one. It may even be more stressful if you are in need of the money from selling your old home to purchase your new home. There are many factors and steps that go into selling your home and it is a bit overwhelming. Take it step by step and understand everything you sign. Don’t be afraid to ask questions if you don’t understand something.

The very first step you need to take is to gather all your documentation regarding your home. If you remember how much paperwork you dealt with when you purchased the home, be prepared for more. It is best to have extra copies made and pay a little more to have them notarized.

• Deed: Your deed shows your legal ownership of your home. It contains names of the old and new owners and has the signature of the person transferring the property. It contains descriptions about your home and the lot including measurements and square footage. If you inherited your home you still should have a transfer-on-death deed or a similar documentation showing that you are the legal owner and how you came into ownership.

• Mortgage contract: The mortgage contract is the document that shows how much money is exchanged for buying the home. It also details the financial terms and conditions and the type of loan. If you still have a lien on your home you will also have to show proof that the mortgage is being paid. If your mortgage is behind on payments, that must be disclosed to all interested parties. If you have paid off your mortgage you will need documentation showing that your property is free and clear of any financial obligations. If you have a second mortgage, that should also be disclosed.

• Property tax: Gather documents that show that your property taxes are current. Some financial institutions include your property taxes with your mortgage payments. If they do, your monthly mortgage statement should show a breakdown of the bill to include how much property tax you pay. If your property tax is delinquent you must disclose that to all interested parties.

• Architectural blueprints: If you have the original drawings and blueprint of the home it would be beneficial to the next owners. If any work has been done to modify the home such as electrical, plumbing, or removing or adding to the structure, it should be disclosed as well.

•  Insurance: The payment history of your homeowner’s insurance may also be needed.

• Renovations and repairs: You must disclose any improvements to the lot or the home or had major repairs to the home, or events or issues such as flooding, earthquake damage, or foundation repairs. Warranties from repairs or improvements may be carried over to the new owner.

• Utilities: Copies of your utility agreements and bills may also be needed. These records will make the smooth transition of utility hook up for the new owner.

• Renters: If you are renting out the property you are selling you should provide a copy of the rental agreement.

If you do not have the original documents, you may request for a certified copy. The more documentation you have about your home the better. Be prepared to take all these forms with you as you talk to all the parties involved.

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.

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Homeowner’s, title insurance both necessities

This was originally published on Monday, April 21, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I am about to purchase my first home but need advice on homeowner’s and title insurance.

Answer: Congratulations on your new home! Buying a home is a huge responsibility and probably going to be one of your largest expenses. When buying a home, it’s important that both insurances are used to cover your property and home.

Title insurance ensures that the property which you are buying is free and clear of any legal issues with regard to ownership of the property.

This covers back property taxes, omissions in deeds, clerical errors and fraud. Title insurance is available for lenders as well as the owners. Lenders require a lender’s title insurance policy to protect it while there’s a loan. If you obtain a mortgage, a lender’s policy is based on the loan amount. Once the loan is paid, the lender’s title insurance ceases. This is why an owner’s title insurance policy is critical. As long as you own the property, the owner’s title insurance policy will be in place. You have the right to choose your title insurance company. Be sure to choose a company that has a good reputation and you feel will be in business for years to come.

Homeowner’s insurance is a necessity to protect you financially. Like most insurance it can be difficult to understand. Many do not read their coverage until they have a claim. Understanding your insurance policy will ensure that you can rebuild your home and replace your belongings in case of a loss. Depending on what type coverage you have, your policy may cover your home and/or personal belongings in the home, such as appliances, furniture, etc. Here are two homeowner’s insurance options on the structure:

• Replacement cost pays you the cost of replacing the home up to the insured amount. Usually, there’s no deduction for the depreciation of home and is based on the face amount of the policy; and

• Actual cash value covers the cost to replace your home minus the depreciation cost at the time of the loss.

Once you decide which homeowner’s policy is best for you, there are other options to consider:

• Contents or personal property coverage covers the valuables within your home. It will reimburse you the depreciated value for clothes, furniture, appliances, electronics and more. Theft and burglary of property are covered under this option.

• Personal liability covers you for bodily injury and property damage claims that occur on your property.

• Medical payments helps pay medical expenses for those who are injured on your property.

• Temporary housing eases the burden of living in a place until your home is rebuilt.

Check with your insurance company to see what kind of disasters are covered. Usually, homes that are in flood zones, earthquake zones or typhoon zones may require special insurance to cover those disasters.

Know exactly what you are buying and ask questions about your policy. Work with your insurance representative to help you find an insurance policy that fits your needs and budget.

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.

Moving’s expensive, but you can be prepared

This was originally published on Monday,October 28, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I recently received a job offer off island and I am planning on moving. Do you have any tips on making this move a smooth financial transition?

Answer: Congratulations on your new job. Moving is never easy and always financially draining. There are many things to consider. The first step should be getting organized, especially with your financial records. Because it’s a professional move there are some expenses that you may claim come tax time. You may also want to create a calendar of dates and deadlines, a to-do list, and a binder that you can hand-carry that contains all the paperwork you will gain during the process.

There are several things you may need to consider.

• Create a budget. This may be difficult, as you may not know what to expect. You will need to start researching the cost of living of the new area. How much does an apartment/home cost to rent or buy? What is the average utility bill? You will need some cushioning in case you run into an unexpected cost.

• Negotiate. It’s OK to talk to your new employer if the company will be helping with any relocation costs. Some companies pay for these and you may be surprised how flexible some companies are willing to be if you ask.

• Banking. Check with your bank if there is a branch at your new location. You may have to open an account at a local bank in the area. Check with your current bank if there are any transition fees or penalties.

• Property insurance. If you are moving your household goods or car, you may need to consider extra insurance to cover your belongings. Having the right amount of insurance could help keep a huge disaster to a mere nuisance.

• Realtor or no realtor? This is a decision you may have to make on both ends. If you are planning to sell or rent your home, it will be very helpful and less stress to get professional help. You may also require a realtor at your new destination. A realtor can give you the ins and outs of an area. Decide how much you can afford for a realtor.

• Medical insurance. Will your insurance cover you at your new location? You may have to purchase another plan. Let your insurance company know of your move and do not cancel your coverage until you reach your destination. You may never know what happens while you are in transit.

• Your retirement plan. Talk to your current human resource manager about transferring your retirement plan. Will there be a fee or taxes to pay? Can your plan be transferred?

• Vehicle(s). Do you plan on taking your car with you? Shipping a car is dependent on how much your car weighs. If you’re currently paying on your vehicle, can you sell your car to cover the remaining balance? If your car is paid, do you want to start another loan? Is there reliable public transportation at your new destination?

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

Keep your insurance in tune with your needs

Your home and car insurance needs will change with time. An annual review of those needs will help you catch up on the year’s changes and keep your coverage current.

Update your content insurance. Whether you use content insurance to cover high value  items or all of your belongings, it’s important to review your coverage once a year. Track down receipts for major items you purchased in the past year. If you use photos or videos to keep records of your belongings, it’s time to update them.

Keep these records secure: you can easily store copies of photos and videos online in private accounts. If your computer and paper files become damaged, you will still be able to retrieve online copies from another computer. You can store receipts for major items with your insurance policy, in a safe deposit box or a waterproof/fireproof safe.

Inspect your home. By inspecting your home annually for fire, theft, and flood hazards, and correcting the problems that you find, you can protect your family from perils. You will possibly prevent or limit damage to your home, and help yourself in the future if you need to file a claim.

Check your doors and windows for gaps where water can enter during flooding or heavy rain in typhoon conditions. You may need to install or replace weather stripping. You should also look for points of entry for intruders—deadbolts, window locks, and additional lighting can help deter burglars. Fires can develop from electrical problems, so test your outlets and look for signs of electrical damage. Test your smoke detectors, and replace the batteries if necessary.

Check if you’re eligible for home insurance discounts. Over the past year, you may have made improvements to your home to safeguard your structure and belongings against major perils. You may have installed smoke detectors, added typhoon shutters, or otherwise weatherproofed and secured your home. Not only do these actions protect your home and your family, but they also may make you eligible for a discount. Create a list of improvements to refer to when you visit or call your insurance broker or agent.

Update your car insurance. If a young driver moves away from home or no longer needs to drive the family car, an annual review can help remind you to adjust your coverage to your current number of drivers. You can also check for car insurance discounts if you have made any changes in the past year, such as installing a car alarm.

Adjust your deductible. If you have saved up enough to cover a higher deductible for your car and home insurance, you can adjust your deductible upward to save money on premiums. But before you do this, it’s a good idea to move those funds away from the financial accounts that you use frequently, to a standalone emergency savings account. If it’s easy for you to transfer funds from your savings and into your checking account, you may be more tempted to spend your deductible before you need it.

Discuss your situation with your broker or agent. Your broker or agent can talk to you about the changes you have made over the past year, and help you find discounts that you were unaware of. He or she can also help you re-shop for insurance, and find policies that are better suited to your needs and budget.

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

Figuring out the home you can afford

How much can you afford to pay each month for your future home?

This question helps you make a sustainable decision about how much to borrow as you start your housing search. Your mortgage may be with you for as long as thirty years, and protecting your credit means making those payments on time, consistently, throughout the life of the loan. In addition to your mortgage payments, you will also have maintenance and utilities costs. Factoring those costs in early can protect you from financial problems down the road.

To start answering this question, let’s take a look at your budget.

Update your budget.  You need a good, realistic starting point as you study your own financial behavior. Costs change, and financial habits change too. If you haven’t updated your budget in a while, now is the time.

Pay close attention to how your family’s spending habits have changed, or are expected to change in the near future. Are you spending more of your discretionary income than you realized? Sort your recent spending into different categories, so that you can determine which spending areas are growing, and which need to be cut down.

Take a look at your other goals. Which financial goals, besides home ownership, are you currently prioritizing? Do you still have room for them in your budget? Does home ownership come first at this point in your life? When you are clear on your choices, you can move forward on your home purchase with greater confidence.

Add or subtract goals from your family budget as you and your spouse see fit. What you have remaining in your budget, added to your current rental/housing costs, is what is available for your future home.

Plan for maintenance and utilities costs. Do you think that your power and water usage will drastically change once you move into your home? Will you be moving from a smaller housing situation to a larger one?  Talk to family members and friends who are homeowners, and ask them about their usage and costs for utilities and maintenance. Try to use the numbers from people who have a similar family size and habits, and figure them into your budget.

Remember property taxes and insurance. Monthly mortgage payments include not only the principal and the interest of the mortgage, but also property taxes and homeowner’s insurance. These costs will depend on the value of the home. It’s something to keep in mind as you look at the monthly funds available in your budget.

Adjusting your spending habits. If you know that you want more room in your budget for your future home, it’s time to review your spending habits. Look back at those categories, and start making small cuts to different categories in your discretionary spending. Target areas of your spending, and think about alternatives to those costs. Take some time to become acclimated to a new spending level, so that you don’t fall back on old habits when the mortgage payments come due.

Many factors determine the amount you can ultimately borrow: the quality of your credit, the amount of debt you have, your savings, and your gross income. But a firm understanding of your own household budget will provide you with an important starting point in talking to lenders about your home-buying dreams.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com.