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Interest Rate vs. APR: Know the Difference

by Home Action News

Interest Rate vs. APR: Know the Difference

 

In real estate, you will see these two terms come into play when it pertains to mortgages. Mortgages can have many different aspects to them, whether it be how they are set up or what the different fees are.

What Is the Interest Rate?

Your mortgage interest rate, according to consumerfinance.gov, is the cost you are paying each year to borrow money for your mortgage. In other words, this is the fee that you pay throughout your mortgage to have the financial institution loan you money.

What Is APR?

The APR is the annual percentage rate. It is like the interest rate but includes more fees. Because of this, you will most likely notice that the APR is typically higher than the interest rate. The additional fees that are included in the annual percentage rate are not only the interest rate but the points and additional fees that may be associated with the mortgage.

What Are the Points?

Points are essentially a trade-off or an exchange between the lender and the individual taking the loan. If you pay points, you will be paying additional upfront costs at closing when you buy your home, but over the long run you will be paying a decreased interest rate for paying the points. This is advantageous to those who know they are going to have the loan for a long time and would like to pay reduced interest.

Should I Be More Concerned With the Interest Rate or the APR?

Both should be considered when looking at a mortgage. When you are looking at the interest rate, you are essentially looking at what the monthly payment will be for you, so the lower the interest rate, the lower the monthly payment will be. However, the APR takes into account what the total cost of the overall loan will be over its lifetime. It is important to weigh both, as the APR and interest rate can both give you information that you need to know.

When to Be Concerned With APR?

The annual percentage rate should be taken into consideration the most when you are planning to see a loan out to its full life or just before its full life. This is assuming you are doing a typical 30-year mortgage loan. This is because if you are paying points to reduce your interest rate, you will not see the true benefit until later in the life of the mortgage. Utilizing points can be in your favor as well in both reducing interest for monthly payments and reducing the overall cost of your loan over time.

To discuss current interest rates and APRs in your area and how to go about assessing which mortgage is correct for you, please contact me directly.

10 Ways to Save on Utility Bills During the Summer Months

by Home Action News

10 Ways to Save on Utility Bills During the Summer Months

 

The summer heat is often the culprit behind jumps in electricity costs during the summer months, so do what you can now to conserve energy and avoid additional costs as the weather heats up. If you're looking to cut back on your spending throughout the summer, your utility bills are great places to start when making changes to your everyday life. 

Here are 10 ways to save on utility bills during the summer months, adopt an environmentally friendly lifestyle and avoid overspending on household expenses this year. 

  1. Switch Off the Lights When You Leave a Room – Turning off the lights when walking out of a room is a great way to curb your energy consumption in the summer.  
  2. Use Rain as a Free Water Source – Collecting rainwater in buckets during a storm is an active way to cut down on your water usage while taking care of your yard this season.
  3. Close Your Blinds and Curtains During the Day – Keeping the heat out on bright, sunny days is an effective way to control your energy expenses this summer. 
  4. Keep Doors and Vents Shut – Closing off parts of your house where you don't spend much time is a convenient way to limit cooling costs while at home during the summer. 
  5. Spend Your Free Time Outside – Going out every day to embrace the warm weather and enjoy the great outdoors is a smart way to use less energy in the summertime. 
  6. Find Creative Ways to Cool Down – Drinking ice-cold beverages and taking cool showers are small ways to save money on utilities while making the most of the summer. 
  7. Put Wet Clothes Out on a Clothesline – Using the hot summer sun to dry your clothes after washing them is an effortless way to reduce utility bills and spend time outside. 
  8. Monitor the Temperature on Your Thermostat – Setting a default number for your air conditioning is a simple way to keep your energy bills from rising when it's hot outside. 
  9. Opt for Fans Instead of Air Conditioning – Circulating air throughout your home with fans is an economical way to cool down your living space while using less energy.
  10. Unplug Electronics That Aren't Being Used – Pulling out their cords when you're not using your electronics and chargers is an easy way to limit your energy usage this summer. 

These 10 ways to save on utility bills during the summer months will keep you from breaking the bank when the weather gets warmer this year. Whether you're focused on using less water, running your air conditioning on a lower setting or another method, it's possible to cut back on power usage and save money in the process. I would be happy to answer any questions you may have about how to circumvent high utility bills in the summertime, so please don't hesitate to reach out to me today.

 

4 Reasons to Consider Investing in Real Estate

by Home Action News

4 Reasons to Consider Investing in Real Estate

 

Many serious investors are looking for ways to diversify their investments. Once you have maxed out your IRA or 401(k), you might look into investment strategies that do not involve more stocks and bonds. One popular way to diversify an investment portfolio is to purchase real estate. Investment properties can help increase your net worth over the long term, but they also have the added benefit of increasing your monthly cash flow.

Parents may also be considering buying a home for their young adult children, who can pay rent to their parents, perhaps splitting it with a roommate. Read on to learn about some of the reasons that investing in real estate is a great idea.

Reason #1: Real estate is an appreciating investment

While some markets can become stagnant or temporarily decrease in value, the long-term real estate market trend usually follows an upward trajectory. Over time, your property is likely to increase in value, allowing you to make more money if or when you eventually sell the property. As with most investments, there are no guarantees; but real estate can be an important part of a long-term investing plan.

Reason #2: Real estate can boost your monthly cash flow

A real estate investment can increase your monthly cash flow in the form of rent. This is a major selling point for many investors, since they may not reap the benefits of traditional investments until much later in life. 

That being said, do not underestimate the cost of owning and managing a property. In addition to your mortgage payment, you will be responsible for property taxes as well as ongoing maintenance on the property. Some years, this might be a very small amount, but you should make sure that you are prepared for inevitable, pricey repairs as well. A good rule of thumb is to save between 10 and 20 percent of your rental income for future maintenance issues. In the long term, you will want to ensure that the rent payments you collect are enough for you to cover all of these costs and have a little extra left over as profit. 

Reason #3: The longer you own an investment property, the more profitable it becomes

Every investor's goal is to increase his or her monthly cash flow and, in the long term, increase his or her net worth. Achieving this through investment properties becomes easier the longer you own a property. This is because rent prices and home values typically rise over the long term, but a fixed-rate mortgage remains the same.

Reason #4: Investing in real estate can provide immediate gratification

Some people prefer to own something concrete rather than relying on the volatility of the stock market. As long as you have a well-planned strategy for how you will pay the costs associated with your investment property, real estate is a relatively safe and stable investment. 

If you have extra money that you would like to invest outside of your more traditional investments, and have carefully considered your long-term investment strategies and the risks involved, give us a call about properties you can buy to improve both your long-term investing prospects and immediate cash flow.

 
 

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Photo of Frank Taglienti Real Estate
Frank Taglienti
Berkshire Hathaway PenFed REALTORS®
565 Benfield Road, Suite 100
Severna Park MD 21146
410-440-0824

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