Jack's New Hampshire Real Estate Blog

Monday Mail Bag – February 8, 2016 – Real Estate, Appraisal & Financial Q & A
February 8th, 2016 1:26 PM

Here are a FEW of the questions I fielded this week:


Homeowner (who is also a broker): We are thinking of adding an enclosed porch, but not sure if we will get a return on our investment. Do you think will get our money back?

Jack: You actually have two questions there. Should you build the porch? And will you get your money back (in increased value or resale)? With regards to the latter, it is quite possible you won't get a dollar for dollar return. As a general rule, when you cure a problem (I.e. Fix something that's broke) you often get more than a dollar for dollar return. When you add features that are beyond what the "typical house" has, it generally costs more than what you will get in increased value.   If you are adding a feature that is expected in the market that nearly all competing houses have, you probably will get full value back. With regards to the enclosed porch, it may only increase the value a 1/3 to 2/3 of the cost of house. So, in answering your second question, the answer is NO (you will NOT get all your $$ back). As to whether or not you will do it, it is a function of how long and how often you will use and home much enjoyment it brings you. As an example, if it costs $18,000 and you only get a $9,000 return, but you enjoy the porch for the next 10 years, than I would say "Who cares" if you don't get your money back in resale, since you have gotten your value back in the way of enjoyment.


Homeowner: I have a 4.375 interest rate. Does it make sense to refinance?

Jack: first of all, I am not a mortgage expert, but I can give you this general advice. Whether or not you refi is a function of your new interest rate, the new loan costs and how long you expect to own the property. This is how you calculate savings and break even. Let's say you are going to save 1/2 percent on your rate and you have a $200,000 mortgage. That means you will save $1,000 (1/2 of 1 percent) on annual interest. If the cost of the loan is $2,000, it would take you 2 years to break even. If you plan on owning the property for more than 2 years it probably makes sense. Many lenders with also do a no closing costs loan in which they will incur the cost themselves and build those costs into the new interest rate, which will be higher than if you paid the cost. So, if you are not sure how long you will own your house, you may pay no closing costs and just lower the rate to just 4 percent (as an example). Nothing to scoff at since even lowering 0.375 percent will save you $750 per year in interest or $63 per month. Not bad for "free money". Lastly, I BEG you to use a LOCAL lender. Don't get tricked into thinking these national online lenders are better.


Posted by Jack Lavoie on February 8th, 2016 1:26 PMPost a Comment

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