One Per Cent Isn't a Big Deal, Is It?

We have a young client that's looking to buy his first house. And as we all know, interest rates have been historically low but are starting to rise again. When he first started looking, rates were at 3.5%. Now they're at 4.5%. One per cent doesn't seem like much, does it? Let's see what difference it makes.

Assuming The Numbers

Let's assume for our buyer that he purchases a house for $150,000. We'll ignore taxes and insurance because these will be constant in this example. We just want to see how the interest rate affects the numbers. Our buyer is young and is looking at a 3-BR, 2-BA house. He shouldn't need to move for quite a while, even after getting married and having kids. But let's assume he stays in it for 7 years which, according to the National Association of Realtors, is the average time between moves.

Crunch Those Numbers

Looking at the amortization chart, a $150,000 loan at 3.5% interest amortized over 30 years will be $673.50 per month. So let's say he's really into paying down this loan and pays $674/month. On the other hand, a loan of $150,000 at 4.5% interest amortized over those same 30 years would be $760.50/month. Not nearly as enthused now, he nevertheless pays $761/month. He's paying an extra $87/month with the higher interest and not paying the loan down any faster.

Visualize the Numbers

If you, like me, need some tables to help organize your thoughts, here's a summary:

Interest Rate	Monthly Payment	Total After 7 Years	Total After 30 Years
3.5%	$674	$56,616	$242,640
4.5%	$761	$63,924	$273,960

It's Not Really the $87 That Matters

That's not even a car payment. It's just a few meals eating out. Maybe you don't think it's a big idea. But multiply it out over the 84 months before he theoretically sells the house and it's $7,308. If he should decide to keep the house the whole 30 years, he's paying $31,320 extra just in interest.

Looking to the Future

What do you think he could have done with an extra $87/month? If he had invested it at 4.5% instead of paying the bank that extra money, he would have $8,603 in his account after 7 years. And if he kept doing it for the full 30 years of the loan he would have $66,314. And let me tell you, you can find plenty of investments that pay 4.5%.

Wrapping It Up

So to recap, that extra 1% in interest will cost our buyer an extra $87/month and an extra $31,000 over the life of the loan. If he had stopped to run the numbers, he could have not only saved himself the extra $31,000 in interest to the bank, he could have earned an extra $66,000 in an investment. That's a great start for retirement.

Tools To Use

Want to try calculating the principal and interest payments for a given loan? Try this calculator from BankRate. And when you calculate the principal and interest, don't forget that this calculator just shows the principal and interest. You still have to divide your annual house insurance and taxes by 12 and add that to the total to get an idea of what a payment would be.

You can calculate how much you can save with a given return by using this calculator from Dave Ramsey. I used a starting balance of $0, a 4.5% return and $87/month for my example here.

HUD Annual Mortgage Insurance Premiums On the Rise

Annual Mortgage Insurance Premiums Going Up

HUD has announced that in an effort to “strengthen the Mutual Mortgage Insurance Fund”, as of April 1, 2013, the Annual Mortgage Insurance Premiums will increase. Current Standard (3.5% down) MIP = 125 bps. New = 135 bps.

Also, under current FHA allowances, anyone who puts 22%+ down on a 15 year term is exempt from paying annual MIP. This exemption will now be removed, effective April 1, 2013. This new MIP amount is 45 bps.

Additionally, effective June 3, 2013, the period of time that the annual MIP will be assessed will increase dramatically: Previously, all loan terms were required to pay annual MI for a minimum 5 years or was cancelled upon hitting 78% LTV. Effective June 3, all FHA loan terms with less than 10% down payment (>90% LTV) are required to pay the annual MIP throughout the life of the loan or the first 30 years, whichever comes first. All terms with more than 10% down (<90% LTV) now must pay annual MI for the first 11 years of the term or the end of the term, whichever comes first.

Finally, HUD has also notified all lenders and potentially impacted institutions (as of 3/11/2013) about the effects of the sequester. Although no jobs have been furloughed as of this moment (due to the 30 day notice requirement to workers), HUD has stated that, “furloughs and reductions in systems maintenance and other areas may result in delays in processing mortgage insurance applications, origination, and servicing inquiries”.

It’s uncertain exactly how long the delays will be and when they’ll take effect. So, using your best judgment, be cautious when establishing closing dates on your FHA or HUD contracts and check with your lender.

The Two Seasons in Nebraska

If you've lived around here long enough, you realize there are two seasons in Nebraska: winter and road construction. And around here, road construction is just around the corner. We'll be seeing a lot of orange barrels and traffic tie-ups real soon, and it could last into 2014. Here are some of the projects slated to go on in Bellevue, Papillion, La Vista and Sarpy County.

Bellevue

• Turn lanes will be installed from Cornhusker Road onto both directions of Kennedy Freeway.
• Sarpy Avenue is getting new asphalt overlays from Chandler Street to Harrison Street.
• Childs Road is also getting new asphalt overlays from Fort Crook Road to Bellevue Boulevard North.
• New asphalt overlays are coming for Reed Drive and 32nd Avenue west of Calhoun Street.
• Harrison Street from 48th Street to Sarpy Avenue is getting new asphalt.
• Capehart Road from 25th Street to the Kennedy Freeway is getting new asphalt.
• 21st Street from Cornhusker Road to Pratt Avenue is also getting new asphalt.
• 36th Street from Capehart Road to Bline Avenue is also getting new asphalt.
• Olde Towne Bellevue is getting some sidewalks, curb repair and curb ramps.
• The Capehart Road Bridge is getting replaced.
• Bike lanes are going to be installed and painted along Fort Crook Road.

Whatever will we do with all this new asphalt? Also, the proposal for expanding 36th Street to four lanes from Highway 370 to Sheridan Road is due to be completed.

Papillion

• Many street repairs and ADA sidewalk ramp improvements will go in around the city.
• Reconstruction of Washington Street from Cedardale Road to Capehart Road.
• Midlands Creek Trail from Highway 370 to First Street.
• A trail project to connect Savanna Shores Trail to Walnut Creek Recreation Area.
• Traffic calming measures (?) along 6th Street from 72nd Street to 84th Street.

La Vista

• Short term improvements to the intersection of 132nd Street and Giles Road.
• Railroad crossing quiet zone improvements at 130th Street and Giles Road, 126th Street south of Giles Road and 132nd Street south of Centech Road.
• Reconstruction of the Lillian Avenue and James Avenue intersection.
• Replacing damaged storm sewer inlet tops on 72nd Street, 96th Street, Harrison Street and Giles Road.
• A new traffic signal at the intersection of 120th Street and Giles Road.
• New storm inlets on both sides of Giles Road at 103rd Street and Giles Road.
• Traffic signal coordination on Giles Road from Interstate 80 to 108th Street.
• Replace concrete panels along Lillian Avenue from James Avenue to Terry Drive.
• Replace concrete panels along Park View Boulevard from 87th Street to Thornapple Lane, along 88th and 89th Streets from Park View Boulevard to Granville Parkway.
• A new asphalt overlay on Giles Road from Harrison Street to Interstate 80.

Sarpy County

• 84th Street will be constructed from Cedardale Road to Capehart Road.
• Survey, design and bridge construction work at 234th Street and Capehart Road and 234th Street and Fairview Road.
• Harrison Street from 225th Street to 204th Street will be asphalted.
• 225th Street from Harrison Street to Centennial Road will be asphalted.
• Centennial Road from 225th Street to 222nd Street will be asphalted.
• 222nd Street from Centennial Road to Lincoln Road will be asphalted.
• Repair and surfacing work will be done on the Fort Crook Road bridge over Papio Creek and railroad.
• Capehart Road from 48th Street to 81st Street will be constructed.
• 114th Street from Highway 370 to half a mile south of Giles Road will be constructed.

Like I said, a lot of work going on around town. Keep the speed down and stay calm through the delays. It'll be worth it.

The Market Is Heating Up

Don't think for a second that you're going to get a steal of a deal when trying to buy in the Omaha market. It's heating up out there. Just this week we have lost two offers in multiple offer situations and another offer turned down. Buying low and selling high sounds good on TV but it's not working around here.
And it's working the same way nationwide, too. This article shows that most markets are picking up.

Why is all this happening? There are several factors in play, most notably:

• The number of foreclosures and short sales are shrinking.
• Large investor groups are scooping up properties because it's a great time to buy.
• Home builders are building fewer houses, scared of the so-called "fiscal cliff."
• In the Omaha market particularly, the number of houses for sale has declined while the number of houses sold has increased. And they're selling in less time.

When the market tightens up like this, houses don't stay on the market as long and they go for higher amounts. Compared to this last January, houses have gone from being on the market for 75 days to 66 days last month. And they went from selling for 96% of the asking price to 98%. Although I don't think it's a seller's market here yet, I think sellers are tired of being kicked around. Things are looking up in their favor.

Christmas Safety Tips

Don't you just love all the Christmas lights this time of year? We keep them up around our house and already have the tree decorated and shining bright through the front window. Lots of people do, and this sometimes leads to house fires and some pretty tough times for everyone.

Here are some ideas for keeping that tree beautiful and smoke-free:

• Don't use any string of lights with worn, frayed or broken cords or loose bulb connections.
• Always unplug Christmas tree lights before leaving home or going to sleep.
• Don't use lit candles to decorate a tree, and place them well away from tree branches.
• Keep live trees as moist as possible by giving them plenty of water daily. Don't purchase a tree that is dry or dropping needles.
• Choose a sturdy tree stand designed not to tip over.
• Use only artificial trees labeled as fire-retardant.
• Make sure the tree is at least three feet away from any heat source and try to position it near an outlet so that cords aren't running long distances.
• Don't place the tree where it may block exits.
• Get rid of the tree when it begins dropping needles. Dried-out trees are highly flammable and should not be left in a house or garage, or placed against the house.

In addition to the tree, here are some other tips to keep your Christmas a joyous time:

• Unattended cooking is the leading cause of home fires in the U.S. Keep an eye on the stove!
• Provide plenty of large, deep ashtrays for guests who smoke and check them frequently. Or ask them to smoke outside.
• After a party, always check on, between and under upholstery and cushions and inside trashcans for cigarette butts that may be smoldering.
• Keep matches and lighters up high, out of sight and reach of children. When smokers visit your home, ask that they keep smoking materials with them.

And how can we forget the fireplace? If you have a wood-burning fireplace, keep this in mind:

• Use care with "fire salts," which produce colored flames when thrown on wood fires. They contain heavy metals that can cause intense gastrointestinal irritation and vomiting if eaten. Keep them away from children.
• Don't burn wrapping papers in the fireplace. That stuff ignites quickly and burns intensely.
• Remove all greens, boughs, papers, and other decorations from fireplace area before lighting a fire. Check to see that the flue is open.

Christmas is a wonderful time of year. Don't ruin it for you and your family with a fire or tragedy. Leave a comment if you have any other suggestions or tips to make Christmas a safe time of year.

Christmas in Omaha 2012

We all love Christmas, with the lights, hot chocolate, beautiful music and the wonderful memories of Chrstmases gone past. I know we all get a little frustrated with the din and all the headaches of preparing, so it helps to relax with some activities and maybe we can start feeling like we did when we were kids. Here are some Christmas activity ideas for you in the Omaha metro:

Where	When	Activity
Henry Doorly Zoo	Dec. 8, 15 and 24 at 10:15 a.m.	Christmas characters diving in the Scott Aquarium. Regular zoo admission.
Henry Doorly Zoo	Dec. 20th through Dec. 23rd from 6 p.m. to 8 p.m.	Supper with Santa. Regular zoo admission plus $15 for zoo members or $20 for non-members. Pre-registration is required.
Downtown	Each night at dark through Jan. 6th	The downtown is lit up with Christmas lights. Free!
Con Agra campus, downtown	Sun - Thurs from 1 p.m. - 10 p.m. Fri - Sat 1 p.m. - midnight Christmas Eve and New Year's Eve, 1 p.m - 5 p.m. Closed Christmas Day and New Year's Day	Ice skating in the rink. $5 admission includes skate rental. Canned donations are also encouraged.
Lauritzen Gardens	1 p.m. - 5 p.m., Dec. 1st - Dec. 31st.	Poinsettia show with a 20-foot poinsettia tree. Admission is $6 for adults and $3 for kids six to twelve. Garden members get in free.
Stuhr Museum	Dec. 7th and 8th, 6 p.m. - 9 p.m.; Dec. 9th from 2 p.m. - 5 p.m.	Lamp lit tour of Railroad Town, cooking, crafts and gorgeous decorations through Railroad Town, live music and the sights, sounds and smells...and the spirit of Christmas. Normal museum admission.
Stuhr Museum	Dec. 16th, 12 p.m - 4 p.m.	Fantasy of Trees exhibit reception. See over 100 lavishly decorated trees. Food and drink provided; normal museum charge.

Do you have any activities you'd like to let others know about? Leave a comment with the information!

Ten Home Safety Tips

10 Tips to Safeguard Your Home

We all know the basics of home security – strong locks, keep the bushes trimmed out front, have neighbors watch over the place, and so on. HouseLogic put together a list of 10 items that burglars don’t want homeowners to know.

Things To Do and Not To Do

1. Alarm your second floor and keep ladders locked up.   Don’t give thieves a chance to get into the upper floor because it’s less likely it will have an alarm.
2. Break down the boxes your new toys came in.   Throwing out the boxes so they can be easily seen is just advertising to the wrong people. Break down the boxes and put them in the recycle bins, or put them in trash bags.
3. Trim up around the house.   Untrimmed bushes can give thieves a place to work without being seen. Keep the bushes trimmed, or plant something with thorns.
4. Make the doors more difficult.   Use steel or reinforced doors and use deadbolts on hardened frames. Make the thief work for it or find a different way in – preferably one the neighbors can see.
5. Reflections.   Don’t position mirrors so the alarm panel can be seen from the door or the outside.
6. Mow the lawn and pick up.   Not keeping up with the grass, letting the newspapers pile up and so forth are just advertising that no one is home. Ask a neighbor to pick up the newspaper and hold the mail with the post office. Make sure someone is mowing the lawn so it looks like someone is home.
7. Don’t keep valuables in something that can be easily carried.   Invest in a wall safe or find somewhere else to put valuables.
8. Don’t talk about vacations until you’re back.   Don’t alert your social networks know you’ll be gone. That gives thieves a leisurely time to ransack your house.
9. Don’t broadcast your whereabouts.   Using geotagging in social applications just lets people know you’re not home and not likely to catch them.
10. Don’t invite trouble.   Inviting people over to see something you’re selling gives would-be thieves a chance to see how your house is set up – alarm, easy access, etc.

More Information

For more information on these tips, you can find the original article here.