You Should Put a Large Down Payment on Your Home – Here’s Why

Real estate trends year-over-year get all sorts of contradictory analysis, which leaves new homebuyers wondering how they’ll ever make a safe, sound purchase. One thing is certain: The larger the down payment you can put down on your home-to-be, the better.

Mortgage RatesSmall House with Stacks of Hundred Dollar Bills on White.

Going up on a down payment enables you to shrink your mortgage rates, a big cause of the financial woes of current owners. Figures from Realtor.com show mortgage rates rising about 100 basis points through last year, and they are expected to continue to rise in 2014, according to The Huffington Post. Same goes with home prices in general. Nineteen percent of us are underwater on those payments, according to CNN Money. That’s down 7 percent from 12 months ago.

By putting more down, you’re lowering your monthly mortgage payment. Lenders tend to drop interest rates when you put more down, since you’re bettering your ability to make your monthly payment. You can bet your new front porch this means people are putting more down now to offset scary mortgages later, fostering long-term financial security despite those looming loan hikes. Visit Bankrate.com for an interest-only mortgage calculator that will give you an amortization schedule for an interest-only mortgage.

In Case of Emergency

A solid down payment also behaves as its own insurance should a future financial crisis hit. By lowering your monthly payment, your mortgage won’t demand more than you can swing each month. If a crisis pops up and you need an emergency loan despite a doable payment, you may be able to borrow against the equity in your home, which may be available thanks to your sizable down payment.

If a crisis or accident has yielded a settlement in your favor, putting the settlement toward your home protects you in much the same way, especially if the event threatens your interest or insurance rates. If you’ve been awarded a structured settlement, consider selling your future payments for a lump sum of cash now and applying the money to your down payment. Contact J.G. Wentworth for more information about selling your future payments.

Resale Value

Homeowners with lower mortgages incur less risk when selling in a down market, which would be brutal if you end up looking to sell during its next dip. The simple fact is when houses cost less, high mortgages—which Realtor.com sees coming—can’t match what you get for your old place. If foreclosure is the end result, a myriad of tax consequences could await, especially if you file for a Cancellation of Debt. Visit IRS.gov to learn more about home foreclosure and debt cancellation. The last thing you want on your tax record is default. So spend now, while you have it, and secure the future of your new home.

Dan Pinter
Accountant, New Hubby, Horticulturist

What Do I Need to Start Homebrewing?

Since we started last year, home brewing has become one of our favorite hobbies to do as a couple. Not only have we made some delicious brews, we’ve also connected with friends and found a way to save money and have a good time.

One question that I’ve been asked is whether home brewing can save money or if it’s an expensive hobby. As with everything, it depends on the person, but I wanted to go over some of the basics, so you can decided if this is a hobby, you’d like to try out.whisky pumpkin ale

What Do I Need to Brew Beer?

At its most basic, the ingredients you need to brew a beer (gluten free or otherwise) are:

  • Malted Grain/Adjuncts: With traditional beers, malted barley, wheat, and rye are commonly used, which are not options when brewing gluten-free.  For GF brewers options like sorghum syrup, pure maple syrup, buckwheat,  molasses, honey, and millet can be used when making a batch.
  • Hops: Hops add both flavor and stability to your brews, providing a measure of bitterness and aroma. There are dozens of varieties available, give plenty of room to craft a brew to your personal taste.
  • Water: You can use your tap water when home brewing, provided you like it. Beer takes on the characteristics of its ingredients, so if your local water has a nasty after taste, then I wouldn’t use it.
  • Yeast: The last main ingredient when it comes to brewing is yeast. You need it to take the wort that you have prepare and transform it into a delicious alcoholic beverage.  Yeast ‘eats’ the sugar in the mixture you prepared (called wort) and breaks it down into carbon dioxide and alcohol. You can purchase either dry yeast or liquid, but if you’re brewing gluten-free, then you’d want to go with dry yeast. Liquid yeasts are typically prepped with mixtures that contain some barely.

As you can see, making beer is essentially boiling  your malt, hops, and water to create a  wonderfully smelling wort. You then add yeast and let it do its thing for about two weeks (if you’re brewing ale). Once that is complete, you can bottle it up and let it carbonate for 7-10 days or you can keg it and serve it immediately.

What Equipment Do I Need to Brew Beer?

The short answer is comes down to how much you want to brew at a time and if you want to do all grain or extract. There are differences between the two, but a big difference for a new home brewer is that extract brewing 5 gallons is much easier and requires less equipment than going all grain. The extract saves you a step at the cost of not having as much control over brewing. If you’re new, though, that may not be a huge deal. You can still brew some wonderful beers and you don’t need to purchase as much equipment compared to all grain brewing.

Typically a 5 gallon homebrewing start kit will include:

  • 6.5 gallon heavy duty fermenter with drilled and gasketed lid.
  • Bottling spigot
  • 3 feet of bottling tubing
  • Three piece fermentation (air) lock
  • #2 drilled stopper
  • Deluxe double lever bottle capper
  • Bottle cleaning brush
  • Automatic bottle filler.
  • Triple scale hydrometer

Prices will vary, but you’re generally looking at $70-$80. If you get a recipe box with the kit, it’ll usually bring the price to about $90-$100. Brewing 5 gallons will give you around 50 bottles of beer.

Is Homebrewing Cost Effective?

That depends on what you’re brewing. When we started brewing, I tracked a few of the recipe kits that we used – both the 1 gallon batches and the 5 gallon batches and here is what we got:

Receipe Kit Cost Bottles Brewed (12oz) Cost Per Bottle/6pk
Honey IPA $15 9 $1.67/$10.02
Dry Stout $34.50 50 $0.69/$4.14
American Amber Ale $33.50 50 $0.67/$4.02
Chocolate Maple Porter $15 10 $1.50/$9.00

You can see how cost effective 5 gallon brewing is compared to 1 gallon. That’s because some ingredients like yeast and hops have to be bought as a whole packet. you can not go to a typical brew shop and ask for 1/3 oz of hops, you have to buy it by the oz. Now you can buy some hops and divide it among several small brews (provided they are stored properly) which can bring the 1 gallon costs down further. Still, if you’re into craft beers, home brewing some of your favorites can be a rewarding hobby and money saver.

Thoughts on Home Brewing

How many of you are home brewers? How many of you are thinking of trying it out soon?

Photo Credit: Ryan Hyde

Save On Renter’s Insurance

renters insurance apartmentMost people are well aware of the fact that if they are renting a home, apartment or condo then arenter’s insurance policy will protect your belongings against accidents, theft, fire, vandalism, etc. Some policies will even provide coverage against accidents where you, or a family member, is found liable.

Fortunately, renter’s insurance is rather inexpensive when compared to other types of insurance. However that doesn’t mean that there aren’t ways you can save money when it comes to your policy. Even if you could save fifteen dollars a month on your policy wouldn’t you rather spend that with your family instead of paying it to your insurance company? And who knows, you could even find that you are able to save more each month.

Pay Your Renter Premium Up Front

If you are able to pay your yearly premiums in one lump sum you should be able to get a discounted rate because it lets your insurance company know that you are a long term customer and are committed to staying with them. Usually, this loyalty is rewarded with savings.

If you can’t pay everything up front ask your insurance agent if there are price breaks for quarterly payments instead of month to month premiums.

Evaluate How Much Insurance You Need

We have a tendency to over insure when it comes to our property because either we believe that our stuff is worth more than it really is or we just make a rough estimate on the high side. Do a complete inventory of your possessions and work from there. Odds are your “estimate” will be much higher than the number you come up with after really looking at the value of your belongings.

Lower Your Risk to Lower Your Premiums

Deadbolt locks, fire alarms, gated communities, fire extinguishers and burglar alarms all help lower your risk of suffering a loss so they help keep premiums low. Make sure to check with your insurance agency to see what other things can help lower your risk in their eyes.

Raise Your Renter’s Insurance Deductible

If you are really looking to cut back on insurance costs the easiest way to do so is to go with a higher deductible. Unfortunately this means you will wind up having to pay more out of pocket in the event you have to file a claim but if it is short term savings you are looking for this is the best route.

Choose an Actual Cash Value Policy

There are two types of policies, actual cash value that pays you what your belongings are worth at the time of the claim, and replacement cost, that pays you the cost to replace the items regardless of their value. Obviously the actual cash value will pay far less as things depreciate over time but again, if you are looking for something to lower your premiums immediately this is one way to go.

Jeff Orloff writes to the Renter’s Insurance blog.

Photo Credit: williamcho

Essential Emergency Supplies

While having an emergency fund is certainly important, it doesn’t really mean much if your family lack the essential supplies to ride out during a storm recovery. I wanted to send out a reminder to grab supplies BEFORE a storm or emergencies happens.

Essential Emergency Supplies

According to sites like FEMA and the Red Cross, there some vital supplies that you need to have to be prepared for a storm.emergency supplies

  • Water—one gallon per person, per day (3 ­day supply for evacuation, 2­ week supply for home)
  • Food— nonperishable, easy ­to­ prepare items (3­ day supply for evacuation, 2 ­week supply for home)
  • Flashlight
  • Battery ­powered or hand­ crank radio (NOAA Weather Radio, if possible)
  • Extra batteries
  • First aid kit
  • Medications (7­day supply) and medical items
  • Multi­purpose tool
  • Sanitation and personal hygiene items
  • Copies of personal documents (medication list and pertinent medical information, proof of address, deed/lease to home, passports, birth certificates, insurance policies)
  • Cell phone with chargers
  • Family and emergency contact information
  • Extra cash
  • Emergency blanket
  • Map(s) of the area

If you don’t have the supplies and a storm or another emergency is coming, please consider evacuating temporarily. You really don’t want to be stuck without the essentials, especially if you have kids.

Thoughts on Preparing for an Emergency

I’d love to hear from you and how prepared you are for emergencies. What do you have in your supply kit? What do you need to grab to complete your bag?