The True Home Cost Page
  Homeowner Planning Help

from the
Consumer Freedom Alliance

Welcome to the Internet's biggest homeowner tipsheet!  We put all the most powerful homeowning tips on one page to help consumers maximize their benefits and minimize the costs of homeowning.  Consumers should use this site because many if not most real estate sites are slanted in favor of real estate agents.  You want unbiased answers to the most common questions asked by homeowners:

  1. Homeowning Costs.  What are the true costs of homeowning?
        • Homeowner Expense Calculator
  2. Money-Saving Tips.  How can you lower the costs faced by homeowners?
        • Mortgage Interest Deduction Calculator
        • How To Save Hundreds On Home Insurance
  3. Buy, Rent or Flip?  Should I buy, rent or "flip" my home for profit?
        • Buy-Or-Rent Calculator
        • Directory: Understanding Housing Values and Trends
  4. Home Valuation.  How do I estimate the market value of any home?
  5. Home Maintenance.  How can I protect its value against decay or disasters?
  6. Home Additions.  Which home improvements will increase my home's value?
  7. Best Places.  Which areas have the best quality of life?
  8. Mortgages.  How do I comparison-shop for mortgages?
        • Directory: Best Mortgage Sites
        • Top Ten Homebuyer Traps
        • Mortgage Shopping Calculator
  9. Refinancing.  How and when do I refinance my mortgage?
        • Directory: Understanding Housing Values and Trends (repeat)
        • Mortgage Refinancing Calculator
  10. Property Taxes.  How can I lower my property taxes?
  11. Selling Your Home.  How do I sell my home for maximum gain?
        • How To Find A Good Real Estate Agent

1. The True Costs Of Homeowning

Buying a home you can barely afford can be a big mistake:  nearly 1.3 million Americans had their homes foreclosed in 2006, at an average loss of $75,000.  On the other hand, if you rent long-term you're missing the opportunity to build a nest egg out of "home equity" -- which is defined as the worth of your home minus what you still owe on your home loan.  Here are the major homeowning costs:

  • Mortgage payments include principal and interest.  In the early going, interest is often over 90% of your monthly mortgage payment.  When borrowers make a downpayment of less than 20% of the home's value, they must also pay for private mortgage insurance (you can stop it when your home equity rises above 20%.)  Its yearly cost is usually around 0.5% of the property's value.  Many Americans are unnecessarily paying for PMI (they may not even remember having ever got it!)  Here's two explanatory pages: PMI Tips, How To Remove PMI.

  • Mortgage closing costs, $1000 - $3000.  These include:

    1. Origination fee.  A lender may charge 1% of the loan principal as their fee for loaning you the money.
    2. Credit Report.  Usually $50-$100
    3. Home Value Appraisal.  Usually $200-400
    4. Recording, and Notary Fees.  Usually $50-$100
    5. Lender's Title Insurance (ATA).  Usually $200-$400
    6. Escrow Fee.  Usually $200-$800
    7. Document Preparation Fee.  Usually $50-$100
    8. Tax Service.  Usually $50-$100
    9. Property Inspection Fee(s) (Termite, Roof, etc.).  Usually $150-$250
    10. Homeowners Assoc. Transfer Fees.  Usually $0-$100
    11. Attorney's Fees.  Usually $0-$500
    12. Miscellaneous Fees (courier, underwriting, wire transfer, etc.).  Usually $75-$150

    "No closing cost loans" are often advertised, but this doesn't mean that there are no charges.  It means the company are eating these costs and raising the interest rate they charge to pay for them.

    "Impounds" are charged at closing:  these are simply payments that you make in advance for homeowner's insurance premiums and real estate taxes. These fees are relayed to the local tax authority and your insurer when you get your home.

  • Homeowners insurance, 0.5% or more yearly.  Yearly homeowners insurance costs usually amount to about 0.5% of the value of the property.  But this cost can be much higher in disaster-prone areas.  Unlike auto insurance you are not required by law to get homeowners insurance, but while you have a mortgage your lender will probably require you to carry it.

  • Property taxes, 0.25 to 0.4% yearly.  This can vary greatly from one city to another, even within the same state.  In some places you could pay $8,000 yearly on a $255,000 home, while in other places it's only about $1,000 for the same home.  Here's a list of property taxes by state, but remember that those are average tax rates and some locations within the same state could have double or half the average rate.  To find the real rate you would need to call a knowledgeable person in the area (e.g. a realtor.)

  • Transfer tax, 1% - 5%.  Sometimes called the "excise tax ", this is charged by the city, county, and/or state in most areas.  It's usually between 1% and 2%, but can be as high as 5% in some places.  It's paid by the seller, but again it has to be paid again when the home is sold.

  • A buyer's agent.  They usually don't charge you anything, but they'll receive up to a 3% commision from the seller.  Sellers may be more likely to cut you a good deal if they don't have to pay that fee.

  • A seller's agent, 3% - 7%.  As we mentioned, buyers aren't directly charged a comission.  When you or your heirs sell your home, a real estate agent will charge anywhere from 3% to 7% unless you sell it yourself.  It is still a cost of homeowning.  Sellers must also pay attorney, closing agent and other professional fees costing several hundred dollars.

  • A home inspection, $300.  You should always pay for a home inspection because they almost always find defects that can help you bargain for a lower price.  Usually it costs around $300.  Be aware that a faulty home inspection that does not find bad structural damage can cost you tens of thousands of dollars (some have even lost hundreds of thousands.)  A good way to make sure the home inspector is qualified is to ask for proof that they have liability insurance, and make sure any agreement you sign does not absolve the home inspector of liability for his mistakes.

  • Moving-In Costs.  These expenses can apply to both buyers and renters.  Costs include the moving van, deposits on electric and other services, and perhaps a few purchases of furniture and appliances.

  • Maintenance Costs, 1% - 3% annually.  On average homeowners spend between one and three percent of its value yearly on maintenance and repairs, increasing as the house ages.  Sometimes people think they can skimp on these costs, but it may lead to depreciation of the home's value, and you never know when the government will "assess" your home for repairs.  Assessments can cost anywhere from a few thousand dollars to 20% of the value of your home.  Renters do not have to pay for most repairs and maintenance.

  • Utilities, $50 - $200 per month.  These include electricity, water and heat.

  • Homeowners Association dues.  Many if not most neighborhoods charge dues that can range from $20 a month to hundreds of dollars, depending on how much is provided (for example, trash pickup and lawn care will drive up the cost).  Dues are usually between $100 and $250 in middle-class neighborhoods and condominiums.

  • Capital gains tax.  Most people can avoid this completely because when you sell your residence you can make up to $250,000 in profit if you're a single owner (double that if you're married) and escape paying this tax.  However, you can only get this exemption once every two years.  The regular capital gains tax for most taxpayers is 15 percent.
How to use calculators.  It's simpler than it looks:  You just input numbers into the  yellow  boxes, click the Get Results button, and the calculator estimates your expenses in the  red  boxes.  Some other things to know:
  • Some calculators have  green  boxes, where the calculator estimates ways you'll gain income. 
  • The  yellow  boxes are pre-filled with some typical numbers, which you can change if you like. 
  • You might find it easiest to start by clicking the Get Results button, to see how it all works.

Homeowner Expense Calculator
What this calculator does for you:  Consumers often don't consider all the expenses of homeowning, so after they buy a home they have trouble making ends meet.  Other online calculators don't tell you all of the costs, perhaps because they were designed by real estate professionals who want to make sales.  Use this calculator before you buy any home, so you can estimate your expenses and judge its affordability.
Let's say you want to buy a home costing $, and
a lender gives you a -year mortgage at %

1. Your up-front one-time expenses are:
       $ in closing costs,
       $ for a mortgage downpayment,
 $ in moving expenses, and
       $ for a home inspection.

2. Your recurring expenses are:
  % of home value yearly for PMI
                        (while your home equity is < 20%),
        % for repairs and maintenance,
        % for property taxes,
  % for homeowners insurance,
      $ per month for utilities,
 $ monthly in owner association dues
3. To calculate: 

Now we're ready to see how much it will all cost!
If you plan to own your home for years you'll
pay approximately...

  $ in up-front costs,
  $ in mortgage payments of
                            $ monthly,

  $ in PMI payments,

  $ in repairs & maintenance,
  $ in property taxes,
  $ in homeowners insurance
  $ in utilities,
  $ in association dues.
=$ total cost over those years.

(Note:  These expenses can be partially offset by deducting mortgage interest, as shown in the
Mortgage Deduction Calculator.  To compare renting costs to these homeowning costs (including
what you'll gain from the sale of your home when you move out) see the Buy-Or-Rent Calculator.)

Mortgage Interest Deduction Calculator
What this calculator does for you:  On your income tax return, you can deduct mortgage interest (but not your entire mortgage payment) and property taxes.  Use this calculator to find out how much money you'll really save on taxes.
(Note:  This calculator uses figures from the "Homeowner Expense Calculator", so start by filling out the boxes in that calculator.)

Your current annual itemizable deductions are:
   $ charitable contributions,
   $ state/local income taxes,
   $ property taxes,
   $ medical expenses above 7.5%,
   $ miscellaneous deductions.

Your home increases in value % yearly
You are: Single   Married
You are in the % income tax bracket

You'll buy the home in:
(If you already own the home, use January)

To calculate: 

Your total Schedule A deductions including mortgage interest will be:
   $ in year 1 ($ interest)
   $ in year 2 ($ interest)
   $ in tax years 3 through

So by deducting all that mortgage interest in those years instead of taking $ in standard deductions, you would save about $ on taxes by buying a home (assuming that your property tax deductions increase in proportion to your home's value, while other deductions will increase by 3% per year.)
2. Money-Saving Tips For Homeowners

If you're a homeowner, fortunately there are some things you can do to reduce the high costs of homeowning:

  • Deduct mortgage interest.  If you itemize deductions on Schedule A of your income tax return, you can deduct the interest portion of your mortgage payments.  Keep in mind that for the first few years the interest you'll pay on your mortgage will probably be about 80% to 90% of your mortgage payments.  So if you pay $10,000 in mortgage payments yearly, you can deduct $8,000 to $9,000 of that amount.  Also deductible on Schedule A are state and local income taxes, property tax, charitable contributions, medical expenses above 7.5% of adjusted gross income (AGI), and miscellaneous expenses above 2% AGI.

    Your other choice is to take the "standard deduction" which in 2007 is $5,350 for single persons and $10,700 for married couples.  If you don't have many itemizable deductions, you may not get much more benefit from a mortgage interest deduction compared to the standard deduction.

    You can use the Mortgage Interest Deduction Calculator at right to figure out how much money you'll save deducting mortgage interest on Schedule A of your federal income tax return.

  • Get a good refinancing deal.  That's covered in the refinancing section on this page.

  • Reduce property insurance costs.  It's often possible to cut the cost of your homeowner's or renter's insurance by 25% or more and save hundreds of dollars every year (scroll down to see a list of ways to save).

If you're thinking of buying a home, here are some more money-saving ideas:

  • Buy small.  Only buy what you can comfortably afford.  Some people think they'll make a lot of money by buying a bigger home and selling it later, but this is speculative and could backfire on you.

  • Buy a fixer-upper.  Some homes don't cost much because they're not well maintained.  If you're handy and willing to work, that's an opportunity to buy at less than market value.

  • Get the best mortgage deal possible.  That's covered in the mortgages section on this page.

How To Save Hundreds On Home Insurance

1. Home security upgrades. Save up to 15-20%.  Get dead-bolt locks and a burglar alarm (preferably one that's monitored 24/7).
2. Fire-fighting upgrades. Save up to 10%.  Fire alarms and extinguishers are worthwhile. A sprinkler system is an excellent (but costly) upgrade.
3. Raise your deductible. Save 15-25%.  Raising your deductible can save big money, especially if it's currently lower than $200.
4. Drop unneeded coverage. Save up to 20%.  Eliminate any "riders" or "floater" clauses that cover unlikely losses. Insurance should cover no more than the rebuilding cost -- don't include the value of the land.
5. Shop around. Save up to 20%.  Home insurance prices from different companies can vary widely, so shop around for a lower rate at sites such as, and
6. Loyalty discounts. Save up to 20%.  Most companies offer a longevity discount for people who stick with them. Often it's a 5% discount for staying 3-5 years, and a 10% discount after six years.  Retirees often get an additional 10% discount.
7. Avoid risk. Avoid anything that increases the risk perceived by your insurer (for example a lower credit score, or keeping a dangerous pit bull, or having an accident-prone swimming pool.)
8. Claims-free discount. Save 10-15%.  If you avoid burglaries and don't make an insurance claim for three to five years you may get this discount.
9. Block watches. Save 5-10%.  If you organize a block watch, insurance rates and the crime rate will both go down in your neighborhood.
10. Live in a safe home. Save up to 20%.  Newer homes have fewer problems.  In windstorm-prone areas, consider brick homes; in earthquake zones, wood frames stand up better. Avoid flood-prone areas.

Call your insurer and consult with them. Tell them about your home improvement plans, make sure you're adequately covered, and be sure to ask what other discounts they offer.

3. How To Buy, Rent Or "Flip" Your Home

Directory: Understanding Housing Values and Trends
Free ZEstimate For Your Home:  Gives you a free no-hassle home appraisal.
Mortgage & CD Rate Alerts:  Emails you an alert when mortgage rates drop.
Bankrate's Mortgage Rate Forecast:  Brings together expert forecasts for the coming months.
Bankrate's "Graph The Trend":  Shows how mortgage rates have changed over recent years.
Housing Price Index:  Gives housing prices for USA metropolitan areas.  The Internet's banking and mortgage authority.
30-Year Mortgage Rate History:  Graphs mortgage rates since 1971.  
Almost all the advice you'll hear about whether you should buy or rent unfortunately leaves out a great deal of important information.  Several homeowning costs are almost always omitted, leaving people with the impression that owning a home is less expensive than it really is.  Home buyers often imagine that it will only take a few years to "break even" compared to renting, when frequently it takes five or more years.  The previous section talked about the many costs of homeowning.  Here are some other financial considerations when deciding whether to buy or rent a new home:

  • How long will you stay?  It makes a difference of many thousands of dollars!  A good rule of thumb in an average real estate market is that if you're going to live somewhere for longer than five years, you should buy; less than five, and you should rent.  In a hot real estate market, it could take just a few years; in a flat market, it could take much longer.

  • Renting vs. mortgages.  Mortgage payments are more expensive than rent, but mortgage payments stay about the same while rent will inevitably be raised.  After ten years or so, rent payments usually exceed mortgage payments for the same size of home.  This makes buying a home a good long-term investment.

  • Avoid capital gains taxes.  When you sell your residence you can profit by up to $250,000 if you're a single owner (double that if you're married) and escape paying capital gains taxes.  You can do this once every two years.  The regular capital gains tax for most taxpayers is 15 percent.

  • How hot (or cold) is the real estate market?  Five percent about the national average over the past few decades.  But it varies greatly by region:  The "rust belt" hasn't increased much, while some areas of California have increased by around ten percent.

  • Finding a good real estate agent.  This is covered in the final section of this page.

  • "Flipping" a home.  You could buy a home and sell it a few years later for a nice profit.  You may want to do this in an area where real estate values have begun to rise rapidly with no slowdown in sight, but be forwarned that such an investment is somewhat speculative.  Make sure any mortgage you take out doesn't have a prepayment penalty.  Some inexpensive home improvements can greatly increase your home's value.
How to use calculators.  It's simpler than it looks:  You just input numbers into the  yellow  boxes, click the Get Results button, and the calculator estimates your expenses in the  red  boxes.  Some other things to know:
  • Some calculators have  green  boxes, where the calculator estimates ways you'll gain income. 
  • The  yellow  boxes are pre-filled with some typical numbers, which you can change if you like. 
  • You might find it easiest to start by clicking the Get Results button, to see how it all works.

Buy-Or-Rent Calculator
1. Input your anticipated homeowner expenses in the Homeowner Expense Calculator, if you have not done so already.  Also, guesstimate this:

  • The home increases in value % yearly
  • You'll pay % to a real estate agent
  • You'll pay % as a transfer tax
  •        2. Input your anticipated renting expenses here:

  • You'll pay rent of $ per month.
  • Your rent will increase by % per year.
  • You'll pay $ for utilities per month
  • You can invest the downpayment and your savings on monthly payments, and earn % interest.
  •   In either case, you'll pay $ in moving expenses. 

    3. To calculate: 

      After you move out in years, here are your financial results:  
    If you buy...
    1. Your home's value will rise to $, so you'll enjoy a capital gain of $ from the sale.

    2. These expenses will subtract from your gain:
          $ in total mortgage interest
          $ in up-front costs (not
                                     counting the downpayment)
          $ in PMI payments
          $ in repairs & maintenance
          $ in property taxes
          $ in homeowners insurance
          $ in utilities
          $ in association dues
    $ to your real estate agent
    $ in transfer taxes. 3. Considering all that, you stand to...
         pay $ to live in the home or
        gain $ from your home sale.
    If you rent...
    1. You'll earn $ investing.

    2. Your expenses will be:

         $in total rent
    $ for utilities

    3. Considering all that, you will pay $ if you rent instead of buy.

    4. How To Estimate The Market Value Of Any Home

    Consumers can get a free estimate of any home's value at a handful of sites including, and  Zillow's reports include a history of the property and rooftop satellite neighborhood photos.  Zillow reports that its estimates "are typically on target, falling within 10 percent of the actual home-sale prices 62 percent of the time."

    These sites calculate their estimates using computer programs that examine property tax assessments and sales price trends.  These estimates are fairly accurate for condos and town homes, but in markets where homes are unalike the information could well be misleading (some have been known to be off by as much as 200%!)  And these sites don't serve all areas:  Texas, New Mexico, Kansas, Mississippi, Indiana, Wyoming and Utah don't make property records available.  In other states, the estimate may be based on pricing data that is two to three months old, which may distort the home's true value by a few percent.

    An in-person appraisal by a realtor is the most accurate way, but it will cost you $300 to $500.  A realtor knows a lot about what does or doesn't add value to your home.

    5. How To Protect Against Decay And Disasters

    The Consumer Freedom Alliance created this Special Report: How To Prevent Home Disasters to answer this question.  Here's its Table Of Contents:

    Table of Contents
    Water Leaks
    Home Fires
        Electrical Fires
        Your Escape Plan
    Pollution Hazards
        Carbon Monoxide
        Natural Gas Leaks
        Indoor Pollution
    Pest Attacks
        Termite Infestations
        Termite Inspections
        Termite Prevention Tips
        If Termites Strike
        Roach Control
        The Human Element
        Home Insurance Traps
        Make A Household Inventory
        Con Men Contractors
    Home Accidents
    Natural Disasters
        Basic Disaster Supplies Kit
        Maintaining Your Kit
        Create An Evacuation Box
    Final Thoughts

    This report is a long read, which is necessary to cover the many ways that your home can lose value.  To make it easy to keep track of home maintenance, we recommend that you sign up for the CFA's Consumer Sleuth newsletter.  It's a quick read -- just the ticket for today's busy consumer.  It starts each month with a "Consumer SmartCalendar" that includes home maintenance reminders.  This is the easiest way to make sure you don't forget to do needed home maintenance.  Ignoring home maintenance could cost you tens of thousands of dollars in repair expenses.  The Consumer Sleuth sends you useful consumer tips twice each week.

    6. How Home Additions Can Increase Your Home's Value (Or Not...)

    Many home improvements will improve both your quality of life and your home's value, but some won't increase your home's value at all.  Here are some worthwhile ideas:

    • Do an improvement that's popular and attractive.  People like nice carpets, paint and wallpaper, kitchens, bathrooms and decks.  Avoid improvements that "stick out like a sore thumb," or that most people won't use.  A swimming pool or hot tub is a detraction to some people, and may not increase home value at all.

    • Don't over-improve.  If you build up the value of your home more than 20% higher than your neighborhood's average home value, most people will prefer less expensive homes in the same neighborhood.

    • Grow  a home improvement: just planting some trees and flowers will increase your home's value by thousands of dollars.  Take into account maintenance costs: you may want to use a lot of rocks and trees and bushes, if you want to save time and don't like gardening and mowing lawns.

    • Consider property taxes: they may rise if you improve your home, especially if they're exterior improvements, which your tax assessor can easily see.  If property taxes are high in your locale, you may wish to delay making improvements until a year before you sell your home.

    • For tax purposes, save all records of home-improvement purchases and the time you spend laboring on your improvement.  When it comes time to sell your home, you can reduce your capital-gains taxes by adding these expenses to the price at which you purchased your home.

    Here's a list of possible home improvements, and estimates of the normal Return On Investment ("ROI") if you contract it to someone else.  These estimates are not from any one source; they are averages of various articles we've seen on the Web and in books about home improvements.

    Improvement TypeReturn on investment
    Interior Decorating 100%
    Central Air Conditioning90%
    Deck (10' X 12')80%
    2-Car Garage80%
    Kitchen & Bath Updates70%
    3-Season Porch65%
    Finished Basement60%
    Main Floor Added Room55%
    New Furnace55%
    Permanent Storage Shed50%
    New Roof50%
    Electric Upgrade (100 to 200 amp)40%
    In-ground Pool25%
    Hot Tub10%

    The Annual Cost Vs. Value Report talks about the value of remodeling projects in greater depth.

    7. How To Find The Best Places To Live

    You can easily get all the answers you need just by visiting, which has profiles on 1000 cities.  Their site covers housing, cost of living, crime, education, economy, health and climate.  You can even describe your ideal place to live, and their expert system will give you rankings of the best places that meet your criteria!  There's also a nice collection of articles discussing where and how you can find a high quality of life.  Another good resource is's Best Places to Live.

    8. How To Comparison-Shop For A Mortgage

    Best Mortgage Sites Directory:
    Looking for the Best Mortgage (PDF):  The Fair Trade Commission's advice on how to shop, compare and negotiate.
    Choosing A Lender:  Article advising which types of lenders to shop.
    Smart Money's Real Estate:  Gives comprehensive help in buying, owning and selling a home.  
    It's common for mortgage rate quotes to vary by a full percentage point (e.g. one bank will charge you 5.5% interest, another will charge 6.5%.)  For a $200,000 house financed with a 30-year mortgage loan, this 1% rate spread can make a difference of about $50,000 in how much total interest you'll have to pay the bank!

    The best way to shop for a loan is to compare many written estimates to find the best deal. This could save you hundreds to thousands of dollars, depending on the value of the real estate. If you rely on just one source, you may find that someone will take advantage of your trust. You should insist on written "good faith estimates".  Online quotes can be trusted only if they are openly posted on the web site, with all lender fees fully disclosed.

    Whether you're purchasing or refinancing, here are some good strategies to consider:

    • Get a free manual.  You can get a free Home-Buying & Mortgage Tutorial mailed to you from Fannie Mae, a semi-governmental housing finance agency.

    • Low-fee loans.  Try to find a loan that costs you only $1,500 to $2,500 in fees to refinance, rather than the many thousands that some lenders charge.  You can fold these fees into the loan, instead of paying them up front.

    • Consider ARMs.  The "3/1 Adjustable-Rate Mortgage" (ARM) is about 0.25 to 0.50 points lower than a fixed rate mortgage, with the first three years locked in at this low rate.  Read the government's Consumer Handbook on ARMs (PDF) and's Hybrid adjustable mortgages offer advantages to understand these loan types.

    • Fixed mortgages are safer.  On the other hand, the probable future rise in interest rates would not be good for those who currently are in ARMs.

    • Interest-only loans.  With this type of ARM you only pay interest for the first 5-7 years, then your payments jump as you start paying off the principal.

    • FHA loans.  These are government-assisted loans that can be taken out by almost any home buyer.  They require only a 3% downpayment, saving you a lot of money up front. But you'd have to pay an interest rate about 0.25% to 0.75% higher, adding up to many thousands of dollars until you refinance it.  And you must also pay FHA mortgage insurance of about $3,000 for the first year and $1,000 per year thereafter until your home equity reaches 22%.

    • Adjust the length.  You could do a 30-year mortgage to lower your monthly payments, or do a 15-year mortgage to pay less interest and pay it off sooner.  Terms of 10, 20 and 40 years are also possible though they are usually unadvertised.

    • Raise Your Credit Score First.  This is especially important if your credit score is shaky.  You can improve your credit by paying bills on time, paying down credit cards, protesting inaccuracies in your credit report, and keeping a steady job.  Another way to improve your mortgage terms is to persuade someone with excellent credit to co-sign the mortgage loan.

    • Places To Look.  Banks, credit unions, mortage loan companies, mortgage brokers and online lending sites are the usual sources.  If you have a 401(k) plan you can borrow up to $50,000.  Friends and family may be willing to help pay, and/or co-sign the loan to allow a lower interest rate.

    • Tax deductions.  After you've financed your home, remember that you can deduct mortgage interest but not loan fees.  If you "pay points", you can take a deduction for that.

    • Assumable mortgages.  Unlike most mortgages, assumable mortgages can be taken over by the person you sell your home to.  If interest rates go up, your assumable mortgage would be a great selling point.  Assumable mortgages are uncommon in America, but usual in Canada.

    • Closing Costs.  Most of these fees are negotiable if you're persistent.  You can get tips to help you Save Thousands on Closing Costs.  You might also fold your closing costs into your mortgage, which will increase your new monthly payment by around $10 to $20 (see Finance Settlement Costs in Mortgage Refinance.

    • Eliminate PMI.  You can stop paying for private mortgage insurance when your home equity rises above about 20%.  Here's two explanatory pages: PMI Tips, How To Remove PMI.

    • Prepayment Penalties.  Lenders will usually lower your rate by 0.125% to 0.5% if you agree to a prepayment penalty lasting three to five years. The downside: if you refinance during that time, you'll pay a penalty of 2-3% of the loan value.  A penalty clause should state that you're not penalized if you sell your home (insist on it!)  Here's an informative Prepayment Penalty Mortgages article.

    • Rate Locks.  You can lock in a mortgage rate at the current level for anywhere from 15 to 60 days, but there are some pitfalls to avoid.  Read What Are "Free" Rate Locks? to understand the benefits and drawbacks of rate locks.

    • "Paying Points."  The idea is to pay your lender in advance to give you a lower interest rate.  Paying one point means paying 1% of the loan amount in advance.  There are several advantages:  points paid are tax-deductible, you'll pay lower monthly payments, and a higher percentage of your money will go towards paying down your loan balance instead of just paying interest.  Ask lenders whether they will extend this offer to you and read Paying mortgage discount points: a primer to determine whether you'll benefit from this strategy.  As a rule of thumb, paying a point is worthwhile in these cases:

      • You stay at least three years in the home, if you can get a 0.375% interest rate reduction;
      • Over five years if it's a 0.25% reduction;
      • Over ten years if it's a 0.125% reduction.

    • "Jumbo Loans."  For 2007, a Jumbo loan is defined as any mortgage over $417,000 (for single-family homes in the continental U.S.; the limit is 50 percent higher in Alaska, Hawaii, Guam and the U.S. Virgin Islands.)  A jumbo loan bears a slightly higher interest rate than a normal loan.

    • Confirm It's A Fair Offer.  Use the free Test My Loan Now site to rate any mortgage offer for fairness and get a counterproposal, and/or spend about $50 to pay the National Mortgage Complaint Center to analyze the fairness of any mortgage offer.

    • Avoid The Traps.  With so much money at stake in mortgage deals, some sharp operators will try to take advantage of trusting people.  An online article Goofs That Mortgage Shoppers Make discusses the worst mistakes and learn how to avoid them.  Here's our own "short list" of the worst mistakes:
    Top ten homebuyer traps:
    1. Not getting a good faith estimate allows the lender to hit you with surprise fees later on.
    2. Settling for an oral rate lock allows unscrupulous lenders to legally weasel out of their promise.
    3. Bait and switch is when a lender quotes you a rate that you know is good, then after you settle on that lender as your loan source, he pitches you a different loan with unfair terms, in the hope that you'll trust it's also good and won't study the details.
    4. Railroading is when a realtor implies that you have to use their recommended lender.  You don't!
    5. Not getting pre-approved for a loan reduces your negotiating power and may increase the sale price.
    6. Not paying for a home inspection by a licensed & insured professional, which gives you (1) peace of mind and (2) negotiating clout.
    7. Not reading documents before signing them. Take your time and if you don't understand it, consult a lawyer.
    8. Relying on one referred lender is bad because no reputation is as good as shopping around.
    9. Loan shopping on separate days is faulty because market volatility may cause rate quotes to vary.
    10. Relying on the "APR" to compare loans doesn't work because lenders aren't required to include loan fees.

    How to use calculators.  It's simpler than it looks:  You just input numbers into the  yellow  boxes, click the Get Results button, and the calculator estimates your expenses in the  red  boxes.  Some other things to know:
    • Some calculators have  green  boxes, where the calculator estimates ways you'll gain income. 
    • The  yellow  boxes are pre-filled with some typical numbers, which you can change if you like. 
    • You might find it easiest to start by clicking the Get Results button, to see how it all works.

    Mortgage Shopping Calculator
    How to choose a mortgage:  You want to buy a house and think you'll live there for years.  You're considering a loan for $, (the principal of the loan) at a % fixed interest rate over a term of years.  You'll pay $ closing costs up front, not folding those costs into the loan.

    To calculate: 

    Your future payments:
    $ will be your monthly payment. 
    $ is the total interest you'd pay over the full term of the loan.
    $ would have been your monthly payment, if you'd folded in closing costs.

    Here are your other options, along with the savings you can expect compared to the mortgage shown above (note: a negative savings number means you would have to pay extra instead of saving):
      pay $ monthly on a 40-year loan at  %, saving $  over years.
      pay $ monthly on a 15-year loan at  %, paying $  more over years. 
      pay $ monthly on a "3/1" loan at  %, saving $  over years.
      pay $ monthly on a "5/1" loan at  %, saving $  over years.
      pay $ monthly on a "10/1" loan at  %, saving $  over years.
      pay $ monthly on an ARM loan at  %, saving $  over years.
      pay $ on an interest-only loan at  %, saving $  over 5 years, then
      pay $ monthly for the last years.

          Note:  more Mortgage Calculators are available for various situations.

    9. How To Refinance Your Mortgage

    Directory: Understanding Housing Values and Trends
    Free ZEstimate For Your Home:  Gives you a free no-hassle home appraisal.
    Mortgage & CD Rate Alerts:  Emails you an alert when mortgage rates drop.
    Bankrate's Mortgage Rate Forecast:  Brings together expert forecasts for the coming months.
    Bankrate's "Graph The Trend":  Shows how mortgage rates have changed over recent years.
    Housing Price Index:  Gives housing prices for USA metropolitan areas.  The Internet's banking and mortgage authority.
    30-Year Mortgage Rate History:  Graphs mortgage rates since 1971.  
    When refinancing, here are some more strategies to consider:

    • Time it right.  The standard "rule of thumb" is to consider refinancing whenever interest rates fall by a percentage point or two.  A better rule is to wait until the loan rate drops enough that you'll save $5,000 to $10,000 over the time you believe you'll own the home.  That could be thirty years, or very short if you think you'll be moving soon.

    • Get the right loan for your future.  If you still owe a lot of money on your mortgage, it's important to pay close attention to refinancing; if not (or if you'll be moving out in a few years) refinancing is less important.  A refinancing over twenty years could save about twice as much money as it would over ten years.

    • First, heck your mortgage's fine print.  It may require that a prepayment penalty be paid if you refinance (usually the penalty expires after a few years.)

    • Consult expert predictions.  If economic experts are predicting that mortgage rates will continue to fall, you can wait; otherwise, you should consider locking in the current rate by refinancing immediately.

    • Consider getting cash.  You can cash out some of your home equity at the same time you refinance your mortgage.

    • Figure out your break-even point.  For example, if your closing costs are $2,000 and you lower your monthly payment by $200, you'll break even in ten months.

    • Read the previous section of this page covering mortgages if you haven't already, to learn more tips.

    How to use calculators.  It's simpler than it looks:  You just input numbers into the  yellow  boxes, click the Get Results button, and the calculator estimates your expenses in the  red  boxes.  Some other things to know:
    • Some calculators have  green  boxes, where the calculator estimates ways you'll gain income. 
    • The  yellow  boxes are pre-filled with some typical numbers, which you can change if you like. 
    • You might find it easiest to start by clicking the Get Results button, to see how it all works.

    Mortgage Refinancing Calculator
    How to choose a refinance loan:  Your mortgage has a % interest rate, with $ in remaining principal.  You could also refinance your principal, paying $ in closing costs.  Your current monthly mortgage payment is $ (excluding taxes and insurance).

    To calculate: 

    Here are your other refinancing options, along with the savings you can expect compared to your current mortgage (note: a negative number in the Monthly Savings column means you would have to pay that much extra instead of saving):
    loan type
    Savings over
    Months to
    break even
    to pay
      30-year fixed: $ % $ $ $
      15-year fixed: $ % $ $ $
      40-year fixed: $ % $ $ $
      3/1 hybrid: $ % $ $ $
      5/1 hybrid: $ % $ $ $
      10/1 hybrid: $ % $ $ $
      ARM loan: $ % $ $ $
      Interest only: $ % $ $ $
      ($ must be paid monthly for the last 25 years of this interest-only loan).

    10.How To Lower Your Property Taxes

    About 25% of America's cities have tax rates higher than 2% (the highest rate is 4% in Newark, New Jersey.)  This means that over 25-50 years, many people pay the same amount in property taxes that they paid for their house!  To lower your property taxes, consider the following options:

    • Find out what property tax breaks are available in your area: there could be tax breaks for veterans, seniors, low-income families, the disabled, long-time residents, owner-occupied homes, and so forth.  Your local assessor's office would have this type of information.

    • When you file your federal tax return, don't forget to deduct your property tax expenses for houses, cars and boats.

    • Move someplace where property taxes are lower.  You can use the Lifestyle Optimizer and City Reports at to check property tax rates in almost any city.

    • When you receive a notice from the assessor that your property taxes have risen, if you think their assessment is wrong, protest it within 30 days.  The assessor's notices may be deceptive, because local governments often juggle some numbers to try to minimize protests.  Sometimes they do this by assessing your home at a low value (to make you think your home is under-assessed), and then they charge a high tax rate on assessments.  The only sure way to determine whether you are being overtaxed is to compare your assessment to other property assessments and actual home sales in your neighborhood.

    Here's a quick guide to appealing your property tax assessment:

    1. Survey your property.  Find out the legal identification of your lot and the dimensions of your land (you may have a land survey in your records.)  Then use a tape measure to measure the outside dimensions of your house.  Note whether the second story is smaller (assessors sometimes mistakenly list them as the same.)

    2. Search the neighborhood for homes similar to your own home.  Look for homes that are similar in age, size, architecture and condition to your own.  A real estate agent who knows your neighborhood will often be able to help you look up records of comparable homes.

    3. Visit the tax assessor's office to see your property record card, something the assessor uses to estimate a home's actual value.  Note anything that's wrong, and try to remember things about your home that would decrease its value.  Check to see whether the assessor added it up correctly.

    4. Review the record cards for houses you think are comparable.  Note which houses are assessed less than yours.

    5. If you think you can show that an assessment is incorrect, meet with the assessor to ask for a correction.  If that doesn't work, ask for the paperwork and guidance you'll need to file a formal appeal. 
    Read this article on Tax-Saving Tips for Homeowners if you'd like to see more tax savers.

    11. How To Sell Your Home For Maximum Gain

    The first principle is to prepare for the sale well in advance.  If your plan, for example, is to list your home for sale in May or June, it's wise to lay the ground work for the sale in January or February at the latest. You can use this advance time to clear the property of junk, contract out some home improvement work, do some of the project work yourself, pack up extra belongings, have a garage sale, donate items, etc. Consider asking a real estate agent for a professional walkthrough several months in advance: you might be surprised at the profitable advice he or she can offer.

    Here are some important steps you should take before you put your house on the market:

    1. Get a loan approval for your next home first.  You don't want to sign a contract to sell your house before knowing if you are qualified to buy another. You'll get a good idea of what you can afford by getting a pre-approval before selling your house. You can then decide whether it would be reasonable to sell your house at this point in time, or perhaps consider renting instead.

    2. Determine the Fair Market Value of your house.  You'll want to get the best price for your property and in the quickest time possible. Over-pricing your home will only limit your chances of selling fast, while under-pricing may speed up the process but you lose out in the bargain. An agent or an appraisal service should be able to assist in determining the fair market value of your home. has a home-valuation calculator that lets you estimate your home's approximate value quickly.

    3. Estimate the cost of selling: 
      • Real estate commissions (3% on up to 7%.)
      • Attorney, closing agent and other professional fees (several hundred dollars.)
      • Capital gains tax (if applicable) and excise taxes (1% to 5%).
      • Advertising costs, if you plan to sell home yourself.

    4. Home improvements.  Are there improvements that could be made to your home that would increase the value cost-effectively and help it sell faster? Usually that's not the case, but your home may have some "hidden value": an unfinished area that could be turned into an additional bedroom or bathroom, for example, could increase your property value by 10% or more depending on the market. See our home improvement section for advice in this area.

    5. Maximize "curb appeal".  It's amazing that sometimes just $500 in landscaping or a quick touch-up on the outside paint can increase buyer traffic from 2 people a week touring your home to 20 people a week. Be sure the approach to your home is clean, tidy and well groomed. Make sure the grass is cut, leaves raked, plant beds mulched and weeded, etc. Any brass should be polished, paint on the door should be in good condition and the door should be washed clean of fingerprints and paw marks.

    6. Make necessary repairs.  You don't want to turn off a buyer because of minor repairs which you haven't attended to. Don't ignore repairs for these reasons:  (1) the home could take a long time to sell, (2) you will probably still end up paying the cost of the repair work for the buyer, (3) you could get a lower sales price because the property was "stigmatized" by not selling within the first few months, and (4) you'll also have to keep paying the mortgage and maintenance expenses while you wait for your home to sell.

    7. Get the house ready to show.  This includes clearing out junk, making repairs, cleaning, landscaping, deodorizing if need be, and perhaps repainting. Get a walkthrough by an experienced real estate agent early on to get their value-building advice. You'll want your house to be sparkling clean and well-ordered when a buyer comes to see your place. A clutter-free environment is essential if you want the house to appeal to the buyer.

    8. Make your home's visual appeal fairly broad.  If the decorating in your home is unusual, you'll risk turning off prospective buyers.  Pack up distracting elements, try to use "neutral" colors (e.g. beige or off-white), and move out excessive furniture to make your home seem larger. You want buyers looking at the house, not your stuff.

    How To Find A Good Real Estate Agent

    When you're ready to choose a real estate professional, here's what to look for:

    • A local real estate agent should know your neighborhood well so he or she can help you determine a fair market price. The agent should also be able to recommend repairs or improvements.

    • Ask family, friends and neighbors for referrals. You could also search Google for "best real estate agent" yourcity (include the quote marks for best results, and also try pluralizing agent to agents.)

    • Phone-interview several agents to find out how professional or experienced they may be. Most will be happy to supply a written outline of how they plan to market your property and the services they will include.

    • Evaluate the personal "chemistry". Do you feel comfortable with the agent as a fair partner who will work with you to give you advice and act as your representative? Does he or she focus on the importance of meeting client needs and personal expectations, or is he or she caught up in the "hard sell?"

    • The firm that your agent is associated with is also important. Find out the firm's commission rate. Some firms can offer discounts on everything from painters to mortgages to moving services. Other firms might try to channel business to their high-paid buddies at your expense.

    • There are also low-cost options such as selling your home yourself or using a cut-rate agent that charges a flat fee as low as $3,000.  However, you run the risk of getting little exposure for your property or somehow botching the sales process.

    ©2007 Consumer Freedom Alliance, all rights reserved.