Image © Paul Heasman – Fotolia.com

In fact, a $100,000 home financed by an FHA insured mortgage, with a 5% down payment will cost you approximately $235,000 over the life of your 30 year mortgage, and you’ll be paying virtually nothing but interest, taxes, insurance and loan fees for about the first 12 years.

Here are some quick and easy tips for saving tens of thousands of dollars on your home mortgage:

1. Pay as much as you can up front in your down payment. Most people opt for the lowest down payment possible, to minimize up front costs, but this means that the loan will be that much more expensive over time. Reducing your loan balance saves a lot of money over the years in interest expenses.

(Don’t fall for the argument that mortgage interest is tax deductible. That deduction will probably disappear in the near future. And the data shows that most first time or lower income home buyers do not itemize their taxes anyway.)

2. Prepay something on your loan principal from day one.

If you are buying in the near future, make plans to pay an additional amount each month, over and above your regular mortgage payment. Write a separate check for this amount. Do NOT add it into your mortgage payment. Write two checks. One for the mortgage payment, and one for the additional amount you wish to pay towards your loan principal. Label this check as “payment on principal” and check your monthly statement to insure that the additional prepayment is credited to your loan balance.

You can take a 30 year mortgage so as to keep your regular monthly payment as low as possible. But in order to save interest, include a prepayment each month as stated above. If you financed $95,000 for 30 years at 5% interest, and pay nothing but your regular payment each month for the entire 30 years, you’ll pay out $88,593 in interest on that loan, and assuming your first payment was January of 2013, you will not have this loan paid off until December of 2042. And it will be 2030 before your regular monthly payment reaches the point where you are paying your loan down instead of paying mostly interest.

If you pay just $25 per month extra, starting with your very first mortgage payment, you’ll save $10,323 in interest costs, and your loan will be paid off 3 years earlier. Paying $50 per month extra will save you around $20,000 of interest, and your mortgage will be paid off a full 5 years earlier.

Shortening your loan length increases the monthly payment, but also pays the loan down faster. However, you can have the benefits of a 30 year loan combined with a shorter, lower cost loan, simply by financing long then prepaying as much as possible on the principal. Only $100 extra applied each month will cut your loan term by virtually 10 years. The $1200 invested yearly for 20 years will save $30,000 in interest costs. This is an 8% return on your money instead of a $30,000 expense.

Even if you have already owned your home for a few years, prepayments always make sense for the typical owner-occupant buyer with an income below $100,000 per year. If you are in the later years of an existing mortgage, you can still shorten the time frame and lower the effective interest rate with the use of prepayment strategies instead of a refinance which may actually cost more.

3. Take The True Costs Of Ownership Into Account Before You Buy.

No one tells you how much your home is really going to cost to maintain and “own”. Ownership responsibilities and costs go well beyond the principal and interest on your mortgage payment. A $100,000 home, relatively cheap by today’s standards, will have property taxes to pay ranging from hundreds to thousands of dollars each year. And any home with an FHA insured loan will require insurance; another $1000 or so per year. These two items will also be part of your mortgage payment, in order to insure that they are paid on time each year.

Will this home need painting every few years? How about the condition of the roof? Are the HVAC and plumbing new or older? These are all items that will cost something to repair or replace over the life of a 30 year mortgage. All extra expenses over and above the purchase price.

4. Pay Attention To The Fees And Other Loan Costs.

FHA insured loans come with a variety of fees that may be included in the monthly payment. It’s important to understand what those fees are, what they are for, and how much they will cost you. In my experience as a real estate agent, I’ve noticed that few buyers are aware of these fees and expenses related to their home purchase. Some of these fees could add up to thousands of dollars. Pay attention to these costs and negotiate to get them reduced whenever possible.

Housing Market Stability Rests On A Foundation Of Home Owners

Many homeowners with FHA insured loans are in over their heads already. Default rates are high and neighborhood upkeep is low. This is combining for a one-two punch in many neighborhoods across the country. It’s no fun for the borrowers either. Losing your home is one of the most traumatic events one may face in their lifetime. Buyers often have no concept of what the true ownership costs will be. This can destabilize them financially and lead to numerous other problems.

It would be in the best interest of the buyers themselves, the entire housing market, the professional real estate industry and the U.S. taxpayers to require that all first time home buyers who are qualifying for government insured home mortgages, take a course on home ownership, with the specific purpose of educating the buyer to the real costs involved, and create a realistic budget for a buyer up front, before they choose a home.

Planning for ownership expenses BEFORE you buy a home goes way beyond the interest rate on your mortgage. Understanding the true costs involved, and choosing a home you can afford to pay for and maintain will make you a happy home owner, help to stabilize the housing market and ultimately make it easier for you to build a solid financial future as the years go by.
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Donna S. Robinson is a real estate investor, author, and housing market analyst located in Atlanta, GA. Follow her on twitter at donnaconsults. Her latest book is now available on Amazon.com. It’s called Basics Of Real Estate Investing

Thousands have been compelled to sign forced placed insurance. Courtesy of Complaint Center

However, research by the property data provider MSB shows that almost six out of 10 homes in America don’t have enough insurance; most policies would only provide enough cash to pay for 80 percent of a property’s rebuild.

Whether you have mortgaged your home or are a cash buyer, your property is likely your most valuable asset – so it makes sense to protect it. However, the insurance product you choose for your property depends on what you plan for its use.

Owner-occupier insurance

Buyers that intend on living in their property require several different forms of insurance to ensure the building, possessions and family are secure.

Insurance should cover damage to the building due to crime and weather; and damage or theft of the possessions inside the home. Owner-occupiers will also require life insurance which allows family to pay off the mortgage in the event of their death.

Damage to the building

Homeowners insurance is the cover which protects the building in the event of either natural or criminal damage. For example, should a property burn to the ground, buildings insurance will pay for its rebuild. A fire occurs somewhere in America once every 23 seconds, so this is a vital requirement, particularly since the average claim for fire damage is currently $31,762.

To ensure your policy doesn’t fall short, when purchasing a property, check the legal surveys for indication of any extra risks. Houses built close to waterways will need extra protection from flooding – even if the risk is only minor. Around a quarter of insurance claims come from areas where flooding is of just a low to moderate risk and standard policies tend not to protect against flood damage.

Additionally, a property’s value generally increases over time, as does the cost of building. By forgetting about your policy for a decade and simply paying the premiums, you could find yourself underinsured when you need to claim. Instead, you should review your policy and take a look at the economics of the industry every few years to see if you are comprehensively covered.

Loss of possessions

Contents insurance covers the loss of possessions due to damage and theft. Take care to detail anything of worth to make sure its value can be reclaimed in full.

Family protection

The World Finance Group states that many families fail to re-assess their life insurance coverage after a significant life event such as having children. Seventy two percent of people take out life insurance policies when they get married but that increases to just 75 percent when they have children. On top of that, three out of every 10 US households have no life insurance at all, according to LIMRA.

Homeowners should again take care to reassess their life insurance needs every few years, or after major events such as a new addition to the family.

Life insurance offers protection to your family and your bank in the event of your death, by ensuring the funds are available to pay off the mortgage. Extra clauses can be added to the insurance, which cover for illnesses and redundancy – to allow for the payment of the mortgage if regular income is hindered. Taking out this level of income protection insurance will make your premiums higher – but many people deem it worthwhile, especially in the current climate with the threat of redundancy biting at the heels of many businesses.

Landlord insurance

For owners of rental properties, insurance needs differ slightly from those of an owner-occupier. A specific rental dwelling policy called a Rental Property Insurance or a Dwelling Fire Policy is required to cover properties you don’t personally occupy. This covers the structure of the house – or the proportion of the building owned by the landlord – as well as providing some cover for contents and liability protection.

Liability protection protects the landlord against any claims due to bodily injury incurred within the property and would defend against any negligence held against the landlord.

Landlords may also be required to provide tenant relocation to their policies, if the dwelling houses more than one single family. This would cover the tenants’ expenses if they had to move out due to damage to the rental property.

Renters insurance

Some landlords like to protect themselves further by ensuring all tenants have a tenancy policy. A tenancy policy ensures the tenants are covered for any injury they cause in the home, rather than attempting to claim through the landlord, which could be very costly.

Image/freedigitalphotos.net

The top reasons why homeowners’ insurance policies are often voided include;

Deliberate Damage

One common occurrence that many homeowners’ insurance companies regularly deal with is property being deliberately damage, and then having claims filed on the property. This is also commonly seen in car insurance claims, but will almost always result in termination of your policy. Deliberately damaging property and then attempting to file an insurance claim is fraud, and is not taken lightly by insurance companies. Those that are able to convince insurance companies to payout for deliberately damaged property will often feel the legal ramifications at a later date if their actions are discovered.

Lack of Receipts for Claimed Items

Many homeowners’ insurance policies are also going to cover items within the home. If your property is damaged, it is important that you have receipts for the items that you are looking to claim. For insurance purposes, as well as accounting purposes, you should save receipts for medium to large purchases that you may someday want to claim in order to avoid having your policy voided.

Illegitimate Flood or Fire

When a house is flooded or suffers fire damage, experts are called in to evaluate the cause of the fire and flood. Often times these will be attributed to faulty wiring or plumbing, which is covered under most homeowners’ insurance plans. However, if the experts called in to analyze the situation are unable to determine the cause of the fire or flood, or believe that the cause is nefarious, the insurance company may feel compelled to void the policy.

High Number of Claims

Policies that have an unusually high number of claims throughout their lifetime often come under increased scrutiny from insurance companies. Although none of the claims may appear to be fraudulent, the unusually high number of claims can suggest negligence on the part of the home owner. Insurance companies reserve the right to void policies with an unusually high number of claims, and often do so when it is cutting into their bottom line.

Changes in Property

Another reason why many homeowners’ insurance claims are often voided includes undocumented changes to the property. If you added several extra rooms to your home and did not inform the insurance company, then attempt to file a claim for those rooms being damaged, the insurance company may choose to avoid your claim on the basis of not being informed of changes in the property that they are insuring.

There are many reasons why an insurance company may decide to avoid a claim. As a general rule of thumb, you should save receipts, document and inform them of changes in the property that they are covering, and also document any damage that your property incurs over the lifetime of the policy.

Contributing Writer Larry Smith is an insurance specialist  who works for HomeownersInsurance.net.

Image/FreeDigitalPhotos.net

There are two basic parts to homeowners insurance: contents and building insurance.

Contents insurance refers to all the “things” in your house. Furniture, computers and other electronics, clothing, household supplies, toys. Basically it means all your stuff.

Building covers involves the actual house. Insurance for the building aspect of your house is how much it would cost to rebuild it. Some people get this confused with the market value of the house, but for insurance purposes, you want to have cover for how much all the supplies and labor would cost to build again should your house be destroyed, such as by fire.

Building also covers fixtures in the house like toilets, fitted kitchens, cupboards and attached enhancements, such as wallpaper. Structures like garages, greenhouses and sheds are usually covered under a building policy. However, insurers have varying policies for things like fences, gates, paths, drives and swimming pools.

Most policies will cover loss or damage from myriad sources, according to the Association of British Insurers. Covered losses include fire, lightning, earthquake, landslip, storm and flood, malicious damage, theft or would-be theft, water leaks from tanks and pipes, falling trees and branches, riot. Impact by aircraft, vehicle or animal and oil leaking from heating systems is also covered.

Things that aren’t included in most policies are: normal wear and tear, maintenance costs, faulty workmanship, breakdown, and any amount over your cover limits, damage done when the home has been unoccupied for more than 30 days, or when tenants are in the home.

Most insurance companies also offer extra cover for various items. For example, Swift Cover offers extra coverage for accidents other than those caused by fire or flood. If a tap is accidentally left running, for example, both contents and building fixtures could potentially be damaged. Extra accident coverage would cover these types of misfortunes.

Other extra cover choices include bicycle coverage, garden coverage, and valuable personal possessions that you take with you to and from your house — jewelry, laptops, mobile phones. Coverage for students away at school, family legal protection, and home assistance are also available extras.

In general when you buy a homeowners insurance policy, you choose an amount for excess. This is the amount you pay before insurance covers the rest. If a fire causes £1000 in damage, your excess might be set at £100, so the insurance company will pay £950 to repair the damage.

Oftentimes, you’ll have a lower premium if you carry a higher excess on your claims.

Some insurers may offer a reduction in premium if you accept a voluntary

For extra excess on all claims – the bigger the excess, the bigger the discount. Those who live in a flat or maisonette can opt to insure the building together to include living space and shared areas like stairs and entrances. Then residents can get their own individual contents policy.

The infographic below from AllState’s Community pages reflects perhaps the most complete safe harbor for your family in times of emergency. The safe room is not always something the average head of family considers, but maybe it should be? Check out this cool infographic and the logic therein.

Created by Allstate Extreme Conditions

Copy & Paste The Code Below

<br /> <a href="http://community.allstate.com/community/allstate_blog/blog/2011/12/07/be-safe-and-secure-in-your-home"><br /> <img src="http://i.imgur.com/1bOUg.jpg"><br /> </a><br /> <br /> <small>Created by Allstate <a href="http://www.allstate.com/catastrophe/main.aspx">Extreme Conditions</a></small><br />

This neat deconstruct shows off some features of a typical safe room that we bet you never thought of. Let us know your opinion on this, and perhaps we can come up with experts to answer your questions. At this point, we are not quite sure exactly what incentive insurers offer when safe rooms are present, but this seems like one of the best economical incentives. We will ask several to find out more.

Bunker image courtesy © Windowseat – Fotolia.com

You don’t have to live in Tornado Alley to have your life blown away. There are many more pitfalls today’s property owners have to evade somehow. Can you afford NOT to understand them all? You may also find that revisiting your homeowner’s policy saves you premiums, at a time when every penny can count too.

Let’s take a look at ten really good reasons you may want to look over your homeowner’s insurance policy.

1. Put simply, you simply have more things to ensure than you did before. The attic is full, the garage overflowing, and many of the new purchases may, or may not, be covered for all eventualities. Also, the value of your home’s contents has in all liklihood, gone up. Add to this the fact that the entire policy payout may not be enough to cover new items, the higher total value of your possessions and even the home, and you have a problem. Conversely, your situation may have changed in the opposite direction. Maybe the kids moved out, you decided to simplify, you simply do not need as much coverage as before. Whichever situation exists, you may be vulnerable to losing lots of money. The best way to determine this is with an inventory of your home, and an evaluation of your existing coverage.
2. You say you just remodeled? Just adding a new bath or kitchen upgrade impacts the value of your home significantly. Take today’s cost of remodeling, materials, and so on, and your homeowner’s insurance could be thousands off where replacements are concerned.
3. Rebuilding costs are up. The market value of your home is sometimes drastically different from the cost you will incur to replace it. The “real value” of the property is what you will be paying for if you have to rebuild, not the land and 2 x 4′s bought back when. This simply concept escapes many homeowners when they think about buying insurance, and especially after they have had insurance for a long time.
4. You’ve installed safety devices. Most insurance companies offer discounts when you add alarms, sprinklers, and other devices that protect your home.
5. Big ticket items like jewelry or even hi end electronics are sometimes excluded in some policies. Even if a policy has provisions for you getting a windfall and buying your spouse the crown jewels, the value of those gems will be lost if you don’t modify your insurance.
6. So you live in a flood or earthquake zone? Well, typical homeowner’s policies do not cover floods. The lightning or fire damage from some local calamity may be remedied, only to find out that all the water damage from the river overflowing is not. Flood insurance is available through some governments, but owners and renters are well advised to seek the advice of their independent agent here.
7. Your office is at home. Some policies have limitations as to whether or not you can have an office in your home. This is something you need to check out so you don’t get caught losing everything over a technicality. Go over your policy for any exclusions.
8. Changing insurance carriers. Homeowners can save a lot of money sometimes by “shopping” insurance carriers. Just combining auto, home and other coverage used to be the biggest savings here, but companies like Aviva, in Europe and the UK, offer incentives like discounts for buying online, and so on.
9. Asset protection. Most homeowners never think of their home as an asset really, but their opponent’s lawyer in a personal injury or other lawsuit may. The structural protection you need is one thing, bodily injury or property damage if someone gets injured in your back yard, is totally another. Are you covered? Can you bet your life you are, right now? You see the point we hope.  This press release via MarketWatch reveals some home economics tips you can use.
10. Home sweet, old home. Basic homeowner’s policies do not cover damage from that occur because of old pipes or symptoms some old homes experience. If you already own an older home, you have already experienced the idiosyncrasies here. Special policy add-on can help you defer loses you might otherwise incurred from owning that charming Victorian.

Many people have never even heard of home warranties, but in parts of the United States, California in particular, they have become very popular.  An estimated nine out of ten existing homes sold in the state come with one-year warranties that cover major appliances, pluming, electrical systems, and heating, all potentially expensive maintenance and repairs not normally covered by insurance.

For real estate professionals, a home warranty can add value to the transaction, something especially needed during a time when home values are plummeting.  Many home sellers will purchase the warranties and offer them to buyers hoping to protect themselves in case something goes wrong during the first year.

ORHP received thousands of entries for the contest but could only choose six from the geographic regions where the company operates: Central/Southwest, Mid-Atlantic, Pacific/Northwest, Southeast, and Southern California.  The prize for each winner was $500.

The success and reliability of home warranties seems to vary depending on the state in which they are purchased.  While some states have little or no regulations and many complaints of poor service, others, like California, have closely regulated systems that seem to work.  Old Republic Home Protection specializes in home warranties and is the third largest of its kind in the United States.