Does Your Homeowners Insurance Policy Cover Your Home’s Appreciation?

With all the recent wildfires in California, I wanted to talk about whether or not you are covered by your homeowners insurance policy if a natural disaster was to strike us.

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Today we’re going to talk about whether your homeowners insurance policy is keeping up with your home’s continual appreciation.

As you know, we’ve had many catastrophes lately with forest fires in California. Could that ever happen to your home here in Lane County? It’s always a possibility.

If you live here, you’re obviously aware of how rapidly our home values have been rising over the last few years. Is your homeowners insurance policy keeping up with your home’s increasing value?

Let’s say you purchased an insurance policy 10 years ago when your home was worth $180,000 and today it’s worth $300,000. Let’s also say we did have a forest fire and the home burned down. Does your insurance policy just cover the $180,000, or does it cover more?

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You want to make sure you’re covered if disaster strikes.

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In reality, your land value is a non-factor. The land stays the same regardless. However, the structure of most insurance companies has an automatic adjustment built in.

Here’s how it works. Many companies look at the material and labor costs in your neighborhood to determine the loss and how much will be paid out. They don’t look at the value that is posted on an appraisal. They want to know how much the home is going to cost them to replace.

I recommend checking with your insurance company, because they each do things in a different way. You want to make sure you’re covered in case disaster strikes.

If you want to know what your home’s current value is, we’d be happy to provide you with a free CMA. You don’t need one for insurance purposes, however.

If you have any questions about your Lane County home or your homeowners insurance, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.

Are We in for a Market Correction Soon?

Property values continue to rise in Lane County, but I don’t think this trend is sustainable.

 If you’re a buyer, I think you should buy now.

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As most people are already aware, home sales continue to rise in Lane County. Over the past 12 months, property values have also risen to the tune of 8.4%. This is great news for sellers, but not for buyers.

Does this mean we’re in for a market correction soon? There are two prevailing opinions about this.

Some experts predict that property values will increase by 4% every year for the next several years, mostly due to millennials entering the market with more zeal than they have in the past. Others maintain that we can’t sustain such growth without running into an affordability issue, and we’re already having affordability issues as it is.

If I was a betting man, I’d predict that Lane County can’t continue this increase until more industry develops. For example, property values in Portland are rising more quickly than ours, but they also have more industry.

If you’re a buyer, you can either buy now and hope values keep rising so your home’s value does as well or wait for a correction. The problem with waiting for a correction, though, is no one knows if or when that will happen. It could be several years from now, so renting for that length of time definitely wouldn’t be advantageous. Another issue to take into consideration is interest rates will continue to rise, which hurts both buyers and sellers.

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The problem with waiting for a market correction is nobody knows when that will happen.

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With that being said, my advice to buyers is to buy as soon as possible.

If you have any other questions about our market or any other real estate needs, don’t hesitate to give me a call. I’d be happy to help you.

What You Need to Know About PMI

Are you looking at buying a home and putting less than 20% down? Your loan will require you to purchase private mortgage insurance, or PMI.

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What is PMI?

PMI is private mortgage insurance. It is essentially an insurance policy that protects the lender from you not being able to pay your loan. PMI is a monthly fee rolled into your mortgage payment and is required for all conventional loans that have down payments less than 20%.

For conventional loans, once you have built up equity of 20% in your home, you can cancel your PMI and remove the expense from your monthly payment. With FHA loans, however, PMI costs stay with the loan for its duration. Once they have reached the 20% equity level,many people change their FHA loan to a more conventional loan. As the buyer, you pay a monthly premium and the lender is the beneficiary.

PMI costs vary based on your loan-to-value ratio, the amount you owe on your mortgage compared to its value, and your credit score. The better your credit score, the better the rate you are going to get on your private mortgage insurance. You can expect to pay between $30 to $70 per month for every $100,000 you borrow.

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People purchase private mortgage insurance because, even though it is an extra cost, it enables them to buy a home much sooner.

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If your credit score was 800, you could expect to pay $68 a month on a $200,000 loan. If your credit score was 625, meanwhile, you’d pay $268 per month for your private mortgage insurance.

The average down payment last year, according to the National Association of Realtors, was about 10%. For first-time homebuyers, the average down payment was 5%. This means that a lot of people are paying private mortgage insurance.

Why though? While it is an extra cost, it enables you to buy a home much sooner. If homes are appreciating at a certain rate, the sooner you can buy, the better off you are. This helps compensate for the sting of private mortgage insurance.

If you have any additional questions or are interested in buying or selling, please feel free to contact me. I look forward to speaking with you soon.