Your home is the biggest part of your net worth and according to statistics, accounts for nearly 40 to 45% of your monthly expenses. As a result, you should always be on the lookout for ways to minimize the expenses and maximize the value. Especially over the long run, as eventually you will sell your current home.
Here are 10 home finance questions that you should have the answer to and the reasons why.
- What is the remaining balance on your mortgage? This gradually goes down every month as you pay your monthly mortgage. Knowing this number is important in determining your net worth, but also critical in other refinancing or home equity decisions.
- What is the current estimate value of our home? When you bought the house, you set the purchase price for your largest asset. Has it gone up or down in value since you bought it? Real estate conditions are always in flux, so it is good to keep up with this every three months.
- What is the current estimated equity you have in your home? This is essentially the estimated value of the home minus the remaining balance. This is a key part of your net worth that you want to see grow over time.
- What is the loan to value (LTV) ratio of your home? This is a percentage where you take remaining balance on mortgage and other property liens and divide by the current estimate value. This is helpful as many people want to know if they can take cash out of their house for improvements, medical bills, college tuition bills, etc.
- How much would you save in interest if you paid a little bit more on your monthly mortgage payment? Increasing your mortgage payment by even $50, $100, or $200 a month can save you a lot of interest over a 30-year loan.
- What is your monthly cash flow budget for home expenses? All bills are not monthly, as some are due quarterly, every other month, or lump payments once a year in a certain month. It is good to plan out the different monthly expense budget.
- Are you properly insured? Compare the coverage in your home insurance policy to value of your home inventory including valuable collectibles
- What is the tax basis in your home? You bought the house for a certain amount, but over the years you have made major home improvements such as a new roof, kitchen remodel, etc. Knowing your tax basis helps at tax time now and in the future when you sell the home.
- What is your annual maintenance and repair budget? Preventative maintenance and landscaping tasks keep your energy bills low and can avoid early replacement costs of equipment.
- What is the 3 year forecasted value of my home? Knowing whether your neighborhood is going to appreciate or not with home values and by how much is important to planning your long term financial future. It can help decide whether to remain in the current house, or consider moving.
We all get caught up in the lifestyle aspects of our home with day to day life, family and friends. It is important to take some time out and get on top of these financial details as they are so important for your current and future financial situation.