First Person: How to Lock in Savings as the Real Estate Market Heats Up

Yahoo Contributor Network

Home prices in the U.S. rose 12.2% year over year in May 2013 according to CoreLogic (www.corelogic.com), which provides data on the real estate markets, and they were up 2.6% from April to May. Home prices rose in all but two states in May.

At the same time that home prices are soaring, interest rates are on the rise, with the average 30-year fixed rate mortgage currently now well over 4%, according to Bankrate.com (www.bankrate.com/mortgage)

Given these trends, some homeowners may think that it is too late to take action to save money on some of the largest home-related expenses. That is not necessarily so. In fact, even with home prices and interest rates up, there are still plenty of money-saving opportunities that could save homeowners hundreds or even thousands of dollars.

Refinance

It is not too late to refinance a mortgage. Sure, mortgage rates have risen somewhat, but they remain low historically. Depending on a homeowner's situation, there are several possibilities to lower monthly payments by refinancing. For example, refinancing might make sense for:

A homeowner who expects to be in his home indefinitely and who still has a mortgage with an interest rate well above what is available in today's market. Although a rule of thumb once was that for a refinance to make financial sense, it needed to result in at least a one percentage point reduction in the mortgage rate, in fact, depending on the upfront cost of the refinance, the reduction in monthly payment, and how long the homeowner expects to own the home, even a lesser reduction could be a big money-saver over time.

A homeowner who doesn't expect to own his home more than five to seven years and can lower his rate by refinancing to a five-year or seven-year adjustable rate mortgage (ARM).

A homeowner who believes that interest rates are likely to continue to go up and, therefore, who wants to refinance an ARM to a fixed rate loan.

Reassess

If a homeowner did not get the value of his home lowered for tax purposes after the real estate bubble burst and, therefore, still is paying taxes on an assessment that is well above the current market, the rebound in real estate values should be a wake-up call that now is the time to take action. Even though real estate prices are up, in many (if not most) markets, they are still well below their peaks, so for many homeowners, the opportunities to lower property taxes as a result of a reassessment could be substantial.

Save When Selling

As the real estate market has heated up, some markets have become seller's market. In a seller's market, homeowners who want to sell may be able to save in several ways.

First, when demand is strong and homes are selling quickly, sellers are in a stronger position to negotiate lower commissions with real estate agents.

Second, in a hot real estate market, sale-by-owner transactions become more viable for owners willing to take on this responsibility.

Third, in a seller's market, a homeowner may not need to invest as much to prepare his home for the market. A good seller's agent can advise on which fix-ups make sense in a hot market and which costly investments are unnecessary.

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

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