Paying extra on your mortgage sounds like a great plan. In the right circumstances it can be. Too often however I meet people who pay extra on their mortgage without any specific financial plan in place.

At least until you are sure it is a smart move. I write this the day after listing a home for sale. They paid extra every month on their home which is still a short sale. The worst part...they are also filing bankruptcy because their credit card debt is overwhelming. Implementing the right financial plan would probably have saved them from both disasters.

Before paying extra on your mortgage I would recommend you talk with a good financial planner to make sure this is the best strategy for building wealth. When I ask people why they do this I usually get one of two responses. Either they are trying to build equity or they are trying to save interest on the back end of the loan. Indeed mortgage amortization tables make this look like a great idea... shave years off your mortgage, etc.

Before you do this consider a few factors...

• Mortgage interest is the only tax deductible interest. For most Americans this is the single biggest write off. If you are in a 25% tax bracket and have a 6% interest rate on your loan, your net effective interest rate is close to 4%.
• You don't build wealth by paying extra. You technically have more equity becuase you owe less but you actually paid the extra amount directly. Basically by doing that you are paying into a savings account that is not paying you interest. Weath is only "built" through appreciation which happens independent of what you owe.
• New changes in the mortgage industry make it much harder to access the equity in your home. If your money is tied there you may not be able to get it out without selling.
• Before paying extra, make sure your higher interest loans are paid off. Credit cards, car loans, etc. If you think the amortization schedule on a mortgage is scary, you should see one on a 20% credit card!!
• Have your money working for you in more than one place. If you put your extra money in your home, it is only appreciating in one market segment. Be disciplined and pay the same amount to another investment. The advantages to this are many including easier access to that investment and being more protected in case of market changes.

I am not saying it is never a good idea to pay extra on your mortgage. There is great freedom in being debt free. What I am saying is consider your overall financial plan using the help of a professional financial advisor before taking such action. Your home is but one part of a sound financial plan.

For anyone in the Indianapolis area, I would be happy to provide you with the contact information for some incredible financial advisors!

If you are considering buying or selling a home in the Indianapolis area, the Borushko Team of Keller Williams Realty would love to help!

Want to get an idea of the value of your home? Sign up for a free Market Snapshot which will tell you whats going on in the real estate market in your area!!

This is an old blog that I am reposting with some updates. With the decline in the housing markets, I felt it prudent to add to the list of items to watch for...

Building a home can be a great experience...or a nightmare. As a local real estate agent I often see the long term effects of decisions made by people choosing to build a home. My past also includes 10 years as a new home sales consultant with both local and national builders. With this experience many of my clients build new homes with great success. With that in mind here are a few tips to help you should you decide to build:

Have Representation: Hire an agent to represent you during the building process who has experience with builders. I know what you're thinking, of course I'll say that as an agent. However with 10 years experience I can tell you that the majority of poor decisions were made by people without representation. The easiest way to say it is that you don't know what you don't know. Also a good agent can help you save money through better choices and stronger negotiation positions.

Don't Overbuild: Do your research and be careful not to build a home that you can't resell. Before you build, make sure you know what style of homes, what upgrades, and what price ranges are typical in the area you've chosen. When you know this information make sure the home you're building fits in to this niche. Again your local real estate expert can do the legwork for you.

Prioritze your Choices: When it is time to decide what to put into your house, prioritze your list of selections. Make sure you select the items that cannot be done at a latter time first. For example a garden or deluxe bath often changes the basic structure of the floorplan and cannot be done later, so this selection becomes much more important than flooring that can be done at a later date. Also make sure you can live with your last minute cuts...I've seen too many people cut out the "full basement upgrade" at the very last minute only to regret it later. That extra square feet is often the storage you need when your family grows or the place for that full bathroom and wouldn't cost much up front.

Choose Location Wisely: Location, location, location. Where you build your home matters. The area of town, the neighborhood, the homesite you choose all make a huge difference. The right homesite will allow you to enjoy your home, and will also benefit you by allowing you to sell your home for more money later. Pay particular attention to the school districts in your area. Better school systems almost always correlate to better resale.

Know Community Performance: Before you build in a community you need to consider resale. One thing to look for is how long it will take for the community to be completed by the builder(s). Have your agent research how long they have been selling in the particular community, and how many lots are still available to sell. Pay particular attention to the last year. How many homes are selling in that community now? An easy way to check is to look at the number of homes currently under construction. Remember that if you need to sell before the community is complete, you will be competing directly with the builder. This can cost you some of your equity.

Check Builder's Financial Position: With the downturn in the housing market, it is critical to know whether the builder you choose is financially sound. Check with the Better Business Bureau, Angies List, local Builders Associations, stocks if the builder is nationally traded, etc. Other possible resources are the local contractors. They usually know which builders are paying their contractors. Remember, you are depositing your hard earned money with the builder assuming they will build your home. There are great financially secure builders out there. However, we have had 3 major builders go bankrupt this past 2 years in the Indianapolis Area. Most of the people who had hired these builders lost their down payments with little or no recourse.

Financing: Get approved before you go to a builder. The approval will definitely help your negotiating position as well as help you know and understand your options. Builders will often pay your closing costs if you choose their lender but the rates are often much higher. Plus you may be giving up some of your much needed seperation.

Have Proper Expectations: No home is perfect. If you choose to build you need to understand that mistakes will be made and there will be some material defects. Good builders understand this and have systems in place to address and correct these issues as they arise. Everything in a home can be fixed if addressed in a timely fashion. We would be happy to recomend you to a great builder with these systems in place.

Buying from a builder and building a home can be a great experience. Hiring an experienced agent can provide you with needed representation, helps make the building process more smooth and predictable, and can save you money in both the short and long term. If you're considering building a home in the Indianapolis area, contact the Matt Borushko Team and put our experience to work for you!

We hear every day that you get what you pay for. Consumers apply this logic to many facets of their lives. If you need legal counsel or need to see a doctor, you are going to select based on their expertise, not on their hourly rate. We hire them because they can help us. We understand that the experts may charge more but in the long run will cost us less.

We apply this logic to most things. So why don't we apply that same knowledge when selecting a realtor? Too often one of the first questions a seller asks is "What do you charge" or "what is your rate?". I think sellers ask the wrong questions because they don't know which questions to ask. So here they are...The list of interview questions you should be asking your agent:

• Why should we select you as our Realtor?
• What areas do you specialize in?
• Are you a full time real estate agent?
• What is your average list to sale ratio?
• How long are your average days on the market.
• What are the market averages for this area. (Ask for proof)
• What is your strategy for marketing this property?
• How many people are on your team?
• Can we terminate our contract if you fail to perform?
• How and how often are you going to communicate with us?
• How will you help us get our home ready to sell?
• How will other agents schedule showings on your home?
• How often will we discuss market conditions?
• and most importantly How are you going to net us more money than other agents?

You should select the agent who:

• Will be HONEST with you about the market and show you supporting data.
• Will get your home SOLD
• Will net you the most amount of MONEY
• Will get your home sold QUICKLY

Great agents accomplish this in many ways. Properly pricing your home will generate interest in your home. They will help you stage your home so that it appeals to buyers. They employ a sound marketing strategy that will reach more buyers and agents increasing the number of showings. More showings to interested buyers increases demand for your home. Lastly, the best agents are great negotiators getting you more money and better selling terms!

If you are thinking about selling a home in Carmel, Fishers, Noblesville, or Indianapolis, call the Matt Borushko Team of Keller Williams Realty today!