Key Takeaways
- Sellers can expect more competition this spring as the market heats up.
- Preparing your home for sale can help attract prospective buyers and potentially increase your home’s sales price.
- Buyers are looking to negotiate, so sellers should address needed repairs ahead of time.
Spring is one of the best times to sell your home. Homebuyers are coming out of winter hibernation with more room in their schedules since the holidays are over. They’re also watching the calendar, hoping to get into new homes before the next school year. You can still take advantage of the busy spring market, but enticing prospective buyers to put down an offer will take some work.
Why You Need to Prepare Your House for a Spring Listing
Kurt Carlton, president and co-founder of real estate investment marketplace New Western in Dallas, says sellers can expect more competition this spring. They still need to prepare their homes ahead of listing so the sale is more likely to close without lengthy negotiations.
“It may seem like spring will be a seller’s market but buyers have a budget and will be looking to negotiate,” Carlton says. “Even minor repairs can be deal-breakers, so sellers should address maintenance issues ahead of time to avoid giving buyers a reason to walk away or ask for a price reduction.”
Preparing your home for sale can also help attract more buyers and potentially hike its sales price. “Properly preparing your house for the market can increase your audience and showings and will also increase your sales price by as much as 20%, depending on the improvements,” says Greg Forest, senior global real estate advisor at Sotheby’s International Realty in Palm Beach, Florida.
6 Tips to Prepare Your Home for the Spring Real Estate Market
When preparing your home for the spring homebuying season, here are some tips experts say can potentially help you sell your home faster and for top dollar:
- Boost your home’s curb appeal.
- Make necessary repairs and renovations.
- Consider making cosmetic upgrades.
- Declutter and depersonalize.
- Do a deep clean.
- Stage your home.
Boost Your Home’s Curb Appeal
Your home’s exterior, landscaping and overall condition and appearance all contribute to its curb appeal. First impressions are everything in real estate and can have a major impact when you list your home for sale.
“The most straightforward and affordable way for sellers to boost curb appeal for spring is to power wash siding and sidewalks and keep the lawn mowed, edged and trimmed,” Carlton says. “A fresh paint job to the entire exterior of a home can get expensive, but clean gutters and a fresh-looking yard will go a long way.”
The entryway is another area that often needs attention. Pantea Bionki, owner and lead designer of Bionki Interiors based in Chino Hills, California, recommends adding vibrant flowers and greenery in pots around the front entrance. If you have a front porch, Bionki says adding cozy seating areas and rugs can create a more welcoming atmosphere.
Make Necessary Repairs and Renovations
Before making any repairs or renovations, consider whether they’ll add value, provide a good return on investment or help attract prospective buyers. Remodeling kitchens and bathrooms may seem like a good option, but Carlton encourages sellers to determine whether they’ll actually get a return on investment. He says homeowners should focus on functionality and curb appeal. “Repair anything that is obviously and visibly not functioning as it should before showing it to buyers,” he says.
A big mistake sellers tend to make is attempting to match the latest design trends or renovating according to their own personal taste, says Andrea Saturno-Sanjana, a broker at Coldwell Banker Warburg in New York City. “Renovations that are too specific often do not appeal to the widest range of buyers,” she says.
Saturno-Sanjana says sellers should consider repairs and refreshing items that are immediately visible to the buyers, as well as what might catch the attention of the home inspector. “For example, it might be less costly to replace loose wall switches before listing rather than to leave them as is for a buyer’s home inspector to view them as red flags, which might signal other problems with the home,” Saturno-Sanjana says.
Consider Making Cosmetic Upgrades
Sellers can make a big impact without paying a small fortune for renovations. “If sellers want a buyer to feel like their home is move-in ready, a fresh coat of paint on interior walls and exterior doors and windows is a high-impact option without construction,” Carlton says.
If you don’t want to spend a lot of time and money fixing up your home, put what you can in the entry foyer, says Sheila Trichter, a broker at Coldwell Banker Warburg. “A fresh coat of paint won’t cost a lot in what is typically a small space,” she says. “Bright overhead lighting, a fabulous print or some other striking art will all set the mood. You want the prospective buyer to be smiling.”
Declutter and Depersonalize
Your home may reflect your life, but you want new people to visualize it as their home. That means removing all the family photos, trophies and any political or religious decor items. Strive for a clean slate.
You’ll also want to declutter. That can be everything from magazines on a side table to the kids’ boots in the hall to your blender on the kitchen counter. The home needs to look sleek and minimalist. Put everything you can away, but don’t overfill closets because prospective buyers will look there, too.
Forest recommends using neutral colors and removing excess furniture to make the space feel more inviting. This will help buyers envision themselves in the space.
Do a Deep Clean
Do a thorough spring cleaning, inside and out. You’ll want to clean out closets, wash all the windows and have the carpets cleaned. Go room by room, but pay attention to the kitchen, bathrooms and outdoor spaces. “These spaces are where people spend their most time, so if they are unappealing it can be a turnoff to a potential buyer,” Forest says.
Stage Your Home
Staging doesn’t necessarily raise the value of your home, but it could entice prospective buyers to make a higher offer and increase the likelihood it will sell quickly. According to the National Association of Realtors’ 2023 Profile of Home Staging, 20% of sellers’ agents said staging a home increased the dollar value offered by homebuyers between 1% and 5% compared with similar homes on the market that were not staged.
However, try not to stage a home for a specific season. “Doing so risks letting the buyers know that the home has been on the market for an extended period,” Bionki warns. “While this information is available online, it is best to avoid drawing unnecessary attention to it. So, I discourage the use of seasonal pillows or decorations to maintain a timeless appeal.”
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But not all home improvements are eligible for tax deductions, and those that do qualify won’t apply to the year you make renovations.
“Now, while most home improvement efforts won’t lower your taxes today, they’re not without their future perks,” says real estate agent Clint Jordan, a veteran and former Air Force fireman who founded Mil-Estate Network, a real estate service for veterans and their families. “If you tackle some major renovations that boost your home’s value, prolong its life or adapt it for a new purpose, you’re essentially making what’s known as capital improvements.” Later, when it’s time to sell, these capital improvements can benefit you and your tax situation, Jordan adds.
Make sure you keep track of all these costs, including receipts, purchase orders and other related documentation, for when you decide to sell your home.
Here are some guidelines for exploring home improvement tax deductions:
Generally, most home improvements, especially cosmetic ones, aren’t tax deductible. However, the IRS does offer some tax benefits for certain capital improvements, such as renovating your home office or a space you rent, making energy-efficient improvements or making changes due to a medical condition.
If you do qualify for tax breaks, you won’t see the benefit immediately. “When you make a home improvement, such as installing central air conditioning or replacing the roof, you can’t deduct the cost in the year you spend the money,” says Roxanne Hendrix, CPA and tax expert with JustAnswer. “But, if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house.”
Most home improvements aren’t tax deductible, but the IRS does specify situations in which you can write off expenses as you improve your home. Here are home improvements that could save you money, either as a deduction or a credit, on your tax bill.
Capital improvements. The IRS defines a capital improvement as one that adds value to your home, prolongs its useful life or adapts it to new users. A capital improvement is tax deductible, but only if the improvement exists for more than one year and remains when you sell the home.
According to the IRS, a capital improvement can be:
- An addition to your home, such as a bedroom, bathroom, deck or garage.
- Landscaping.
- Exterior upgrades, such as a new roof, new siding, storm windows or doors.
- Insulation added to the attic, walls, floors, pipes and ductwork.
- Home system improvements, including an HVAC system, furnace, ductwork or security system.
- Plumbing upgrades, including the septic system, water heater or filtration systems.
- Interior improvements, such as built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting or fireplace.
Home office improvements. If you use part of your home as your main office exclusively for business, you can typically deduct repairs and maintenance costs. “The amount you can deduct depends on whether the project impacts the entire home or just the office,” explains Courtney Klosterman, home insights expert at Hippo Insurance. The deduction is also categorized similarly to capital improvements and only applies to the percentage of your home that your office occupies.
For example, Klosterman says you could potentially get a tax break if you replace your home office windows with dual or triple-pane windows to help improve insulation and reduce noise. This would also benefit the entire house, but the deduction would only be applied to the percentage of the property the office takes up. If the improvement only benefits your home office, then you can deduct 100% of the cost of improvements.
Landlord home improvements. If you rent out a portion of your home, you can potentially depreciate the expense as a rental expense from the rental income you receive. “Improvements that benefit only the portion of the home being rented can be depreciated in full. Improvements that benefit the entire home can be depreciated according to the percentage of rental use of the home,” Hendrix says.
Medical improvements. You can potentially get a tax break if you make medically necessary upgrades to your home as part of the medical expense deduction. “These include improvements that help make your home more accommodating for a disability that you, your spouse or dependents that live in your home have,” Klosterman says.
The amount you include in the deduction depends on how the improvement impacts the home’s value. Klosterman explains that if your home’s value increases, your medical expense is considered the cost of the improvement minus the increase in home value. If your home’s value doesn’t increase, you can include the entire cost in your medical expense deduction.
Historic home improvements. The federal historic rehabilitation tax credit gives homeowners a tax break if they are renovating a historic home. “Historic homes can qualify for this tax credit and other grants since many organizations wish to preserve historical buildings,” Klosterman says. “Taking advantage of these can help lower the financial burden of potential repairs while helping you maintain your home’s original beauty.”
Per IRS guidelines, the property must be classified as a “certified rehabilitation,” meaning any rehabilitation of a historic structure certified with the National Park Service must be consistent with the historic character of the property or the district where the property is located. The credit is equal to 20% of the qualified rehabilitation expenditures.
Energy-efficient improvements. Homeowners can potentially qualify for the Energy Efficiency Home Improvement Credit of up to $3,200 for energy-efficient improvements made after January 1, 2023. For 2024, the credit is 30% of qualified expenses, but Klosterman says there are limits for different types of improvements.
Energy efficient upgrades, including structural improvements or the installation of new systems, can also reduce your home’s energy usage, strain on critical systems and utility costs, Klosterman explains.
“Some states also offer their own incentive programs, ranging from tax credits and rebates to low-interest loans for energy-efficient upgrades,” Jordan adds. “These can cover a broad spectrum of improvements, from solar installations to HVAC upgrades and even landscaping for water conservation in some areas.”
These rebates could add up to as much as $14,000 and can be combined with income tax credits.
Clean energy improvements. Investments in renewable energy for your home – solar, wind, geothermal, fuel cells or battery storage technology – may qualify you for the Residential Clean Energy Credit. According to Hendrix, the tax credit is 30% of the costs for qualifying, newly installed property from 2022 through 2032. The credit percentage drops to 26% for property installed in 2033 and 22% for property installed in 2034.
The credit applies to your primary residence in the U.S., new or existing. It may also apply to a second home, but you must live on the property part time and cannot rent to others; however, fuel cell property claims don’t apply. “For these upgrades, you can carry forward any excess credit and apply it to reduce the tax you owe in future years. You may not include interest paid, including loan origination fees,” Hendrix says.
The IRS states that the cost of repairs and maintenance necessary to keep your home in good condition, but don’t add to its value or prolong its life, don’t qualify and cannot be included in your basis – the amount you paid for the property plus the cost of capital improvements.
Some examples the IRS gives include painting the interior or exterior of the home, fixing leaks, filling holes or cracks, or replacing broken hardware.
Additionally, costs associated with improvements that are no longer part of the home and costs with a life expectancy of less than one year after installation do not qualify.
There are some exceptions. The entire project is considered a home improvement if items that would be considered repairs are done as part of an extensive remodeling or restoration of the home. For instance, the IRS explains that if you have a casualty (such as a fire or storm) and your home is damaged, then increase your basis by the amount you spent on repairs that restored the property to its previous condition. You must also adjust your basis by any amount of insurance reimbursement you received or expect to receive for losses.
According to Hendrix, the money you spend on your home fits into two categories from a tax perspective: the cost of improvements and the cost of repairs.
“You add the cost of capital improvements to your cost basis in the house,” Hendrix says. Capital improvements increase the cost basis of your property, which reduces your tax burden when you go to sell. “The price you paid for the home will increase in turn reducing your capital gain on the sale of the home in the future,” she adds.
On the other hand, repairs are treated differently and not added to your cost basis. “Although you can’t deduct home improvements, it’s possible in some situations to depreciate them,” she says.
Depreciation means you deduct the cost over several years, typically anywhere between three and 27.5 years, Hendrix says. This also depends on the type of assets. “To qualify to depreciate home improvement costs, you must use a portion of your home other than as a personal residence,” she adds. This typically means using part of your property as a residential rental property or as an office for business.
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Americans are paying more in down payments as elevated home prices are causing prospective homebuyers to have to come up with more upfront cash to purchase properties, a Redfin analysis shows.
House prices are nearly 7 percent higher in February compared to what they were a year ago, which has contributed to the typical buyer putting down 15 percent of a purchase price compared to 10 percent the year prior.
Higher prices, though, are not the only reason making buyers pay more in the initial payment when buying property. High mortgage rates are contributing to would-be homeowners wanting to pay more of the downpayment than they might have in the past.
“A bigger down payment means a smaller total loan amount, and a smaller loan amount means smaller monthly interest payments,” according to Redfin.
To illustrate how much people are able to save when paying more in a down payment, Redfin looked at how much someone would have to spend a month on their mortgage outlays if they bought a house at the national median price of $374,500. If a buyer puts down 10 percent on a 6.79 percent rate, their mortgage payments would amount to nearly $3,000 a month. A 15 percent down payment would mean monthly payments of a little over $2,800.
Read more: What is a Mortgage? Types & How They Work
Mortgage rates have been elevated, partly due to the Federal Reserve hiking its funds rate to battle high inflation. At one point in the fall of last year, borrowing costs soared to the highest since the turn of the century. While rates have declined since then, they are still hovering around the 7 percent range, much higher than they were during and prior to the pandemic.
While elevated housing prices are contributing to buyers paying more in down payments, they may be able to afford such higher cash up front because of the value their pervious homes have accrued over the last few years as homes have become more expensive.
“Some of those people may not have the income to qualify for a large loan, but the equity they’ve built allows them to make a bigger down payment so that they can purchase the house they want with the smaller loan that they do qualify for,” Redfin points out.
Cash is increasingly becoming king
One other development that is shaping the housing market is buyers are more and more purchasing homes in all cash transactions.
More than a third of purchases, 34.5 percent to be exact, in February were paid for in cash. This is higher than last year when cash transactions accounted for 33.4 percent of purchases.
“Some homebuyers are paying in cash for the same reason others are taking out large down payments: elevated mortgage interest rates,” Redfin said. “A large down payment helps ease the sting of high rates by reducing monthly interest payments, whereas an all-cash purchase removes the sting altogether because it means a buyer isn’t paying interest at all.”
Some of these purchases are from investors but they also come from wealthier Americans who can afford to pay all-cash when buying a home. This is contributing to the crowding out of first-time home buyers, said Redfin Economics Research Lead Chen Zhao.
“High mortgage rates are widening the wealth gap between people of different races, generations and income levels,” she said.
Soaring home prices during COVID as buyers took advantage of plunging mortgage rates led to this division on who is able to buy property. To drive the point home, Redfin points out that in February all-cash purchases were nearly 3 percent higher than a year ago but sales secured through mortgages fell by nearly 3 percent.
Read more: How to Buy a House With Bad Credit
“Wealthy Americans are the only ones who can afford to buy homes. Meanwhile, people who are priced out of homeownership are missing out on a major wealth building opportunity, which could have financial implications for their children and even their children’s children,” Zhao said.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
From its glorious beaches to unique suburban neighborhoods and vibrant cities, New Jersey can be a great place to call home. And its proximity to two major metro areas – New York City and Philadelphia – make it a prime spot for job seekers looking to grow their careers.
The average home value in New Jersey is $503,432, according to Zillow. That’s a 9% increase from a year ago. Three New Jersey metropolitan areas made Realtor.com’s list forecasting the hottest U.S. markets in 2024: Allentown-Bethlehem-Easton, PA-NJ, ranking No. 23; New York-Newark-Jersey City, NY-NJ-PA, ranking No. 75; and Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, ranking No. 80. These markets were ranked based on a combination of forecasted home price growth and predicted number of sales.
If you’re hoping to buy a New Jersey home, it’s important to find a great real estate agent to help with your search. Here are some of the top real estate companies in the Garden State by sales volume, according to RealTrends agent ranking service.
Based in Colonia in the heart of central New Jersey, the Robert Dekanski Team has recorded over $2 billion in sales and sold more than 10,000 properties. Robert Dekanski began selling New Jersey real estate in 2002. The team of 66 consists of agents and support staff serving buyers looking for homes across the Garden State.
Based in Hoboken, the Jill Biggs Group is dedicated to helping homebuyers in Hudson County. Affiliated with Coldwell Banker Realty, the team of more than 50 focuses on areas that include Weehawken, Jersey City and other neighborhoods that are only a quick train ride across the river from Manhattan. Jill Biggs has more than 20 years of experience in New Jersey real estate. In 2023, the group earned $434 million in sales.
Chris Walsh leads The Real Estate Leaders, a group of 70 agents assisting buyers and sellers throughout New Jersey, though mainly focused on Monmouth County.
Since 2003, Walsh has sold over $750 million worth of real estate and more than 1,200 homes. Affiliated with eXp Realty LLC, the group earned $305 million in sales in 2023.
With offices in Short Hills, Summit and Chatham, the Sue Adler Team is dedicated to helping homeowners looking to buy in northern New Jersey. Affiliated with Keller Williams Realty Premier Properties, the firm, which consists of nearly 40 professionals, focuses on towns that include Westfield, Berkeley Heights, Maplewood, Livingston and South Orange. Sue Adler, the firm’s CEO, has more than 20 years of experience selling real estate.
The Jack Binder Group has been a top-producing real estate team since 1986. Based in Avalon, the Jack Binder Group focuses on the beach communities of Avalon and Stone Harbor. The team of seven is committed to helping New Jersey buyers find their ideal shore home. In 2023, the group earned $268 million in sales. The Jack Binder Group is affiliated with Ferguson Dechert Real Estate.
With offices in Westfield, Summit, Jersey City, Ridgewood, Short Hills and Red Bank, the Michelle Pais Group at Signature Realty brings 68 combined years of real estate experience to the table. The team of 14 has sold more than 4,000 homes totaling upward of $1.5 billion. Michelle Pais, the firm’s owner, has been selling real estate for almost 20 years. The firm’s target areas include Westfield, Mountainside, Summit, Cranford and Clark.
With offices in Margate and Margate City, Paula Hartman and her staff of 15 serve the communities of Margate, Longport, Atlantic City, Ocean City and surrounding beach towns. Affiliated with Berkshire Hathaway HomeServices, The Hartman Home Team earned $250 million in sales in 2023. Paula Hartman works alongside her daughter and son-in-law, Dana and Brian Hiltner, and her son, Todd Gordon.
Known as SEG, Stacy Esser Group Realty has a staff of seven based in Tenafly, situated in northeast New Jersey across from New York City. Affiliated with Keller Williams Town Life Realty, SEG earned $213 million in 2023.
Former pro tennis player Aleksandr Pritsker is founder and CEO of Team Blackstar, a Montclair-based real estate firm with a staff of 15. Affiliated with eXp Realty, Team Blackstar serves Marlboro, Manalapan, Colts Neck, Freehold and Holmdel. In 2023, the firm earned $213 million in sales.
Affiliated with eXp Realty and led by realtor Matthew Rowack, the Rowack Real Estate Team is a group of nearly 70 real estate agents with an office in North Brunswick. The Rowack Real Estate Team serves the communities of Edison, East Brunswick, Monroe, Piscataway, Franklin and Princeton. In 2023, the group earned $209 million in sales.
How to Find a Real Estate Agent Near You
Your search for a real estate agent in New Jersey could start with one of the firms above. But it’s a good idea to interview several real estate agents and find out how they work before settling on yours. Buying a home in New Jersey is hardly an inexpensive prospect, and it’s something you want to get right. Take the time to find the perfect agent for you.
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Declining rates and a strong economy may embolden potential home buyers and could help the housing market turn a corner from last year’s doldrums when record high home loans costs and elevated pricing kept both buyers and sellers out of the market.
Mortgage rates peaked at two-decade highs in the fall of last year. This, plus elevated prices of homes, made buying a home the most unaffordable it’s been since the turn of the century.
But rates have been declining over the last few weeks and are now in the mid-6 percent range. And with a robust economy plus higher wages that Americans are seeing, the market will likely see a shift over the coming months, Mark Zandi, chief economist at Moody’s Analytics, told Newsweek.
“When looking back over the last couple of years when market activity picks up, when people feel like housing is a bit more affordable and you see a pickup in activity sale,” he said. “And the economy is strong, meaning the labor market, job market is very, very, good. Lots of jobs, low unemployment. Wage growth has improved and that’s another good strong fundamental.”
The sticking point as to how fast the market rebound hinges on prices, which continue to be elevated, Zandi said.
The median sale price of a home as of January 21 stood at more than $362,000, a 5 percent increase from a year ago in what was the biggest increase since October 2022, according to real estate platform Redfin. The median asking price was also elevated, jumping by 6.5 percent to about $384,450.
“I do think we need to see some moderation in house prices, you know, if not outright declines, then flat prices for a while to allow incomes to catch up and affordability to be restored,” Zandi told Newsweek.
Prices will decline should the used homes market, which has frozen as sellers are reluctant to give up their old rates and replace them with costly home loans. A shift in that segment of the market may improve affordability, Zandi said.
“Once they start moving, and I suspect we’ll see more and more of those folks moving in the coming year, they’ll have to become somewhat aggressive on pricing, they’re going to have to lower their price,” he told Newsweek.
Over the next months, single-family housing construction is likely to recover the quickest due to severe shortages in that space and other segments of the market are likely to catch up as mortgage rates and the economy improves.
“House prices, they’ll be the last to recover,” Zandi said. “I think they kind of go sideways, down, for two to three years to let incomes and mortgage rates catch up and affordability is restored.”
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
A mortgage involves a lot of paperwork, from the stack of documents you’ll get at closing to the statements you’ll continue to receive from your lender as you pay down your loan. You might be wondering how long to keep these statements and other mortgage documents, and if you need to keep every single one — especially in our digital age.
Many experts advise holding onto certain mortgage documents for the life of your loan or beyond, or at least until you sell your home. “Even if you pay off your mortgage, it is a smart idea to keep the paperwork,” says Roselina D’Annucci, a New York-based attorney with Serrano & Associates PC.
Ah, but exactly which documents do you need to keep after paying off a mortgage? And what sort of paperwork do you need to hang onto, after you’ve sold a home?
Here’s what to know about how long to keep mortgage statements and other home-related documents — and specifically, what can go and what can stay.
Even if you pay off your mortgage, it is a smart idea to keep the paperwork. Once you sell and there are no future tax implications associated with the sale of that property, your paperwork may be discarded.
— Roselina D’Annucciattorney, Serrano & Associates PC
How long should you keep mortgage statements?
Before we look at how long to keep mortgage statements and other paperwork, let’s get clear on which documents are worth saving and what they do for you.
When you buy a home, you’ll receive several important pieces of paper, including:
- Deed – The deed indicates your ownership of the home and is signed by you and the seller, explains real estate investor Warner Quiroga, president and owner of Prestige Home Buyers in Long Island, New York. “The main job of a deed is to move the legal rights of a property from one person or business to another,” he explains.
- Promissory note (mortgage note) – This is the legal contract, in which you promise to repay the debt you took on with interest and agree the home is collateral for the debt. “Some states use a document called a deed of trust for this,” Quiroga notes.
- Purchase agreement or contract – Signed by both you and seller, this document typically includes the price paid for the home, closing date and other essential details.
- Home inspection report – A detailed report from a professional home inspector with notes indicating your home’s condition, including possible issues.
- Closing disclosure – “This form summarizes the final details of your mortgage loan and the property sale,” Quiroga explains. “It tells you things like the amount, length and type of your loan, the interest rate, the overall costs and the escrow fees.”
- Seller disclosure document – This spells out other details about the home that the seller is aware of. “It tells you about the condition of the house and any known problems that might influence its value or safety,” such as structural defects or hazards like asbestos or lead paint, Quiroga says.
- Title insurance document – This document from the settlement or title company includes information about your title insurance policy, which protects the lender (and you, if you opt for this coverage) from issues with the property’s title.
- Addendum and amendments – These documents specify any alterations or changes not present in the original purchase and sale agreement (signed when your home offer was accepted).
- Buyer’s agent agreement – “This piece of paper is a contract between you and your real estate agent,” Quiroga says. “It usually explains how the agent will work for you and how they will be paid.”
Some of these papers can go fairly soon. “The agent’s agreement and addendum documents can be discarded after as little as three years, since the statute of limitations for IRS auditing is up to that time,” Quiroga says. While Quiroga recommends tossing the home inspection report, too, other authorities recommend that you keep it — if nothing else, to have evidence of the home’s condition when you bought it.
With everything else, it’s best to hang onto the paperwork for the life of your mortgage.
What information your mortgage statements contain
But wait, you might be thinking. We haven’t explained how long to keep mortgage statements.
Once you begin making monthly mortgage payments, you should receive these statements by mail, email or uploaded to an online account from your lender or servicer. The statements may include details such as:
- Upcoming payment information: You’ll be able to see the amount of your next mortgage payment, with a breakdown of how much is going towards the principal and interest. Escrow account (for homeowners insurance and property taxes) and fee totals will be listed as well.
- Loan and account details: Your statement will include basic information about your loan, including your account number and your property’s address. You should also see the outstanding balance on your mortgage, your current interest rate and maturity date (when your loan will be completely paid off). If there’s a prepayment penalty on your mortgage, you might see that, as well.
- Transaction history: Like a bank statement, this section will show any charges and payments you’ve made since the last billing cycle.
- Past payment breakdown: Here, you’ll get a glimpse of the progress you’ve made on your mortgage balance. It can include a look at what you paid last month and so far this year.
- Contact information: This section will give you options for getting in touch with your loan servicer.
Mortgage statements have a very short shelf life, so they can be destroyed or shredded whenever you choose. “Since the information contained on monthly statements is always changing, there’s no need to keep them for any prolonged period of time if you don’t want to,” says Than Merrill, CEO of FortuneBuilders, a real estate investor coaching firm. Those documents can absolutely go fairly soon — or even immediately, if you can access them online. At most, you might keep one on hand, in case you need to furnish proof of your mortgage details or home address for some reason.
Which mortgage statements are most important to keep?
While you can get rid of your monthly mortgage statements, there are some other documents that you should keep as long as you own the home. These include:
- Deed: “Above all, never throw away or remove the deed to your home, as this is by far the most important document to keep,” says Leonard Ang, CEO of iPropertyManagement, an online resource for landlords, tenants and real estate investors. The deed proves that you own your home. If you sell your property, you’ll need to transfer the deed to the new owner.
- Purchase agreement and seller’s disclosures: These documents have certain details about your home’s condition. If any issues develop with your home, you can check to see if the problems were outlined here.
- Closing documents, including the closing disclosure, deed of trust or mortgage note: These are important to keep because they outline the financial and legal agreements of the transaction, including the terms and costs of your loan and repayment obligation.
- Home inspection report and home warranty: Because it contains specifics about the state of your home, the home inspection report may come in handy for future maintenance or renovation/remodeling projects. Similarly, if you have a home warranty, it will detail what’s covered under your policy, which you’ll want to check before replacing any appliances or home systems. “A homeowner should indefinitely hold onto any documents that detail the state of the home,” Merrill says. “While they may not sound necessary to keep at first, there’s always the chance they will come in handy in the future.”
- Property survey: This document shows your property lines, which is useful if you want to build on your land.
If you ever move onto a new property, you’ll probably ask, “Do I need to keep old mortgage documents after selling the home?” Generally, you should keep this documentation until the next tax cycle just to be safe. Then, you can shred it.
You might also wonder, “What documents do I need to keep after paying off the mortgage?” Generally, it’s a good idea to keep everything cited here until you part with the property, even if it pertains to a loan you’ve fully settled. We’ll explain why in more detail in the next section.
Why is it important to keep mortgage documents?
Now that we’ve given you an overview of how long to keep mortgage documents, you’re probably curious why you need to save this small mountain of paperwork. In short, if a title, insurance, tax or legal question arises, your mortgage paperwork can prove invaluable. “For instance, your homeowners insurance agent may request some of this paperwork, particularly if there is an insurance claim involved,” Ang says.
Let’s say you’ve paid off your mortgage and are ready to sell your home. If your mortgage lender never filed a satisfaction of mortgage with the local recording office for some reason, your mortgage documents could save you from a dispute during the sale. “The easy fix is to hand over the document that you saved, pertaining to your payoff, whether it is a letter acknowledging payoff or the payoff itself,” D’Annucci says.
Other reasons you might need your mortgage statements include determining your capital gains tax liability, preparing for a major remodeling project and having documentation in case you get audited.
But most crucially, you might need these documents if you ever face foreclosure. “The majority of my clients facing foreclosure did not keep their original documents, which may be used as a defense that could possibly win your case and, in some cases, wipe out the mortgage itself due to errors or non-compliance of certain laws and regulations,” D’Annucci says.
The lesson here? “Keep everything,” declares D’Annucci. “You never know what challenges you may face in the future that your carefully preserved paperwork can help resolve.”
What is the best way to store mortgage paperwork?
Ideally, you should store original paper mortgage documents within a fireproof and waterproof safe in your home or in a safe deposit box at your bank. At the very least, store paper documents in a carefully organized file cabinet that you can lock. “Try to organize your papers in a binder or folder,” Ang says. “Chronological order may be most helpful, with indicator tabs showing the month and year.”
It’s also smart to keep a digital copy of your mortgage documents in cloud-based storage or on a hard drive.“Just be aware that a hard drive can be lost, and cloud-based storage can be hacked,” Quiroga says. “Plus, digital copies can be altered. That’s why holding onto the original paperwork is wise.”
If you decide to discard any of these documents — and you shouldn’t until you sell the home, at the earliest — don’t simply throw them away in the trash. “All sensitive content should first be removed before discarding, including your account numbers, Social Security number and date of birth that can be redacted by using a redaction pen or stamp,” D’Annucci says.
After that, you can either thoroughly shred or completely burn the paperwork, provided no remnants remain.
What to do if your mortgage documents are lost or damaged
Lastly, if you’ve lost or damaged any original mortgage documents, don’t despair. You may have options to retrieve them or get replacements, says Gabriel Freitas, Broker/Owner at Voyant Realty in Andover, Mass.
However, he advises homeowners to keep a close eye on the “original note from a closing package, as well as any discharges when mortgages are refinanced or paid off.”
“Other documents can be obtained if you lose them, but those two are the ones you might need most, so having them handy is a good idea,” he says.
Many companies that participate in real estate transactions — like lenders and title companies — keep this type of paperwork on file. If, for some reason, you need a physical copy of a particular document, the company that was involved in that part of the deal may be able to send you a replacement.
“You may be able to request a duplicate document from your lending institution,” Quiroga says. “For lost deeds, you can contact your local recorder’s office and request a copy.”
Bottom line on keeping mortgage statements
In today’s digital world, there are a few areas where paper still rules. Mortgage and real estate title documents are among them. While it’s generally safe to toss out the monthly statements from your lender, you’ll want to hold onto anything relating to the original mortgage contract and terms (e.g., the promissory note or deed of trust, the closing disclosure) for at least as long as you own your home. These, along with other critical documents – including your ownership deed, purchase agreement and proof of title insurance — you should keep in their original, hard copy form.
You probably won’t have to pull out your mortgage documents very often, but you should still make sure that they’re kept somewhere safe and accessible for when you do need them.
Key takeaways
- Let your mortgage lender or servicer know if you’re getting a divorce.
- Your divorce mortgage options include refinancing your mortgage, selling your home or paying your ex-partner for their share of equity.
- To help you decide, calculate the amount of home equity you have, as well as any tax implications and impact to your credit.
One of the biggest decisions divorcing couples face is who gets the house in a divorce. If you’re in this situation, your options might depend on how the home is financed and titled, among other factors. Another question people might ask during a divorce is, “What are my rights if my name is not on the mortgage?” Here’s everything you need to know about how divorce impacts your mortgage.
Mortgage options when dealing with divorce
1. Refinance your mortgage
Some divorcing couples with a joint mortgage decide to refinance to a new mortgage in only one of the spouse’s names. This releases a spouse from responsibility for that mortgage when their name is removed from the loan.
However, unless that partner’s name is also removed from the title, they can still benefit from the sale and equity in the home. It’s important to not only refinance but also update the house title to reflect one owner. When only one spouse is on the mortgage but both are on the title, you’ll need a quitclaim deed to remove one spouse’s name from the title.
Keep in mind: The spouse applying for the refinance can use only their own income and credit score to qualify, warns financial advisor Jeremy Runnels, CFP, of West Coast Financial in Santa Barbara, California. Depending on current rates, you could get a much higher rate when you refinance, as well.
“The lender is going to look at the individual and make sure they’re OK having them as the sole guarantor,” says Runnels. “The issue is can you afford it, and that goes for either spouse.”
If a partner will receive alimony or spousal support, they can use that income to qualify for a refinance, as long as the divorce settlement stipulates that they will receive alimony for at least three years, says Runnels.
If the couple has equity in the home, the spouse keeping the house could alternatively apply for a cash-out refinance to pay their ex-partner their share (more on that below).
Some refinancing options you have when dealing with a divorce include:
- Conventional refinance
- Streamline refinance (for FHA, VA and USDA loans)
- Cash-out refinance
2. Sell your home
The divorce agreement might call for the sale of the home and the splitting of profits. If you go this route — and many couples do — consider the costs. These might include the Realtor’s commission, the costs of sprucing up the property to make it more attractive to buyers, real property transfer taxes and capital gains taxes.
3. Pay your ex for their share of equity
Let’s say your home is worth $300,000, and you owe $200,000 on the joint mortgage. In this case, you’d have $100,000 in equity, so you’d need $50,000 to buy out the other spouse’s share (assuming a 50/50 split).
To get the cash, you could refinance into a $250,000 loan in your name only, and use the $50,000 cash payout to settle up with your ex.
You’ll need to qualify for the refinance, however.
“Their income needs to be high enough to handle the new mortgage on their own, and the home must have the equity in it to take the cash out,” says Michael Becker, loan originator and sales manager at the Baltimore retail branch of Sierra Pacific Mortgage. “FHA and conventional cash-out refinances are capped at 80 percent loan-to-value, while you can go to 100 percent on a VA loan.”
If you want to keep the house and don’t have enough equity to do a cash-out refinance or the money to pay your ex their share, a home equity line of credit (HELOC) or home equity loan could be the solution.
“You could look at doing either a home equity loan or a home equity line of credit, as some lenders will allow you to go to 95 to 100 percent of the value of your home,” says Becker.
Important financial considerations when getting divorced
Deciding what to do with the marital home can get messy. Before diving into any particular course of action, consider the long-term impacts on your finances:
Evaluating your home equity
Whether you plan to refinance the joint mortgage or sell the home, you’ll need a professional appraisal report to determine it’s worth and any equity you might walk away with.
Sometimes, however, a couple doesn’t agree on the appraised value. This can cripple efforts to move forward and can mean spending more time and money on attorneys and appraisers. In this situation, it’s best for the parties to strive to agree on which appraiser to work with and to accept the outcome of the valuation, whatever it might be.
If you are selling the home, you might decide to split the equity (less closing costs and any repairs and improvements) or use it to pay off other debts you accrued together. Likewise, some couples include a provision in their separation agreement that they’ll accept the first offer on a home, provided it’s within a certain percentage of the list price.
Tax implications
Whether you sell the home as part of the divorce agreement or buy out your spouse’s share, capital gains taxes could come into play. This is a tax on the sale of capital assets, such as a home, when the profit exceeds a certain amount.
If you sell the home, you and your spouse might be able to deduct up to $250,000 of gain from your federal taxable income, but it applies only to the primary residence you’ve lived in for at least two of the last five years prior to the sale.
There are also tax considerations regarding alimony payments. The spouse who earns a higher income and pays alimony can’t deduct those payments from their taxable income, but the spouse receiving alimony does not have to declare it as income. (This applies to divorces finalized after Dec. 31, 2018.)
The higher-earning spouse could make a case for paying less alimony, which can lower the receiving spouse’s income to qualify for a new loan, says Runnels.
Conversely, alimony payments might hurt the payer’s income and chances for a mortgage.
“Can a spouse afford the house and all the alimony and child support payments?” says Runnels. “On the flip side, can the alimony (recipient) afford to keep the house, given they are responsible for all the expenses?”
Protecting your credit
Divorce is an emotional, often volatile event — but the worst thing divorcing couples can do is take financial revenge.
“Many times, out of bitterness, I’ve seen one or both spouses ruin the credit of the other spouse,” says Becker. “They decide that it’s the other person’s problem and refuse to pay bills that may be joint accounts. This can damage your credit greatly and keep you from being able to qualify for any mortgage for a long time.”
The bottom line: Keep paying all of your bills through the divorce process to protect your credit.
“Close your joint accounts and get your own accounts set up,” says Runnels. “If you’re arguing with your spouse over who is going to pay a bill, and you get a ding on your credit, it’s going to be harder to get a loan.”
FAQ about divorce and mortgages
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Even if you plan to hold onto the house and pay the marital mortgage yourself, the names on the loan are ultimately the ones responsible for paying it — including your ex.
If for some reason you can’t pay the mortgage, your ex could refuse to pay it, damaging both of your credit scores and making it harder for you both to qualify for another loan. It’ll also be much more challenging to sell, gift or bequeath the home because your ex could claim some ownership of the property. In general, it’s best to take your ex’s name off the mortgage and move forward with your own, new loan.
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It’s important to inform your mortgage lender or servicer of your divorce. This could help you avoid delinquency issues if your ex decides to stop paying the loan before the divorce agreement is finalized.