This Month's Newsletter

Fixing Up Your Home: Protect Your Housing Investment

Your home is an investment in living as well as in savings. If neglected, it will pay no dividends. If properly maintained and improved, it will pay a high yield in comfort and usefulness for your family and in avoidance of costly repair bills. Home improvements also tend to raise neighborhood standards and, as a result, property values. From an economic standpoint, home improvements mean higher employment, increased markets for materials and home products--and therefore a more flourishing community. 

If You Do It Yourself 

If you are handy with tools and have the experience, you can save money by doing many jobs yourself. But unless you are skilled in wiring, plumbing, installing heat systems, and cutting through walls, you should rely on professionals for such work. 

When you buy the required materials, it pays not to skimp. Good materials are not necessarily the most expensive. What you need are products that look good, are easy to maintain, and last a long time. Buy only from reliable dealers. 

If You Use a Contractor 

If you plan to use the services of a dealer or contractor, take care to choose one with a reputation for honesty and good workmanship. There are several ways to check on a contractor: 

• Consult your local Chamber of Commerce, the Better Business Bureau, or Local Consumer Protection Agency.
• Talk with people for whom he has done work. 
• Ask your lender about him, if you plan to finance the project with a loan. 
• Check his place of business to see that he is not a fly-by-night operator. 
• Find out, if you can, how he rates with known building-product distributors and wholesale suppliers. 
• Ask friends and relatives for names of firms that they could recommend. 

Compare Contractor Offers 

Before deciding on a contractor, you may want to get bids from two or three different firms. Make sure that each bid is based on the same specifications and the same grade of materials. If these bids vary widely, find out why. 

Many contractors offer package plans that cover the whole transaction. Under such a plan the contractor provides all materials used, takes care of all work involved, and arranges for your loan. 

Your contractor can make the loan application for you, but you are the one who must repay the loan, so you should see that the work is done correctly. 

Understand What You Sign 

The contract that both you and the contractor sign should state clearly the type and extent of improvements to be made and the materials to be used. Before you sign, get the contractor to spell out for you in exact terms: 

• How much the entire job will cost you. 
• How much interest you will pay on the loan. 
• How much you will pay in service charges. 
• How many payments you must make to pay off the loan, and how much each of these payments will be. 

After the entire job is finished in the manner set forth in your contract, you sign a completion certificate. By signing this paper you certify that you approve the work and materials and you authorize the lender to pay the contractor the money you borrowed. 

Beware of Fraud 

Most dealers and contractors conscientiously try to give their customers service equivalent to the full value of their money. Unfortunately, home improvement rackets do exist. Here are a few common sense rules to follow: 

• Read and understand every word of any contract or other paper before you sign it. 
• Never sign a contract with anyone who makes fantastic promises. Reputable dealers are not running give-away businesses. 
• Avoid wild bargains. The best bargain is a good job. 
• Never consolidate existing loans through a home improvement contractor. 
• Do not let salespeople high-pressure you into signing up to buy their materials or services. 
• Be wary of salespeople who try to scare you into signing for repairs that they say are urgent. Seek the advice of an expert as to how urgent such repairs are. High-pressure and scare tactics are often the mark of a phony deal. 
• Avoid salespeople who offer you trial purchases or some form of bonus, such as cash, for allowing them to use your house as a model for any purpose. Such offers are well-known gimmicks of swindlers. 
• Never sign a completion certificate until all the work called for in the contract has been completed to your satisfaction. Be careful not to sign a completion certificate along with a sales order. 
• Proceed cautiously when the lender or contractor demands a lien on your property.

13 Extra Costs to be Aware of Before Buying a Home

Whether you're looking to buy your first home, or trading up to a larger one, there are many costs - on top of the purchase price - that you must figure into your calculation of affordability. These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you're not informed and prepared.

Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all of these costs will apply in every situation, however it's better to know about them ahead of time so you can budget properly.

Remember, buying a home is a major milestone. Whether it's your first, second or tenth home, there are many important details to address, during the process. The last thing you need are unbudgeted financial obligations cropping up hours before you take possession of your new home.

Read through the following checklist to make sure you're budgeting properly for your next move.

1. Appraisal Fee

Your lending institution may request an appraisal of the property which would be your responsibility to pay for. Appraisals can vary in price from approximately $175 -$ 300.

2. Property Taxes

Depending on your down payment, your lending institution may decide to include your property taxes in your monthly mortgage payments. If your property taxes are not added to your monthly payments, your lending institution may require annual proof that your taxes have been paid.

3. Survey Fee

When the home you purchase is a resale (vs. a new home), your lending institution may ask for an updated property survey. The cost for this survey can vary between $700- $1,000.

4. Property Insurance

Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan.

5. Service Charges

Any new utility that services your hook up, such as telephone or cable, may require an installation fee.

6. Legal Fees

Even the simplest of home purchases should have a lawyer involved to review all paperwork. Shop around, as rates vary greatly depending on the complexity of the issues and the experience of the lawyer.

7. Mortgage Loan Insurance Fee

Depending upon the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% -3.5% of the total amount of the mortgage. Usually payments are made monthly in addition to your mortgage and tax payment.

8. Mortgage Brokers Fee

A mortgage broker is entitled to charge you a fee in order to source a lender and organize the financing. However, it pays to shop around because many mortgage brokers will provide their services free to you by having the lending institution absorb the cost.

9. Moving Costs

The cost for a professional mover can cost you in the range of:

• $50-$100/hour for a van and 3 movers, and
• 10-20% higher during peak demand seasons.

10. Maintenance Fees

Condos charge monthly fees for common area maintenance such as grounds keeping and carpet cleaning in hallways. Costs will vary depending on the building.

11. Water Quality and Quantity Certification

If the home you purchased is serviced by a well, you should consider having your water checked by your local experts. Depending upon where you live, determines whether or not a fee is charged, to certify the quantity and quality of the water.

12. Local Improvements

If the town you live in has made local improvements (such as the addition of sewers or sidewalks), this could impact a property's taxes by thousands of dollars.

13. Land Transfer Tax

This tax is applied whenever property changes hands and the amount that is applied can vary.

Important Tips To Keep Your Home Safe

It's much more than a physical structure. It's the place where memories are made, where dreams are shared, where lives are lived. And many of your home's contents--the video of your baby's first steps, grandmother's brooch or old family photos, for instance--simply cannot be replaced. That's why it makes good sense to do everything you can to protect your home from fire and theft.

Preventing Fires

Most fires are preventable. First, let's look at the top causes of home fires.

• Cooking fires. Cooking fires pose a serious hazard. Always stay near the stove when cooking. Avoid wearing loose sleeves while cooking; they can be ignited by a burner or a grease splatter. You'll also want to keep curtains and other flammable materials well away from the range or oven. And never put water on a grease fire, which can cause the hot grease to splatter, burning you or spreading the fire. Instead, smother it with a lid or another pan, then turn off the burner. Leave the lid in place until it has cooled off completely.
• Portable and space-heating equipment. Wood-burning, kerosene, propane and electric heaters can ignite draperies, clothing and other flammable items. Keep anything that can burn at least 3 feet away from all heating equipment. Shut off a heater before you leave the room or go to bed. When you purchase a heater, make sure it's been tested and approved by a reputable organization.
• Careless smoking. Cigarettes are the leading cause of fire deaths. Never smoke in bed or in a place where you may fall asleep. Also, use deep ashtrays so a lit cigarette won't roll out and fall onto rugs or furniture. It's also a good idea to run water over an ashtray before emptying it into the trash. A smoldering cigarette butt could set the trash on fire.
• Electrical wiring. You can't see wires hidden inside walls and ceilings, but there are some warning signs of electrical problems. If lights dim or flicker, fuses blow frequently or sparks shoot from receptacles when items are plugged in or unplugged, consult an electrician. Faulty electrical cords can also spark a fire or cause an electrical shock. Never run cords under rugs or heavy furniture. Pressure can crack insulation and break the wires. Don't overload outlets.
• Children with matches. Children playing with matches or lighters are the leading cause of fire deaths for children 5 and under. Keep these items up high, preferably in a locked cabinet, out of the sight and reach of small children. Teach older ones how to handle matches responsibly.
• Holiday hazards. Decorations and candles are a special concern during the holidays. If you buy a live Christmas tree, choose a fresh one and water it daily. With an artificial tree, make sure it's made of flame-retardant materials. Keep candles well away from anything that can burn and blow them out when you leave the room or go to bed. Fireworks also deserve special mention. They endanger life, limb and property. Avoid amateurs who set off fireworks. Instead, attend public displays conducted by trained pyrotechnicians. Even sparklers are hazardous; they burn at 1200 F.

There are some other simple, common sense precautions you can take to decrease your chances of a home fire:

• Never store or use gasoline in the home. Gasoline is a motor fuel only. Keep small quantities in an approved container designed to store gasoline, and store outside, preferably in a locked, detached shed. Wipe up spills immediately and never refuel motors near heat sources, sparks or cigarettes.
• Don't overload electrical receptacles.
• Don't use light bulbs with greater wattages than a fixture can handle.
• Don't let combustible materials such as newspapers and rags pile up in basements and garages.
• Leave plenty of air space around appliances and television sets; they can overheat and catch fire.
• Use outdoor gas and charcoal grills with caution. Keep them away from structures, particularly when in use. Never add materials to the fire.

Fireplace Safety

If your home has one or more fireplaces, special precautions can help to keep home fires burning safely:

• Never burn charcoal or use a hibachi in your fireplace. Both produce deadly carbon monoxide.
• Protect against sparks by enclosing a fireplace's opening with glass doors or a sturdy screen.
• Never close the flue while a fire is still smoldering. Carbon monoxide could build up.
• Never use gasoline, kerosene or lighter fluid to start a fire. Burn only dry, seasoned hardwood. For extra safety, light fires with long-stemmed matches.
• Have your fireplace and chimney inspected annually. They should be properly vented and free of blockages. Have them cleaned as needed.
• Protect the top of your chimney with a guard that keeps out birds and small animals and keeps in sparks that could ignite your roof.
• Keep flammables such as newspapers, magazines, rugs and carpeting well away from the fireplace.
• Remove holiday decorations from the fireplace and mantle before building a fire to avoid having the decorations ignite.
• Teach children to stay back from the fireplace.
• Never leave a fire unattended.
• Keep a fire extinguisher handy.

If Fire Breaks Out

Smoke detectors greatly increase the likelihood you'll survive a fire. Place at least one on each floor of your home and outside each sleeping area. Install detectors inside bedrooms for added protection. Mount detectors on the ceiling, at least 4 inches away from the wall. Test detectors monthly and replace batteries once a year. To help you remember, plan to install new batteries on an annual event, such as the Fourth of July. Replace smoke detectors after 10 years.

If a fire does break out, take immediate action. Smoke and flames spread rapidly. Get out of the house right away, then call the fire department from a neighbor's house or a cellular phone. Fumes overcome most victims long before flames reach them. Use your safest exit. If you must escape through smoke, get down and crawl low under the smoke, keeping your head about 12-24 inches off the floor.

If you haven't gotten around to conducting a family fire drill, now's the time to do it. And visit your local hardware store or home center to invest in a few fire extinguishers. Extinguishers are classified according to the type of fire they will put out, and you'll find the classification displayed on an extinguisher. A Class ABC extinguisher is multi-purpose and works well against any small, self-contained fire. Keep one in the kitchen, extras in the basement or garage. Contact your fire department to ask about training. Don't attempt to fight a fire unless you know you have the right extinguisher to handle that type of fire, and be sure to keep your back to a safe exit.

Fire Safety Checklist

Take this quick quiz to help you assess your family's fire safety plan:

• Do you follow the fire prevention practices outlined above? Pay special attention to safety tips on cooking, smoking, use of heating equipment, proper storage of flammables and precautions regarding children and matches.
• Are your smoke detectors working? There should be at least one on every floor of your home. Test each detector monthly, and replace batteries annually.
• Do you hold regular fire drills? Several times a year, have your family practice exiting your home safely and quickly in the event of an emergency. Designate a meeting place for all family members to gather once they are out of the house.
• Have you taught your children to "stop, drop and roll"? In the event their clothing catches fire, kids (and adults) should stop, drop to the floor, cover their faces and roll over and over or back and forth to put out the fire. Keep rolling until the fire goes out.
• Have you planned an alternate escape route? It's important to have at least two escape routes from each room in your home, often a door and a window. Practice using them now to be sure you could get out in an emergency.
• Can you safely exit from the second floor? A chain ladder or other easily accessible ladder can help you escape from the upper stories of your home in the event of a fire.
• Do you know how to use your fire extinguishers? Know where your fire extinguishers are kept, and read the instructions for use before you need them.
• Do you know the phone number for your local fire department and the location of the nearest phone outside your house? In case of fire, always evacuate your home first, then call for help from a cellular or other nearby phone.

Preventing Theft

Every year, burglars hit more than five million households, stealing more than $4 billion worth of property. Determined thieves can break into just about any home, but you can take steps to make entry a lot more difficult for them.

• Invest in a quality door. Door security begins not with a good lock but with the door itself and the frame it fits into. Weak door assemblies can be broken with a single kick, popped open with a jimmy bar or even pried out-frame and all-from the wall. Strong exterior doors have solid, not hollow, cores; doors that are sheathed in metal are even better.
• Install deadbolts. Deadbolt locks provide the best protection for the least amount of money. Ordinary spring-operated locks can be defeated with a credit card. Intruders can't slip a deadbolt lock because it has a solid metal bar that fits into the door jamb. To be effective, a deadbolt lock should have at least a one-inch throw (meaning the metal bolt extends at least an inch past the edge of the door). Doors with glass panes present a special security problem because a thief can break the pane, reach inside and unlock the door. If local laws permit, the solution is a double-cylinder lock-one that must be opened with a key from inside as well as out. But don't defeat the purpose by getting into the habit of leaving the key in the lock on the inside. To exit quickly in case of a fire, keep the key near the door but in a spot that can't be reached from outside. You might want to hang it on a nail near the floor where you can find it easily if fire breaks out.
• Don't forget windows. Windows and sliding glass doors also should be secured. Look for locks specifically made for different window styles at your local hardware store or home center. You also can secure a sliding glass door with a broomstick or piece of 1" x 2" lumber laid in the door track when the door is closed.
• Light up. Outside flood lighting reduces your risk of burglary by highlighting the exterior of your home at night. You can choose from lights that remain on all night or motion-sensitive lights that come on only when someone approaches your home. Motion-sensitive lights save energy and could catch a would-be thief by surprise. Timers on inside as well as outside lights give the impression that someone is home, even if you're on vacation, out to dinner or visiting the neighbors.

Sounding an Alarm

For greater peace of mind, consider investing in a professionally installed alarm system. Alarm systems come in many shapes and sizes, at prices that range from a few hundred to several thousand dollars. Many installers also charge monthly monitoring fees, which should be taken into account when you shop for a system. A home alarm system includes some combination of the following components:

• Perimeter sensors. These consist of photo cells or magnetic contacts on doors and windows that sound an alarm when an intruder tries to get inside. Perimeter sensors are mounted on two points, such as the door jamb and the door itself. Photo cell sensors are activated when something passes through a beam of light projected between the two points, while magnetic sensors are activated when contact is broken between the two magnetized points.
• Heat and motion sensors. You can use heat and motion detectors to protect specific spaces in or outside your home-a bedroom hallway, for instance, or your backyard. Heat detectors respond to body temperatures. Motion sensors detect movement.
• Glass break detectors. These devices recognize the sound of breaking glass. They activate the alarm when they sense breaking glass in a window or door.
• Keypad. One or more keypads allow you to turn the system on and off.
• Audible alarm. A piercing alarm alerts neighbors and the police. And it lets the burglar know he's been detected, meaning he'll probably leave your house in a hurry.

Keep in mind that false alarms can be a problem. In addition to annoying the neighbors and taking the police away from real emergencies, some communities now assess fines for excessive false alarms. The National Burglar & Fire Alarm Association reports that nearly 80 percent of false alarms are caused by user error. Steps to prevent false alarms include regular system maintenance and ensuring that whoever has a key to your house also knows the codes to activate and deactivate your system. Local police are a good source of information and recommendations regarding security systems. They work with the security services in your area and can tell you what types of break-ins are most common in your community.

After you've determined which alarm system is best for you, ask your insurance agent, family or friends for referrals. Get written quotes from at least three companies. Before you obtain an alarm system, investigate a security service's reputation and how long it has been in business. Also ask about warranties and what they cover.

Insuring Against Loss

Homeowners or renters insurance provides money to replace possessions after a fire or theft. Remember to keep a good inventory of your property, including serial numbers. A quick way to do this is with snapshots or a camcorder. Store your inventory in a safe-deposit box or other location outside your home, and update it every year.

While you're making an inventory of your valuables, consider engraving them with your name. This makes it easier to trace the goods back to you if they're stolen. Many local police departments will loan etching tools.

Most insurers recommend that you insure your property at replacement cost. This reimburses you for what it would cost to replace items today, instead of paying only for their current, depreciated value. You'll pay a little more in premiums for this extra peace of mind, so shop around for the best policy and the best price. Consider only reputable companies and agents. Get at least three quotes. Some companies provide lower rates if you have more than one type of coverage with them, such as auto and home. Review your insurance coverage annually.