5 Homeowner Resolutions for the New Year

When thinking about your New Year’s resolutions, don’t forget to include a few items related to your home and finances. An annual evaluation will help you make sure you’re taking care of your property properly.

Check Up on Your Homeowners Insurance

Check the limits of your coverage to make sure you’ll have enough insurance to repair or replace your home, if needed, especially if you’ve made home improvements in the past year that added finished space to your property.Check your insurance coverage for other structures on your property, since many homeowners don’t realize they need extra insurance for a detached garage, a fence or a pool. If you have a basement, optional sewer and drain backup insurance can be helpful.  Check to see if you should buy flood insurance. It’s not very costly if you don’t live in a flood zone and it covers you for floods caused by storms. Review your personal property or contents insurance. Items like jewelry or furs or art may need special insurance coverage.

Evaluate a Refinance

Compare your current mortgage rates and term to see if you can secure a lower rate to save on your monthly payments. Use a mortgage calculator to compare payments on a shorter loan term. Homeowners should consider how long they plan to stay in their home to determine whether refinancing makes sense because it can take several years to recoup the costs of a refinance. Look at your mortgage bill to see if you’re paying private mortgage insurance.  If you have enough equity you might be able to eliminate the PMI, which will lower your payments even if you don’t refinance.

Consider Prepaying

If your mortgage rate or term is already low, it could make more sense to prepay your mortgage rather than refinance.You can shave years off your mortgage by setting up biweekly payments, making one extra payment each year or rounding up your monthly payment every month. The difference prepayment makes depends on your loan balance, your loan term and interest rate and how much extra you pay. Before you decide to prepay your loan, find out whether your home is appreciating or depreciating. You might find that it’s better to use a bonus or other extra cash for other investments.

Maintain and Repair

Your home, just like your body, needs an annual physical to make sure your systems are running right.  Start on the outside, looking at your trees to see if they need to be trimmed, then your roof, flashing and gutters. Inside,  test your sump pump, alarm system and smoke detectors. You can find out the average life expectancy of your appliances from the National Association of Certified Home Inspectors so you can budget for repairs or replacements.

Check your HELOC Terms

If you have expensive repairs to make, you may want to tap into a home-equity line of credit, but make sure you understand how it works. Unlike home-equity loans, which are typically fixed-rate loans for a specific term, HELOCs generally have an adjustable rate.  You should check to see if you’re in an introductory, interest-only payment phase and check the caps to see what your maximum rate adjustment will be. If you think your payment will be too high when the loan adjusts, contact your lender to see if you can refinance both your first and second loans into one fixed-rate loan. Some lenders offer a convertibility option that will allow you to convert your loan to a fixed rate for a small fee. Refinancing your first mortgage to a lower rate and payment could free up funds for your HELOC payments.