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Housing Loan Terminology Decoded

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If you are in the market, looking out for a home loan, you may be having a hard time understanding the complicated home loan terms—especially if you are new in the market. To help you make an informed decision with a clear mindset, here are some of the key terminologies associated with a home loan.

1. Partial Disbursement

This refers to the case when the loan amount is released by the lender in stages. Such a case occurs when the property for which the loan is availed is under construction. [Read Also: Home Construction Loan]

2. Full Disbursement

This refers to the case when the loan provider disburses the full loan amount at one go.

3. Equated Monthly Installment (EMI)

This is the amount to be paid by the borrower every month, towards repayment of the availed home loan. EMI amount is the combination of principal amount and the applicable rate of interest.

4. Pre-EMI

In case partial disbursement of a loan, only monthly interest payments are made on the amount disbursed, before the actual EMIs begin. Such a payment is called Pre-EMI. [Check Also: Home loan EMI Calculator]

5. Margin

It is the difference between the maximum loan amount offered by the lender and the actual market value of the property. In other words, Margin may also be understood as the down payment to be made by the borrower.

6. Balance Transfer/Refinance

It is a special facility offered to existing home loan borrowers, who wish to move their home loan account to a new lender and pay off the outstanding amount with the proceeds from a new loan.

Check Also: Home Loan Balance Transfer 

7. Prepayment Penalty/Charges

This is the additional amount to be paid by the borrower while making a prepayment. It is important to note that there are no prepayment charges applicable to individual borrowers. However, standard charges, as prescribed by the lender, will be applicable to non-individual borrowers.

8. Loan to value ratio (LTV)

This is the ratio of the maximum loan amount offered by the lender to the actual market value of the property.

9. Credit Score/CIBIL Score

This score represents the evaluation of a borrower’s ability to repay the loan. The score is primarily based on the credit report and other information sourced from various credit bureaus.

10. Pre-Approved Property

Some lending institutions already have a list of pre-approved properties from authentic, trustworthy builders that are legally verified and evaluated on various parameters. Choosing a pre-approved property allows the buyer to stay assured and avoid the hassle of legal and technical evaluation.

11. Offer Letter

Once a loan has been approved/sanctioned, the lending institution releases an offer letter to the borrower, containing loan-related information such as:

It is important to note that the loan is disbursed after the completion of documentation and property verification.

12. Amortisation schedule

This refers to a detailed table of recurring loan payments that contains a bifurcation of the principal component and the interest charged in an EMI till the loan is completely repaid.

13. Security

This is the asset provided by the borrower to the lender as collateral for the availed loan. In most cases, the security required is the equitable mortgage of the property for which the loan is availed.

14. Repayment tenure

This is the time frame under which the borrower has to fully repay the loan.

15. Default

This occurs in a case when the borrower fails to timely pay the EMI amount. Certain penal interest is levied by the lending institution on subsequent EMIs in case of default.

Keeping the above terminologies in mind will definitely help you better understand the terms and conditions of any lending institution, to make a sound judgement.

The post Housing Loan Terminology Decoded appeared first on Compare & Apply Loans & Credit Cards in India- Paisabazaar.com.



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Company fired me, and 6 months later want me back.

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At the beginning of January I was fired from my job for "misconduct". I was the manager of my own department and I had a technician under me who was spouse to the operations manager above me. The spouse/technician would purposefully defy instructions and even told me that he "chooses to ignore me". This happened multiple times, and I would get mad enough to argue about it, and that's what I was fired for. I was allowed to get on unenployment insurance and have been collecting it since, but the company did appeal against it at the beginning (which they said they wouldn't do) and I still won my counter appeal case.

Fast forward 6 months; the main investor/owner of the company calls me asking me if I'd like to work there again, because apparently he was never consulted about the spouse working full time in my department and didn't even know I was fired. He told me he'd be firing the husband and wife and wants me to work the first 30 days on a 1099 contract as a trial to see if I want to take a full time position with them again.

I asked for $4k for the entire month and he agreed, but there arent any clear goals or a contract, just come in for 30 days and see if I like it. He's also aware of my unenployment benefits, and told me to not say anything about payment and keep claiming, so that if I don't want to stay after the 30 days I can just keep claiming UI. I told him I wasn't comfortable with that.

I don't have any other job leads within my area, but I also don't feel very comfortable working with the company again. In all honestly I'd prefer to just stay on unemployment till a new company gives me an offer, rather than risking it for a company that fired me before.

I'm curious what I should do about this situation and the best way to cover my ass if I end up comitting to this contract job. I think I'd feel more comfortable if there was a well defined contract, and if I was able to control my own hours and work a maximum of 30 hours a week, so I could tell UI my earnings and that im working part time. I also feel I lowballed my asking price and I could've asked for much more, my original salary was 45k/yr.

Anyway, if you read all this and you have any suggestions or insight, then please share!

Tldr; husband and wife combo get me fired from job 6 months ago, owner/investor wants me back on a 1099 contract for 30 days as a trial, says the two will be fired. Not sure what to do.

PS. I absolutely plan to tell UI of my earnings and was never comfortable with the thought of committing fraud.

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A 31 Year Old’s Journey to $5,000,000 in Rental Property Value

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Today, I have a great article to share with you from Kyle Kroeger on how to invest in real estate. He has a goal of reaching $5,000,000 in rental property value, and is sharing his plan today.

The prospect of retiring early on real estate is highly intriguing to me. It should be for a number of people and I’ll highlight a bit more below.

For millennials, like me, we don’t have it easy. Despite the mainstream media’s thoughts, millennials have faced a Great Recession, massive student loans and a global pandemic already at a young age.

We’ve seen a lot but that can be used to our advantage for financial planning and life goals.

That’s okay if things are a bit harder for millennials financially. It’s a bit more fun when things are hard.

Here I’m ready to show you why real estate investing can be a great asset class.

Related content:

 

My Background

I’m the prototype millennial that loves buying expensive coffee, avocado toast, iPhone apps, blah blah.

So what? Life is short, so enjoy what you love.

I went to a large public university for undergrad and come from a very much middle of the road family in the Midwest. I knew I wanted to study finance in undergrad as I had more of an analytical mindset and liked numbers.

When I graduated from college, I had a decent amount of student loans. The total amount was somewhere over $60,000 worth of student loans. While I was at school, I really didn’t realize how much student debt I had and how that would impact my financial future.

My family has always had a hardworking mentality, so I worked part-time while attending undergrad (each year).

The problem was that money went to keeping the lights on and paying bills. Not tuition.

Upon graduating, I landed a job in investment banking in Chicago. It was tough to crack into, but the pay was intriguing and the opportunity to get some great experience was invaluable. Even if it meant dealing with unique personalities and long hours.

If I could slug it out for 3 years, I knew I could focus on working, saving and paying off my student loans. I followed a disciplined approach of prepaying my loans as much as possible.

After 5 years of working in finance, I was able to successfully extinguish my $60,000 of student loans. Following my student loan repayment, I quickly saved to purchase my first house. That became my first foray into my comforts of using real estate to build wealth.

 

Why Invest in Real Estate?

Working long hours and being chained to my desk made me realize quickly that there is so much more to life than work and making a ton of money. After my first house purchase, I realized that investing in real estate is very straightforward and manageable.

I believe the minor fixes, capital costs for repairs, etc. are generally overblown.

If you do it right, you can manage through those costs and use low cost of capital (mortgages) to build wealth over the long-term. The key thought here is long-term.

Real estate investing is a marathon, not a sprint. Multi-generational wealth can be built through real estate. There are plenty of case studies to back it up. The fact that real estate is illiquid actually works to your benefit.

If a macroeconomic event occurs, you simply can’t panic sell. You’ll have to stick it out and work through the issues firsthand. The best part is you are in control, so you can control your destiny in a way.

When you invest in index funds or stocks, you have no control. You can analyze and make decisions that may improve your odds of generating an attractive return, but you are not making the day to day decisions.

To me, the pros outweigh the cons on whether or not you should invest in real estate.

Here are some pros of real estate investing:

  • You maintain full control of your holdings.
  • There are multiple types of real estate (single-family, multi-family, apartment).
  • There are income-oriented markets like providing options for low-income, suburban and urban communities.
  • You can invest in specific markets. So specific that you can invest on a particular street that piques your interest.
  • Real estate is simple. We aren’t investing in the next Facebook or Instagram.

Here are some cons of real estate investing:

  • It can be time-consuming.
  • The debate is out there whether real estate outperforms alternatives.
  • It requires a learning curve. Even the most experienced investors are still learning.

Finally, there is no one-size-fits all approach to real estate investing. In fact, there are plenty of strategies out there that can tailor to your risk tolerance.

Related content: Renting or Buying? What’s the better decision?

 

Real Estate Investment Strategies

Here are some general investment strategies to help you understand the risk profile (in order of least risky to most risky). Generally, higher risk can lead to higher expected returns.

1. Core Real Estate

Think of core real estate as purchasing a property for cash flow. The property is in great shape, needs limited repairs and is fully leased. This is one of the most common forms of passive real estate investing. Core investing will end up being the least risky and lower returns.

2. Core Plus

Core plus has a little more risk. Think of core real estate as a base, but it requires you to provide some additional value to the property. For example, you are looking at a property that has 50% of the units in a 4-plex that are renovated. The other units need to be renovated and leased out at higher rates.

You can come in and provide additional value by renovating and finding new tenants. This is the in-between on the risk scale. There is an opportunity for improvement albeit at not too much risk.

3. Opportunistic / Distressed

For simplicity, I’ll group opportunistic and distressed together. This is usually the higher risk and higher return investing within real estate. You’ll likely need some significant expertise in real estate and some sort of angle. A common example is a fix and flip strategy. You seek out properties that are dormant and attractively priced. You already know plenty of contractors and resources to fix the property for an eventual sale.

There are plenty of other strategies and subsets of these but the above should give you a general feel for high-level strategies.

For me, I like core plus because it’s straightforward enough and offers attractive risk/reward. You don’t need to know how to fix a water heater or know every nut and bolt of a house. You simply look for cash flow improvement opportunities in high-demand markets.

 

Journey to $5 Million in Real Estate Value

The main goal with direct real estate investing is to make cash flow passive while still maintaining as much control as possible. You can do things like real estate crowdfunding or invest in REITs, but you’ll lose control and have less flexibility if you are trying to create generational wealth for your family.

If you own a ton of stock and want to pass it down to your family, what’s stopping them from selling? If you do real estate investing right, you can pass a full-fledged business down to your family that also provides consistent cash flow.

 

Why $5 Million in Value

$5 million isn’t a hard number but rather a goal. This number also seems like a lot on it’s face and it is. But this is a total aggregate value of property. Not equity.

It doesn’t happen over the course of a year or two. It’s a multi-year process that takes time and patience. This amount of property value presents a great opportunity for income and scale without too much hassle.

You can remain a “small business” in the real estate space and not overload your life with stress.

 

The math of real estate investing for beginners

The math to why $5 million in rental property value is pretty straightforward. I’d like a six-figure ($100,000) income into perpetuity as a baseline. This would allow me to live comfortably from real estate only while also holding a substantial equity position.

So, the math is as follows:

Targeted Income divided by Cash Yield = Equity Value in Real Estate

Targeted Income = $100,000

Cash Yield = 8%

Cash yield represents the annual cash flow from rental properties relative to your equity position. For example, a rental property earning $8,000 per year of income to you on a $100,000 downpayment would equity to a cash yield of 8%.

This would equate to an equity value of $1.25 million in a real estate portfolio ($100,000/8%). So, if you can meet that bogey of a cash yield you are in good shape. If you exceed it (8+%), you can potentially reach your income goal faster.

So how do I get from $1,250,000 of equity in real estate to $5,000,000?

Well, for investment properties you should have a downpayment of 25% to purchase the property. So, $1.25 million of equity implies $5 million of real estate value ($1.25M/25%).

I built a rental property spreadsheet to help me stay accountable when pricing out real estate transactions. The model serves a number of purposes. Most importantly, I use it to:

  1. ensure I’m putting an offer on a property that meets the above criteria (realistically), and
  2. use it as a budget to track my forecast to what was actually received. The model can become a glorified 5-year forecast for each investment.

I walk through how I use the rental property spreadsheet here while walking you through an exact case study.

I hope you find the complete walkthrough helpful.

How to Get There / How Long It Takes

$1.25 million of equity is a lot of money. Absolutely, but you can get there over time. People do it everyday with their 401(k) and Roth IRA contributions.

It will absolutely take time.

Like your retirement contributions, you should have a full roadmap of how you plan to get there.  I have 3 real estate properties right now so I’ve already gotten started on the plan.

With much more work to go, however.

Here is a plan for 8 years to get to the desired income goals and a $5 million rental property value. The assumptions include:

  • Starting income of $120,000 with a 5% income increase each year.
  • Focus on saving 35% of your pre-tax salary each year for real estate investing.
  • Reinvest any cash flow earned from existing rental properties.

Financial Wolves’s Retire on Rental Income Plan:

These are not my exact income and checking account balances but they are a somewhat close representation.

So, as a 31 year old millennial it should take me about 8 years of hard work to eventually retire on real estate. That would put me in a position to earn a steady living from real estate before I’m 40 years old.

There are a few interesting things that stand out from this plan:

  1. Income is very important: Increasing your income is crucial with real estate investing. Without a continuous flow of reinvestable cash, it becomes harder to acquire more real estate.
  2. Compound interest is no joke: Compound interest from the cash flow of your properties is a huge value driver. When you are in property acquisition mode, you should harvest as much cash as possible to continually make acquisitions. The sooner the better as the cash flow snowball benefits are massive. Finally, you can see at the tail end of the investing cycle you can start investing in larger properties. Once you start dealing in larger dollar amounts, you are in the big leagues.
  3. Rental properties cash flow can be substantial: If you can do real estate investing as a side hustle to your ordinary income, the cash flow benefits can be exponential. Look at the cash balance build up during the back end years (years 5-8). You simply can’t acquire enough property.

Once you achieve scale, you’ll have a ton of financial flexibility. Plus, the above assumes no amortization on the loans so your equity balance will likely be compounding along the way. This will give you extraordinary residual value to work with.

 

Tips for Getting Started In Real Estate Investing

Here are some tips for getting started with real estate investing.

1. Just Start

One of the best pieces of advice I received was from a savvy real estate investor. They said you simply just need to give it a go. It’s true.

If all goes wrong or you don’t like it, at least you can cross it off your bucket list… Hey, I was a real estate investor once.

Not only should you just start. You should start by trying to manage your real estate properties without an asset management firm helping you. This will help you understand your properties. You’ll get used to the ins and outs of repairs, requests and leasing.

With technology now, you should be able to efficiently manage everything.  As you scale, start thinking about how an asset management firm can help you. Yeah, back to the reduce time without sacrificing too much income point.

2. Use Technology

Technology continues to be a very underrated component of real estate investing. Back in the day people would have to manually account for everything.

Some old-time real estate investors still think that you need to take 2 am calls about a leaky pipe… Or, you need to manually collect checks from tenants to bring them to your bank. Reduce your time by using resources like Landlord Studio to do all the required bookkeeping.

Or, a tool like Cozy to manage rent payment with multiple tenants in one unit. You’ll get paid instantly and Cozy even sends out rent payment reminders. What’s not to love?

3. If You Struggle That’s Okay

If you struggle with your property and it requires capital contributions from you right away, that’s okay. Let’s be honest. No one invests to lose money. A property can require a ton of work one year but then nothing for the next 5 years.

Just because something bad happens in the short-term doesn’t mean you completely messed up the long-term. At the end of the day, things can get resolved. When I sold my first property, I realized that anxieties and the stress that I had about the property at the onset were definitely not worth it.

 

Conclusion – Is Real Estate Investing Worth It?

At the end of the day, real estate is not for everyone. However, you can use this as a baseline for whatever asset class you are interested in. To me, real estate provides the optimal solution for building long-term wealth that requires limited time.

You can build a fully operating business out of your real estate holdings that will give you the flexibility to do the things that you enjoy in life. Here are a few tips that I will try to follow along the my real estate investing journey:

  1. Stay disciplined with your investing. Stick to one strategy and be excellent at it.
  2. Focus on the long-term.
  3. Scale your time and don’t be afraid to outsource.
  4. Build a team of people you trust.
  5. Retire early and enjoy life.

It’s not that simple and will take a ton of work to get there, but my early estimations is that it will be totally worth it. Between blogging income and a small real estate business, I should be able to work where I want and when I want.

Have you or will you try real estate investing? Let me know in the comments below. I’d love to answer any questions.

Author Bio: Kyle Kroeger is the owner of FinancialWolves.com. Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing, and the online economy. Follow us on Pinterest, YouTube, Twitter, and Facebook.

The post A 31 Year Old’s Journey to $5,000,000 in Rental Property Value appeared first on Making Sense Of Cents.



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Eco-Friendly Home Modifications That Impact Your Home Insurance

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As the green revolution continues to gain popularity, homeowners are discovering practical ways to reduce their carbon footprint. One of the most meaningful ways is by making eco-friendly modifications to your home and making sure your homeowners insurance takes them into account.

Benefits of eco-friendly home modifications:

  • Lower utility costs
  • Reduced carbon footprint
  • Save money on energy costs
  • Potential tax credits

Whether you’re on the market for a new energy-efficient home or interested in upgrading your current space, you must make sure your policy is ready to accommodate those changes. While many insurers are extending their coverage to include green renovations, not all offer this additional coverage.

We’re here to guide you through how typical eco-friendly home modifications impact your home and your homeowners insurance. We’ll break down four home improvements you can make to your home, the benefits, installation considerations and insurance implications.

Solar energy

One of the most common eco-friendly home modifications, solar energy is the cleanest and most abundant resource available to us. A big investment, solar energy gives homeowners a way to save money and generate their own electricity.

Benefits of solar energy

Lower energy costs

In the U.S., the demand for solar energy is at an all-time high. As the prices of installation have dropped, solar energy has become an economical choice for many homeowners. The lifespan of solar panels is typically around 25-35 years, so they are a long-term investment that will continue to pay off.

Increased home value

In addition to saving money, installing solar equipment to your home can increase its value, sometimes by tens of thousands of dollars. While a solar upgrade can be an expensive investment, the increased home value can help you earn back what you spend.

Reduced environmental impact

Besides the potential tax breaks, solar energy has a positive impact on the earth. Solar energy doesn’t produce air pollution or carbon dioxide, which helps reduce emissions and the negative impact on the environment. Solar panels help homeowners take control of their energy consumption and also contribute to the reduction of U.S. dependence on other energy sources.

Solar energy installation considerations

Roof stability

Not every roof can support a solar energy system. Hardware options will differ by weight and sizes, so make sure you understand what a roof needs to be able to support them. Even for roofs that are designed to support solar panels, installation can have unintended consequences. If your roof is damaged during the installation process, your insurance policy may not cover it. Make sure you contact your provider to discuss your coverage and avoid being forced to pay out of pocket to cover damages.

Cost

While the hardware cost continues to drop, the soft costs associated with solar installation aren’t dropping nearly as fast. At the end of 2018, the average price of a residential rooftop system was around $18,000, before tax credits or incentives. Approximately 64% of the total cost of residential systems. These costs include, but are not limited to:

  • Permits
  • Labor
  • Sales tax
  • Indirect corporate costs
  • Supply chain costs
  • Transaction costs

Even though solar energy is much more affordable than it once was, it is still out of reach for some. Thankfully, there are financing options for homeowners.

Solar power financing options
Third-party ownership 40% of homeowners with solar energy systems use third-party ownership. Under this type of agreement, homeowners spread out their payments over time and share the responsibility of maintenance with the third party.
Solar lease A solar lease requires the homeowner to pay fixed payments to the solar leasing company. The homeowner will pay any electricity usage that extends beyond what the system generates.
Loan financing Solar loans are designed to help homeowners stretch the system’s cost of the system over the length of the term while directly owning the panels and all the benefits that result from them.

Tax incentives

As a way to reward homeowners for choosing solar energy, the U.S. government offers tax breaks and incentives.

  • Tax credits — There are both federal and state tax credits given to homeowners, allowing them to deduct a percentage of their solar costs from their taxes.
  • Solar renewable energy certificates (SRECs) — If you live in a state which requires that a certain amount of their allotted yearly energy has to come from solar power, you will collect SRECs. You can sell SRECs to supplement your income.
  • Performance-based incentives (PBIs) — PBIs are paid to homeowners (per kilowatt-hour) for the energy that’s produced by their systems. The rate is set at the time of installation.

Solar energy insurance implications

Most homeowners insurance policies cover rooftop panels, though you may consider increasing your coverage to include the cost of the entire system. Remember, all insurance policies are different. Examine your policy and contact your provider to see what your needs are since other options like ground-based and carport systems are not always covered.

Shamor Paul, co-founder of Sunly said, “A solar power system, if designed and installed by a professional, and carrying all necessary approvals and inspections, should not be an issue to get insured. As it is an added asset to the home, the premium may increase to cover the replacement cost.”

If you plan to sell the extra energy you generate, consider additional liability through Green Energy Insurance. This coverage would protect you in case of a net-metering accident that damages property or harms the employees of the municipality.

Geothermal heating and cooling

One of the lesser-known energy options, geothermal systems use the earth’s heat to warm and cool your home. There are three main types of geothermal technologies: ground source heat pumps, direct use geothermal and deep and enhanced geothermal systems.

Geothermal heating and cooling benefits

Lower energy costs

Geothermal systems yield substantial energy savings for homeowners. Up to 65% more effective than regular HVAC systems, installing a geothermal system in your home can reduce your energy costs by approximately 70% per year.

Another advantage of this method is its single system design. You can avoid worrying about multiple components that can break at any point and reduce maintenance costs. These systems also have an extremely long lifespan, so there won’t be a need to replace parts regularly.

Increase home value

Geothermal energy is a long-term investment that results in considerable savings. Even though installing a geothermal system is expensive, you are adding a significant amount of value to your home. Unlike solar energy, which requires visible hardware, most of the geothermal components are buried underground. This not only protects the investment but also means that the curb appeal is high.

Reduced environmental impact

An effective way to reduce your carbon footprint, geothermal systems use 25% to 50% less electricity than conventional options and don’t contribute to the burning of fossil fuels or greenhouse gas emissions. As an added bonus for your family’s safety, this type of energy eliminates the chance of a carbon monoxide leak in your home. Choosing to pursue geothermal energy is one of the most environmentally-clean home improvements you can make.

Geothermals installation considerations

Property suitability

While geothermal technology can thrive in any environment, it doesn’t mean that any home is suited for it. When evaluating your home for a geothermal system, your provider will consider three things:

  • Soil properties
  • Groundwater available
  • Available land

Cost

The installation cost of a geothermal heat pump generally ranges somewhere between $10,000 to $25,000. The upfront cost is noticeably higher than traditional options, but the savings over the lifespan of your system can be worth it. Low operating and maintenance costs also supplement the initial costs, leaving you to break even on the entire system in under ten years.

Like solar energy, there are federal and state tax incentives and select financing options available to help mitigate the cost. Figure out what incentives you’re eligible for here.

Geothermal systems insurance implications

With such an expensive system, making sure your insurance covers your investment is crucial. Start by contacting your provider to see what is included. If you have an extensive system, you may need additional coverage. Most components of a geothermal system are buried underground, which means they are safe from external dangers like vandalism, hail or wind damage. But if you live in an area that is prone to earthquakes, be wary. Since homeowner insurance policies do not cover earthquakes, you should take out an additional policy to cover your investment.

Rain harvesting

Rain harvesting is one of the easiest eco-friendly home modifications. Collecting water for future use, it also reduces storm water pollution. You can use the rainwater you harvest for outdoor irrigation or utilize it in your home for laundry, cleaning or purified human use.

Benefits of rain harvesting

Lower water costs

Collecting rainwater allows you to be less reliant on water companies. And if you have enough to meet your daily needs, it will drastically reduce your water bill. Another great benefit about harvesting rainwater is its storage life. Since rainwater is not always consistent — and in some areas scarce. having a reservoir of rain can help you get through dry seasons.

Rain harvesting systems generally have low maintenance costs, especially if you are collecting water for outdoor use with no purification requirements. After installation costs, you shouldn’t expect to dedicate funds for regular maintenance.

Increased home value

Having a well-maintained rain harvesting system can have a positive effect on your property’s value. If you plan to sell your home, most potential buyers might find the eco-friendly system attractive and vital as the demand for clean water continues to grow.

Reduce environmental impact

Harvesting rainwater impacts the environment in multiple ways. Collecting rainwater allows you to lessen your reliance on companies and reduce the demand for groundwater, which keeps increasing every year.

Collecting rainwater also reduces the chances of soil contamination. Runoff water can pick up contaminants from pesticides and other pollutants and spread them to the surrounding water sources. Eliminating the chance for excess water to run off by collecting and reusing it is a way to mitigate the negative impacts of pollution. In addition to increasing your home value and reducing an environmental impact, rainwater harvesting systems give your home an emergency water supply.

Rain harvesting installation considerations

Property suitability

Rainwater harvesting systems can be easily integrated into most homes, though some things can rule out suitability entirely. Your roof and gutters are at the center of property compatibility. Depending on the material they are made of, they could potentially introduce contaminants into your water supply. Older pipes or galvanized roofs may cause lead, copper or zinc contamination. So before installing any system, make sure you identify what materials your roof and gutters are made of.

Not every climate is a match either. Infrequent rainfall negates the purpose of rain harvesting systems altogether. If you live in a particularly arid climate, for example, you would not see a quick return on investment.

Cost

You decide how intricate you want your water harvesting system to be. It can be as simple as one tank or more complex with pumps and purification technology. The price of these systems can range from hundreds to thousands of dollars, depending on which system you choose. The initial cost of setting up a water harvesting system is high, and the return isn’t as quick as what you see with geothermal systems.

Time

A rainwater harvesting system requires a big time commitment from homeowners. You’ll have to regularly check your tanks and make sure they are clean. So while it won’t cost as much some of the more involved home modifications, it requires more of your time.

State and local restrictions

There are no federal laws concerning rainwater harvesting, though some states do have restrictions on how much rainwater you can collect. States also specify where and when you can collect rainwater and limit how it can be used. For example, there are generally stricter guidelines if the water is intended for drinking.

In climates where rainfall is not frequent, states may restrict collection to ensure that the water that does fall flows to its rightful water drainage system and is not limited to a number of people. Read more about the laws and legislation of states here.

Rain harvesting insurance implications

Contact your broker before installing a system to make sure your home insurance policy will cover it. Much like solar panels, rainwater harvesting requires above ground, outside fixtures. This means that the equipment is susceptible to damage. When going over your current policy, make sure you consider potential damage to the system, as well as to your home. Leaks or floods as a result of your rainwater harvesting system may not be covered under every policy, so adding coverage is always a good idea.

ENERGY STAR products

ENERGY STAR appliances and products use less energy than the traditional options on the market. To be considered an ENERGY STAR product, it must meet the energy requirements set by the U.S. Environmental Protection Agency (EPA). As a homeowner, choosing appliances and products with an ENERGY STAR will help you save money, energy and contribute less to harmful emissions.

ENERGY STAR Benefits

Lower energy costs

The average homeowner can save hundreds of dollars on their energy bills by choosing products with the ENERGY STAR. Designed to be energy efficient, the appliances you replace will impact how much money you save on your energy bills. For instance, a traditional clothes dryer can use the same amount of energy as an ENERGY STAR model dishwasher, refrigerator, and washing machine combined.

Beyond just certified appliances, ENERGY STAR also offers installation of doors and windows designed to control air leakage and sunlight transmittance.

Increase home value

There is no denying that replacing appliances with ENERGY STAR models is a significant investment. But once the installation process is over, you’ll be rewarded with incremental home value ranging from hundreds to thousands of dollars. While the increase may not be as substantial as installing solar panels, energy efficiency is a selling point for many buyers on the market.

Reduced environmental impact

ENERGY STAR’s mission is to reduce the impact we have on the environment. Since 1992, the label has helped reduce greenhouse gases by more than 3.5 billion metric tons, which is proportional to the yearly emissions 750 million cars would produce. While saving money on electricity bills directly benefits homeowners, the environmental impact ENERGY STAR products reduce cannot be ignored.

ENERGY STAR Installation considerations

Cost

The benefits of switching to ENERGY STAR certified products cannot be overstated. But updating your home with these types of appliances will require a considerable amount of money, especially if you plan to make replacements all at once.

Depending on the appliances you want to replace, your energy savings may not be as significant at the beginning. For example, a dishwasher will most likely yield fewer savings than a refrigerator because it uses less energy by default. If updating all of your appliances is unrealistic for your budget, create a long-term plan to gradually switch to all ENERGY STAR products.

To help offset some of these costs, the government offers federal income tax credits for making energy-efficient improvements to your home. However, to claim the tax credits, the improvements must be made to your home before 2021.

ENERGY STAR Insurance implications

Adding ENERGY STAR appliances and updates to your home generally doesn’t impact your insurance. Most homeowners insurance policies have coverage for energy-efficient appliances. Contact your insurance provider to better understand what type of coverage you need and what incentives they provide.

Final thoughts

Eco-friendly home modifications are considerable investments but benefit homeowners with savings, increased home value and tax credits. More than that, these home modifications are changes homeowners can make to help the environment. Personal responsibility for your carbon footprint is part of living in the global community. No matter how many changes you are able to make, every bit makes an impact.

The post Eco-Friendly Home Modifications That Impact Your Home Insurance appeared first on The Simple Dollar.



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