Wealthy Insider's Home Buyer Strategy #5:
We'll talk about two things here:
a.) How to save hundreds of dollars every year on Homeowners Insurance and on your annual real estate tax bill.
b.) How to get the U.S. Government to subsidize your monthly mortgage payment.
If you have a loan or a mortgage, you are required to purchase homeowner's hazard insurance every single year. If you own a home, but don't have a mortgage, you should do it anyway.
Homeowners insurance covers your house if there's a fire, tornado, earthquake, burglary or any major, sudden or catastrophic issue. It also covers the contents of your house. There are several ways to save on this.
Save on Homeowner's Insurance: This information came from one of the top, nationwide insurance agents on the entire East Coast because this is how he used to get his new business customers.
He would go to other insurance companies' clients and inform them that their current insurance company had been less than straightforward about the types of coverage and the availability of ways to save. Of course, they would be a little upset with their existing company and ended up switching to him.
Let's use an example of you buying a $400,000.00 house. The lender says, "You need to get an annual insurance by the time we go to settlement to cover any hazards, fire, storm damage, other sudden or catastrophic damage, etc." And so you dutifully follow their instructions and do so.
You tell the insurance agent, "I want to buy a hazard insurance policy for a home that I'm about to purchase." They say, "How much is the house?" You tell them it's $400,000.00. Then they ask the features and the details of the house and give you a $400,000.00 insurance policy. You go to settlement, and everything's fine.
Most borrowers are not aware that there are 'Insider Techniques' that can be used to restructure the policy and still stay within the lenders requirements for insurance coverage. And this does not require reducing coverage or raising deductible levels.
When using this technique alone, borrowers save up to 35% of the annual cost of the homeowner's insurance premium -- every year! The average policy costs a little over $1000.00 per year. So that equals a savings of $350 every single year.
This can reach into the thousands of dollars of savings during the average ownership time of a homebuyer.
Now, the second part of this strategy -- when you get your homeowner's insurance, you might not realize that it's also going to increase every year, automatically. This is because of the 'escalating clauses' or 'inflation adjustments' built into your policy.
Quite often, a homeowner's insurance policy costs increase from 5% to 8% each year. This means that on a $1,000.00 a year policy, you're going to pay $50.00 to $80.00 more next year ... and then another $50 or $80 increase the year after that, and so on.
Ten years into the property, you can see how your insurance policy will go up 60 to 70%. Instead of paying $1,000.00 a year, you could be paying $1600.00 or $1700.00 a year.
You don't need to do that either. With the right information and one phone call, you can reduce this cost as well, and in many cases actually eliminate it totally.
Now the third part of this strategy is the most important aspect that I hope you'll remember. This top Nationwide insurance agent told me, "You know where the real losses are? I mean those losses that I told you about before, where people over-paid by hundreds of dollars a year are bad enough, but what I'm about to tell you is devastating."
"And we see it all the time unfortunately -- and people lose tens of thousands of dollars."
What happens when there's a disaster, like an earthquake, a flood or a fire, when a lot of the stuff in the home is destroyed, unrecognizable or even gone? Or you can't find it, due to a major storm or flood or tornado or whatever?
On average, Homeowners will only get 75% of their contents, or the cost of their contents replaced, by their insurance company. And it's not because the insurance companies don't want to. As a matter of fact, they're generally pretty good about replacing everything.
As a guest on my radio show once, he said, "Imagine, for a second - just close your eyes right now on the radio. Close your eyes & walk through your home, mentally, with a pad of paper - not even going to your house. Mentally do this and write down every single item you own in every single room of your house, and maybe even the brand name, if you can think of it.Or if you can't, then maybe just the type of that particular item." Of course, I couldn't do that.
Nor can the average person, he told us. "That's why they only get about 75% replaced after a disaster because they can only remember about 75% of what they had, and/or describe it effectively. Maybe they can remember it, but they can't describe it effectively, which you also must do for them to figure the
He said the 'Insiders' know that everyone should document all of their belongings for proof, should they ever need it. But, there are only a very few uncontested ways of documenting and recording them, in order to make sure the insurance company will give you 100% replacement of the cost of all your insured belongings.
When you employ one of these tactics, you will save not only multiple thousands of dollars when getting ALL of your items and belongings replaced, you will also save a lot of mental anguish at a time when you really don't need any more stress.
Reduce Your Annual Real Estate Taxes: A lot of people don't realize that you can change your real estate taxes, without litigating. When you feel that your home is over-assessed, you can get it reduced simply and quickly.
The annual real estate tax assessment is done by the tax assessor's office in whatever county or jurisdiction or city you live in. They don't come out to see your house - at least not in most cases. So they're not necessarily privy to all the improvements, features and benefits of your specific house.
They are simply looking at basic square footage, number of bedrooms & bathrooms, whether or not there's a garage and the size of the lot and maybe a few other items, depending on the jurisdiction you're in - and that's it.
So when your house is assessed for more than your neighbor's house, which is the same size -- and you may even have fewer improvements than your neighbor, and you're paying more in real estate taxes than you should be paying -- you've got a problem.
On my radio show, I had interviewed the Chief Budget Director for taxation for the county I live in. It's a county of well over one million people and is so enormous, it has hundreds of millions of dollars coming into the tax assessor's office every year.
He explained this insider process for my listeners. This special process allows a homeowner to get a lower annual real estate tax bill, through administrative procedures only; no courts or litigation.
Now, I imagine it wouldn't be too much more complex in any other county or jurisdiction because there aren't too many counties or jurisdictions as big as the one I live in.
If your house is assessed at $250,000.00 and you're paying for example, $1.00 per thousand on the assessed value, that's $2,500.00 a year. So, if you should only be assessed at $200,000.00 ... then you would only be paying $2,000.00 a year which is a $500.00 a year savings. These kinds of savings really add up, as you can see!
He said there are two steps to this process, but that 50% of the people who try it are successful after just the first step -- and never need to move on to step two.
However, for those who do need to move on to the second step, a full 80% of those individuals are successful in reducing their annual real estate tax bill every year. And this costs them nothing to follow and implement the process.
Ways to get Uncle Sam to Increase Your Monthly Paycheck: This is a strategy the IRS actually offers you, but that most people are not aware of. First of all, most people know that you get to write off the majority of your mortgage payment when you own a home. Whereas when you rent, you don't get to write off anything.
When you own a home, you get to write off all the interest paid on a mortgage and all the real estate taxes every year.
Well, that's almost 90% of the monthly payment! Some homebuyers are aware there's a lot of interest in a mortgage. But most are unaware that it's almost 90% of the payment.
So, if you're paying $1,500.00 a month in interest and taxes, that tax write-off is $18,000.00 a year. That's $18,000.00 a year of your annual income that will not be taxed, and depending on your tax bracket (federal and state) - let's just use 20%, which is pretty low ... that's $3,600.00 in taxes that you would NOT have to pay.
Do you see how the thousands and thousands in savings are adding up, just since you started your e-course?
Now, depending on your personal tax situation, the figure of $3,600.00 is not exact because you also get a personal exemption that will reduce that amount.
The bottom line is you would be getting a tax refund after next year. After you go through the entire year, making mortgage payments -- next year, you would file your tax return - and the IRS would send you a refund because you overpaid your taxes, since you own a home now.
So, why would you give the IRS your money for 18 months, just to wait for them to give it back to you?
You've been overpaying your taxes, pure and simple. And most folks don't understand that they don't have to do that.
Once you are a homeowner, there are a couple of different legal and approved ways for you to tell the IRS that you want to pay fewer taxes every month.
So in this case, instead of having the U.S. government applying the homeownership tax subsidy on an annual basis, they will do it for you monthly.
Don't pay the IRS extra money when you don't have to.
To conclude ...
As you can see, with just this one strategy alone, you've learned how to save hundreds of dollars every year on Homeowners Insurance and on your annual real estate tax bill.
You've also learned how to get the U.S. Government to subsidize your monthly mortgage payment.
Be sure to check your email often, because in a few days, you'll get your sixth 'inside real estate' secret.
In it, I'll be talking about how you can hire your areas Top 'Buyer's Agent' to get you the best deal possible and to represent you - for FREE!
Find the Best Deals and Save $25,000-$50,000 on Your Northern Virginia Home Purchase. Get My Free Homebuyer Savings CD to find out HOw to use the "Insider Techniques" to get Huge Home Purchase Savings.
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Until next time,
Thierry Roche SFR, CDPE
Host of Talk Radio's,
'Inside Real Estate'