To age in place is an increasing popular goal. Homeowners across the country are renovating their homes to enhance accessibility and lengthen their independent, productive lives. Of course, there’s a lot more to their goal-setting than preparing to install ramps and handles. Owners are putting sound financial planning into the mix.

In this article, we lay out some thoughts on promoting well-being and home accessibility. We’ll add tips on preserving value along the way.

Homes are among the priciest items most of us ever buy. A significant slice of the purchase goes into paying the real estate professionals. Clients should know what they’re paying.

Listing agents throughout the United States charge sellers 5-6% of the home’s sale price. In cold, hard, dollar terms: a commission of 5% on a $200,000 house is $10,000. Even after seller concessions, that original figure is in your agreement and it is binding.  

Buyers and sellers alike should know how the fees are structured, and that these fees are negotiable in the initial agreement stage. While many buyers assume the seller covers agents’ fees, at the end of the day, the buyer pays for the asset. In effect, the buyer pays all fees, as the seller prices these costs into the home sale.

A recast mortgage could be an option for homeowners who need to tweak their mortgage payments. Most big banks allow at least one recast for a client with a conventional (Fannie Mae or Freddie Mac) mortgage loan.

To recast the loan, the owner makes a lump-sum payment to the loan principal. The minimum amount that has to be made is the lender’s call. The lender then issues a new amortization schedule, now with lower payments. Reducing the debt left on the loan principal means there is now less interest to pay.

In short, the main idea with a loan recast is keeping the same loan terms — especially important to people whose loans already have low interest rates, and those who wish to avoid resetting the term of years — but lightening the monthly payment due from here on. A recast can be an appealing prospect for a homeowner who’d like to lower the principal in one fell swoop, leaving the length of the loan as it is, only with lower future payments.

For a homeowner who has built up substantial equity, a cash-out refinance can free up funds for big projects. Lenders expect to see many requests for these loans this year. According to industry research, cash-out activity should spike in the second half of 2021, when the economy is on better footing, yet interest rates are still low.

A redesigned bathroom, a renovated kitchen, an addition to the floor plan, the installation of central air or a security system… These are the big-ticket items that cash-out refinancing supports. Assume a homeowner wants to do a $30K kitchen upgrade. There’s a balance of $100,000 on the current mortgage. The new, cash-out refinance mortgage will amount to $130,000. That’s $100,000, plus $30K in cash from the lender. Then the homeowner can do that kitchen upgrade, and do it at a better rate than credit cards typically offer.

So, the cash-out refinance creates a bigger mortgage — and may also extend its term of years. The bigger loan can mean bigger interest tax deductions if the money is used to build or upgrade the home, or install accessibility features.

Today’s low interest rates are exciting, and many homeowners are thinking about refinancing their mortgage loans. There’s a sort of FOMO (Fear of Missing Out) in the rush to get loans. But for those who already have fairly low, fixed interest rates (say, 5% or under), saving money through refinancing can cost more than it’s worth.

The question: Given the costs of refinancing, will a reduced interest rate prove worthwhile? The answer: It all depends. Let’s take a look some pros and cons of refinancing now.