appreciation

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The dividend payout ratio is the ratio of total dividends paid to shareholders relative to the net income of the company. Investors can use the dividend payout formula to gauge what fraction of a company’s net income they could receive in the form of dividends.

While a company will want to retain some earnings to reinvest or pay down debt, the extra profit may be paid out to investors as dividends. As such, investors will want a way to calculate what they can expect if they’re a shareholder.

Understanding Dividends and How They Work

Before calculating potential dividends, investors will want to familiarize themselves with what dividends are, exactly.

A dividend is when a company periodically gives its shareholders a payment in cash, or additional shares of stock, or property. The size of that dividend payment depends on the company’s dividend yield and how many shares you own.

Many investors look to buy stock in companies that pay them as a way to generate regular income in addition to stock price appreciation. A dividend investing strategy is one way many investors look to make money from stocks and build wealth.

Investors can take their dividend payments in cash or reinvest them into their stock holdings. Not all companies pay dividends, and those that do tend to be large, established companies with predictable profits — blue chip stocks, for example. If an investor owns a stock or fund that pays dividends, they can expect a regular payment from that company — typically, each quarter. Some companies may pay dividends more frequently.

Pros and Cons of Investing in Dividend Stocks

Since dividend income can help augment investing returns, investing in dividend stocks — or, stocks that tend to pay higher than average dividends — is popular among some investors. But engaging in a strategy of purchasing dividend stocks has its pros and cons.

As for the advantages, the most obvious is that investors will receive dividend payments and see bigger potential returns from their holdings. Those dividends, in addition to stock appreciation, allow for two potential ways to generate returns. Another benefit is that investors can set up their dividends to automatically reinvest, meaning that they’re holdings grow with no extra effort.

Potential drawbacks, however, are that dividend stocks may generate a higher tax burden, depending on the specific stocks. You’ll need to look more closely at whether your dividends are “ordinary” or “qualified,” and dig a little deeper into qualified dividend tax rates to get a better idea of what you might end up owing.

Also, stocks that pay higher dividends often don’t see as much appreciation as some other growth stocks — but investors do reap the benefit of a steady, if small, payout.

What Is the Dividend Payout Ratio?

The dividend payout ratio expresses the percentage of income that a company pays to shareholders. Ratios vary widely by company. Some may pay out all of their net income, while others may hang on to a portion to reinvest in the company or pay off debt.

Generally speaking, a healthy range for payout ratios is from 35% to 55%. There are certain circumstances in which a lower ratio might make sense for a company. For example, a relatively young company that plans to expand might reinvest a larger portion of its profits into growth.

How to Calculate a Dividend Payout

Calculating your potential dividend payout is fairly simple: It requires that you know the dividend payout ratio formula, and simply plug in some numbers.

Dividend Payout Ratio Formula

The simplest dividend payout ratio formula divides the total annual dividends by net income, or earnings, from the same period. The equation looks like this:

Dividend payout ratio = Dividends paid / Net income

Again, figuring out the payout ratio is only a matter of doing some plug-and-play with the appropriate figures.

Dividend Payout Ratio Calculation Example

Here’s an example of how to calculate dividend payout using the dividend payout ratio.

If a company reported net income of $120 million and paid out a total of $50 million in dividends, the dividend payout ratio would be $50 million/$120 million, or about 42%. That means that the company retained about 58% of its profits.

Or, to plug those numbers into the formula, it would look like this:

~42% = 50,000,000 / 120,000,000

An alternative dividend payout ratio calculation uses dividends per share and earnings per share as variables:

Dividend payout ratio = Dividends per share / Earnings per share

A third formula uses retention ratio, which tells us how much of a company’s profits are being retained for reinvestment, rather than paid out in dividends.

Dividend payout ratio = 1 – Retention ratio

You can determine the retention ratio with the following formula:

Retention ratio = (Net income – Dividends paid) / Net income

You can find figures including total dividends paid and a company’s net income in a company’s financial statements, such as its earnings report or annual report.

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Why Does the Dividend Payout Ratio Matter?

Dividend stocks often play an important part in individuals’ investment strategies. As noted, dividends are one of the primary ways stock holdings earn money — investors also earn money on stocks by selling holdings that have appreciated in value.

Investors may choose to automatically reinvest the dividends they do earn, increasing the size of their holdings, and therefore, potentially earning even more dividends over time. This can often be done through a dividend reinvestment plan.

But it’s important to be able to know what the ratio results are telling you so that you can make wise decisions related to your investments.

Interpreting Dividend Payout Ratio Results

Learning how to calculate dividend payout and use the payout ratio is one thing. But what does it all mean? What is it telling you?

On a basic level, the dividend payout ratio can help investors gain insight into the health of dividend stocks. For instance, a higher ratio indicates that a company is paying out more of its profits in dividends, and this may be a sign that it is established, or not necessarily looking to expand in the near future. It may also indicate that a company isn’t investing enough in its own growth.

Lower ratios may mean a company is retaining a higher percentage of its earnings to expand its operations or fund research and development, for example. These stocks may still be a good bet, since these activities may help drive up share price or lead to large dividends in the future.

Dividend Sustainability

Paying attention to trends in dividend payout ratios can help you determine a dividend’s sustainability — or, the likelihood a company will continue to pay dividends of a certain size in the future. For example, a steadily rising dividend payout ratio could indicate that a company is on a stable path, while a sudden jump to a higher payout ratio might be harder for a company to sustain.

That’s knowledge that may be put to use when trying to manage your portfolio.

It’s also worth noting that there can be dividend payout ratios that are more than 100%. That means the company is paying out more money in dividends than it is earning — something no company can do for very long. While they may ride out a bad year, they may also have to lower their dividends, or suspend them entirely, if this trend continues.

Dividend Payout Ratio vs Dividend Yield

The dividend yield is the ratio of a stock’s dividend per share to the stock’s current price:

Dividend yield = Annual dividend per share/Current stock price

As an example, if a stock costs $100 and pays an annual dividend of $7 the dividend yield will be $7/$100, or 7%.

Like the dividend payout ratio, dividend yield is a metric investors can use when comparing stocks to understand the health of a company. For example, high dividend yields might be a result of a quickly dropping share price, which may indicate that a stock is in trouble. Dividend yield can also help investors understand whether a stock is valued well and whether it will meet the investor’s income needs or fit with their overall investing strategy.

Dividend Payout Ratio vs Retention Ratio

As discussed, the retention ratio tells investors how much of a company’s profits are being retained to be reinvested, rather than used to pay investors dividends. The formula looks like this:

Retention ratio = (Net income – Dividends paid) / Net income

If we use the same numbers from our initial example, the formula would look like this:

~58% = (120,000,000 – 50,000,000) / 120,000,000

This can be used much in the same way that the dividend payout ratio can, as it calculates the other side of the equation — how much a company is retaining, rather than paying out. In other words, if you can find one, you can easily find the other.

The Takeaway

The dividend payout ratio is a calculation that tells investors how much a company pays out in dividends to investors. Since dividend stocks can be an important component of an investment strategy, this can be useful information to investors who are trying to fine-tune their strategies, especially since different types of dividends have different tax implications.

In addition, the dividend payout ratio can help investors evaluate stocks that pay dividends, often providing clues about company health and long-term sustainability. It’s different from other ratios, like the retention ratio or the dividend yield.

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FAQ

How do you calculate your dividend payment?

To calculate your exact dividend payment, you’d need to know how many shares you own, a company’s net income, and the number of total outstanding shares. From there, you can calculate dividend per share, and multiply it by the number of shares you own.

Are dividends taxed?

Yes, dividends are taxed, as the IRS considers them a form of income. There may be some slight differences in how they’re taxed, but even if you reinvest your dividend income back into a company, you’ll still generate a tax liability by receiving dividend income.

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Nestled amidst the picturesque Sierra Nevada Mountains, Reno, Nevada, is a city brimming with natural beauty, vibrant culture, and captivating attractions. From stunning landscapes to cultural landmarks, Reno offers a plethora of sights to explore. So whether you’re a recent transplant renting an apartment in Reno or you’re looking on Redfin for homes for sale in the area, there are many beautiful places to see. Here are the eight of the most exquisite places to visit in Reno. 

Ryan Cleek Studios©

“When it comes to world-class outdoor recreation, Reno is a tough city to beat,” states photographer Ryan Cleek of Ryan Cleek Studios. “It has an international airport, plus incredible terrain for mountain biking, hiking, camping, hunting, fishing, snow sports, and off-roading all nearby, and beautiful Lake Tahoe is around one hour, or less, away.” 

1. Lake Tahoe: Pristine blue waters, just a short drive away 

Just a short drive from Reno lies the magnificent Lake Tahoe, a sparkling jewel renowned for its crystalline waters and breathtaking mountain backdrop, and one of the top places to visit in Reno. Surrounded by lush forests and snow-capped peaks, Lake Tahoe is perfect for outdoor enthusiasts. You can indulge in a variety of activities such as kayaking, paddleboarding, hiking, and skiing, depending on the season. The azure waters against the vibrant greens and blues of the surrounding landscape create an awe-inspiring view that is truly unforgettable.

2. Callahan Park: A tranquil oasis in Reno

Callahan Park in Reno, Nevada, is a tranquil oasis that offers a peaceful retreat from city life. Spanning 62 acres, this picturesque park boasts lush green spaces and scenic trails. Visitors can enjoy leisurely walks or invigorating jogs while taking in the park’s natural beauty. Sports enthusiasts can make use of the soccer fields, baseball diamonds, and tennis courts for friendly matches or organized games. With its picnic areas and shelters, Callahan Park provides an ideal setting for outdoor gatherings and relaxation.

i Deux Photography©

“Nestled at the base of Galena Forest and home to countless beautiful features, Callahan Park has wonders for everyone to enjoy, including Galena Creek, two playgrounds, and the Galena Creek Trailhead for hikers of all ages to explore,” says photographer Jerrine Plunket of i Deux Photography

Captured Moments By Regina©

According to photographer Regina Diaz of Captured Moments By Regina,  “Reno’s trails and walking paths are one of the many wonderful things Reno has to offer. At Caughlin Ranch Trails, you can find so much beauty from the ponds, ducks, wild flowers and the sound of water streaming in the background.”

3. Fort Churchill: A historic landmark in Nevada

Fort Churchill in Nevada stands as a historic landmark with a rich past. Established in 1861, it played a crucial role in protecting settlers along the Pony Express route. The remains of the adobe fortifications and restored buildings offer a glimpse into frontier life. The park surrounding the fort features diverse ecosystems and scenic trails. With the picturesque Carson River flowing nearby, visitors can enjoy fishing and paddling activities. 

Sara Weir Photography©

“Reno has many stunning desertscapes that are worth exploring, and among my personal favorites are the captivating outlying historical sites,” says photographer Sara Weir of Sara Weir Photography. “One site that holds a special place in my heart is Fort Churchill. It’s a small walking path winding through what remains of the fort. I recommend visiting it during sunset. The views are spectacular.”

4. Galena Creek Park: A natural wonderland in Reno

Galena Creek Park in Reno, Nevada, is a nature lover’s paradise. Spanning over 1,900 acres, this pristine park offers stunning views of the Sierra Nevada Mountains and a tranquil creek. Hikers and bikers can explore the park’s extensive trail network, immersing themselves in its unspoiled wilderness. The park’s panoramic vistas and rich biodiversity make it a haven for nature enthusiasts. With its breathtaking beauty and serene atmosphere, Galena Creek Park is a must-visit destination for those seeking a peaceful retreat in the heart of nature. 

Kendall Price Photography©

“One of my favorite places in Reno is Galena Creek Park,” says photographer Kendall Price. “It offers fishing at Marilyn’s Pond, but it is a great hiking spot as well. I go there often to take pictures of families in a beautiful mountain setting that is only 25 minutes from downtown Reno.” 

5. Reno Riverwalk: A vibrant urban escape

Situated along the banks of the Truckee River, Wingfield Park is a verdant oasis in the heart of Reno. This idyllic spot is a haven for relaxation, offering lush green spaces, peaceful river views, and charming bridges. Visitors can enjoy a picnic, take a leisurely walk along the riverfront, or even catch a live performance at the outdoor amphitheater. With its tranquil ambiance and scenic beauty, Wingfield Park provides an ideal escape from the city’s hustle and bustle.

Breanna Elise photography©

According to photographer Breanna Elise of Breanna Elise photography, “The Reno Riverwalk is a beautiful walking trail filled with river scenery, flower gardens, and local art. Located in the heart of downtown Reno alongside the Truckee River, the Riverwalk is dotted with a variety of local restaurants, bars, and boutiques that bring enjoyment to natives and visitors alike.”   

6. Rancho San Rafael Park

Rancho San Rafael Park is a picturesque urban oasis. Sprawling across 600 acres, this expansive park boasts scenic walking trails, lush green spaces, and a serene pond that attracts various wildlife. Nature lovers can marvel at the park’s diverse flora and fauna, while outdoor enthusiasts can engage in a wide range of activities, including picnicking, hiking, and biking. Rancho San Rafael Park also features the stunning Wilbur D. May Arboretum and Botanical Garden, where visitors can immerse themselves in the beauty of meticulously curated plant collections. 

Blanca and Brandon Photography©

According to Blanca and Brandon, “Although the Reno area is surrounded with a ton of varying landscapes including mountains, lakes and deserts, one of our favorite places for a summer evening stroll with our 1-year-old and doggo is Rancho San Rafael Park. So much greenery and a beautiful property to walk around and just a few minutes drive from the river. Truly one of Reno’s gems.”

7. Animal Ark: Experience wildlife up close 

Animal Ark is a unique wildlife sanctuary located just outside Reno, providing a home to a variety of exotic and endangered animals. Take a guided tour through the sprawling grounds to observe magnificent creatures such as cheetahs, wolves, and bears in a natural and safe environment. Animal Ark’s mission of conservation and education makes it a truly inspiring place to visit, allowing visitors to deepen their understanding and appreciation for the animal kingdom.

8. Historic Virginia City: A step back in time 

Venture back in time to the 19th century by visiting the historic town of Virginia City, a captivating remnant of Nevada’s mining boom. Stroll along the wooden boardwalks and explore the well-preserved buildings, including the Old Washoe Club and Piper’s Opera House. Delve into the town’s rich history through guided tours and immersive experiences, such as the mine tours that take you deep underground. Virginia City’s authentic Wild West charm and panoramic views of the surrounding desert make it a must-visit destination.

A final note on beautiful places in Reno

Reno, Nevada, is a captivating destination that never fails to enchant both locals and visitors alike. Its remarkable array of stunning attractions caters to every interest and leaves a lasting impression on all who explore its wonders. So, get out there are enjoy these beautiful places to visit in Reno. 

Source: redfin.com

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Nestled in the heart of the Pacific Northwest, Spokane, WA, boasts a rich cultural scene, with a variety of museums that cater to diverse interests. From art enthusiasts to history buffs and science lovers, this vibrant city offers an array of museums that captivate and educate visitors. From stepping into a world of creativity and inspiration at the Northwest Museum of Arts & Culture, where art, history, and regional culture converge to uncovering where science comes alive with interactive exhibits and engaging activities at the Mobius Discovery Center, many remarkable museums are sure to fascinate and educate. 

Whether you’re looking to rent an apartment in Spokane on Redfin, purchase a home in the area, or just want to know what it’s like living in Spokane, join us as we embark on a journey through five remarkable museums in Spokane, each offering a unique and enriching experience that will leave you with a deeper appreciation for the art, history, and wonders of this vibrant city.

1. Jundt Art Center & Museum

The Jundt Art Museum, located on the campus of Gonzaga University, showcases an impressive collection of art from various periods and styles. Established in 1995, the museum houses over 5,000 artworks, including paintings, sculptures, ceramics, photographs, and prints. The collection spans a wide range of artistic genres, from European and American masterpieces to contemporary works by renowned regional and international artists. The Jundt Art Museum also hosts temporary exhibitions that explore diverse themes and artistic movements.

2. Northwest Museum of Arts & Culture

The Northwest Museum of Arts & Culture (MAC) is a prominent cultural institution dedicated to preserving and showcasing the art, history, and culture of the Inland Northwest region. Founded in 1916, the museum houses a diverse collection of artifacts, artworks, and archival materials that span various disciplines, including fine art, Native American artifacts, regional history, and natural history. Visitors to the MAC can explore exhibitions that delve into topics such as regional heritage, indigenous cultures, contemporary art, and historical events. This is a must-visit museum in Spokane for locals and tourists alike.

3. Bing Crosby House

The Bing Crosby House is a historical residence located on the campus of Gonzaga University that was the childhood home of the legendary American singer and actor, Bing Crosby. Built in 1913, it’s a modest two-story Craftsman-style home that reflects the architectural style of the time. It provides a glimpse into Crosby’s early years and how he was raised. 

4. Mobius Discovery Center

The Mobius Discovery Center is an interactive science center that offers a hands-on learning experience with a focus on science, technology, engineering, art, and mathematics (STEAM). The center features a variety of exhibits and activities designed to engage and inspire curiosity in science and exploration. Visitors can participate in interactive displays, experiments, and educational programs that cover a wide range of scientific topics. Some exhibits include bottle rockets, electricity, and bridges and various structures. 

Source: redfin.com

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All 12 Federal Reserve districts have seen issues with a lack of housing inventory, which is largely due to existing homeowners holding back on listing their homes after previously locking in low mortgage rates. 

Demand from the buyer side has remained steady or increased, however, and new home builders have responded to inventory shortages by increasing speculative inventory production, according to the Federal Reserve Beige Book, released Wednesday. 

The Beige Book is a compilation of data and interviews with bank and branch directors, community organizations and economists from on or before May 22.

“Residential real estate activity picked up in most Districts despite continued low inventories of homes for sale,” the report states. 

The Beige Book also notes that “home prices and rents rose slightly on balance in most Districts, after little growth in the prior period.”

In return, the lack of inventory of homes for sale pushed demand for rental properties in some areas — including New York, Chicago, St. Louis, Kansas City Federal Reserve districts.

Following are excerpts of statements on housing conditions from each of the 12 Federal Reserve districts. 

***

Boston – Contacts around the District attribute the still-low sales numbers to low inventories more than to weak demand, as slightly lower mortgage rates have helped bring more buyers to the market.

House price appreciation has slowed on average but remains slightly positive, with the exception that home prices in Massachusetts (not including Boston) have experienced modest declines from a year earlier. The modest price growth in the Boston area marks a trend reversal from the preceding few months. 

Contacts anticipate that, despite healthy buyer demand, home sales are likely to experience only a modest seasonal increase moving forward, owing to extremely low inventory levels.

New York – The residential sales market has been strong across the District. A New York City-area contact reports that the sales market in and around New York City has picked up strongly in recent weeks after a brief pause in early April, which was due to uncertainty in the banking sector.

After a slow start to the year, housing markets in upstate New York have also started to pick up, with bidding wars and multiple offers becoming more common. Inventory remains exceptionally low and is restraining sales activity in much of the District. A key factor suppressing new listings is the prevalence of homeowners with historically low interest rates on their existing mortgages, reducing the incentive to sell and move.

A strong economy and relatively high mortgage rates have pushed some movers to the rental market, boosting demand.

Philadelphia –  High interest rates have continued to dissuade existing homeowners from listing their house and losing their low interest rate. Existing home sales have fallen moderately in this district, and prices have continued to rise as the market heats up again. New home builders have benefited from the unseasonably modest sales of existing homes as the resale market has slowed. 

Cleveland – Demand for residential construction and real estate has stabilized in this District, and contacts attribute this stabilization to the arrival of spring and flattening interest rates.

Homebuilders have reported an increase in speculative construction projects in this District, as many buyers want to purchase and move into homes immediately, in part to avoid further rises in interest rates.

Richmond – Residential real estate respondents indicate in the report that the spring market is off to a good start, with sales prices continuing to appreciate, but not at the same pace as last year. For-sale inventory remains constrained due to fewer people putting their homes on the market, but buyer traffic has been steady while the days on market has increased slightly in the last month. 

However, fluctuations in mortgage rates have caused buyers to pull back, with pending sales and closed sales both down in this District. Builders have been offering strong incentives to close deals. 

Atlanta – Housing demand throughout the District has remained strong despite interest rate and home price volatility. Though home sales are down compared to a year ago, sales in many markets in this District have increased on a monthly basis, as buyer sentiment has modestly improved. 

The supply of existing homes for sale has remained low as homeowners have showed increased hesitancy to list homes for sale, especially if they financed at a low interest rate. Home prices remain down from peak levels but have recently shown month-to-month improvement.

New home builders have responded to inventory shortages by increasing speculative inventory production, and some have begun to reduce buyer incentives.

Chicago – Residential construction activity has been down modestly in this District. Contacts report that high-interest rates have led some projects to be postponed or canceled and that while construction costs had fallen, the decline isn’t enough to offset higher financing costs. 

Residential real estate activity has decreased modestly as well. Prices and rents have declined, and the low inventory of homes for sale has helped to prevent larger declines.

However, there have been reports of rising retail rents in some areas because of a lack of high-quality new construction.

St. Louis – Rental rates for residential real estate have increased slightly in this District. The number of new listings in residential real estate have dropped sharply in Louisville since our previous report, while new listings in the Memphis and Little Rock regions have remained unchanged. Seasonally adjusted home sales have remained unchanged since the previous report. 

Minneapolis – Residential construction has remained subdued. Single-family permitting in April was more than 40 percent lower year over year in the Minneapolis-St. Paul region; most other large markets in the District saw even bigger declines. Discounts have started to appear for some speculative developments.

Closed (residential real estate) sales in April fell notably year over year across the District, with many larger markets seeing declines of 30 to 50 percent. Median sale prices have declined in western and central Montana and have been flat in several other markets. 

Kansas City – Housing rental rate growth has remained elevated in several western District states, but the pace of increases has declined broadly and swiftly from the growth rate experienced during the past year. 

Dallas – Housing demand broadly has held up in the Dallas District, though sales have continued to be weaker than a year ago. Contacts have noted a decent spring selling season, with prices largely stable, and builders have been able to raise prices slightly in selected areas.

Outlooks have been cautious, however, with some voicing concern about whether demand would hold up beyond the spring selling season.

San Francisco – Activity in residential real estate has slowed further in this District. Contacts across the District have reported stable demand for single-family homes, although high mortgage rates have restrained prices. Existing single-family inventory has been low, and owners appeared hesitant to forego their existing low-rate mortgages by listing their homes.

Despite reported improvement in the availability and cost of materials, construction of new homes has been flat-to-down as developers responded to higher financing costs.

Source: housingwire.com

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Let’s talk mortgage basics: “What is the loan-to-value ratio?”

If you’re currently shopping for a home or already going through the mortgage loan process, chances are you’ve heard the phrase loan-to-value ratio get thrown around on more than one occasion.

You may have also encountered the acronym “LTV” while perusing mortgage advertisements or playing around on mortgage rate comparison websites.

Regardless of what’s going on in the housing market, you should know all about this very important term when applying for a home loan.

Why? Because it can greatly affect mortgage rate pricing, refinance options, and overall loan eligibility.

How to Calculate the Loan-to-Value Ratio (LTV)

  • It’s actually one of the easiest calculations you can make
  • Simply divide the loan amount by the appraised value or purchase price
  • And you’ll wind up with a percentage known as your LTV
  • The tricky part might be agreeing on a sales price and getting the home to appraise at value

Simply put, the loan-to-value ratio, or “LTV ratio” as it’s more commonly known in the industry, is the mortgage loan amount divided by the lower of the purchase price or appraised value of the property.

If we’re talking existing mortgages (in the case of refinance loans), it’s the outstanding loan balance divided by the appraised value.

When calculating it, you will wind up with a percentage. That number is your LTV. And the lower the better here folks!

It’s actually very easy to calculate (no algebra required) and takes just one step. You don’t even need a mortgage calculator. In fact, you might be able to run the numbers in your head. Honest!

Let’s calculate a typical LTV ratio:

Property value: $500,000
Loan amount: $350,000
Loan-to-value ratio (LTV): 70%

In the above example, we would divide $350,000 by $500,000 to come up with a loan-to-value ratio of 70%.

Using a basic household calculator, not a so-called “LTV calculator,” simply enter in 350,000, then hit the divide symbol, then enter 500,000. You should see “0.7,” which translates to 70% LTV. That’s it, all done!

This means our hypothetical borrower has a loan for 70 percent of the purchase price or appraised value, with the remaining 30 percent the home equity portion, or actual ownership in the property.

LTV ratios are extremely important when it comes to mortgage rate pricing because they represent how much skin you have in the game, which is a key risk factor used by lenders.

A Lower LTV Ratio Means More Ownership, Better Mortgage Rate

  • The lower your loan-to-value ratio the more home equity or down payment you have
  • Which is another way of saying ownership or skin in the game
  • A low LTV equates to a lower mortgage rate because you’re viewed as less risky
  • It means the bank is risking less since you are more invested in the underlying property

Essentially, the lower the loan-to-value ratio, the better, as it means you have more ownership (home equity) in the property.

Someone with more ownership is less likely to fall behind on payments or foreclose, seeing that they have a greater equity stake, aka financial interest to keep paying the mortgage each month.

They’ve also got more options if they do struggle with payments, as they could just sell the property without taking a loss (or the bank losing money).

Not only that, but banks and mortgage lenders also set up pricing adjustment tiers based solely on the LTV ratio.

Those with lower LTV ratios will enjoy the lowest interest rates available, while those with high LTVs will be subject to higher mortgage rates and/or closing costs.

For example, if you’re being “hit” by the lender for having a less-than-stellar credit score, that adjustment will grow larger as the loan-to-value ratio increases (higher LTV ratio = greater risk).

So if your mortgage rate is bumped a quarter percent higher for a loan-to-value ratio of 80%, that same pricing hit may be increased to a half percentage point if the LTV ratio is a higher 90%.

This can certainly raise your interest rate in a hurry, so you’ll want to look at all possible scenarios with regard to down payment and loan amount to keep your LTV ratio as low as possible.

More importantly, just maintain an excellent credit score and you’ll have plenty of loan options, regardless of your chosen down payment or available home equity.

80% LTV Is a Very Important Threshold!

  • Keep your mortgage at/below 80% LTV if you want to save money
  • You won’t have to pay private mortgage insurance (PMI)
  • And it should result in a lower mortgage interest rate with fewer pricing adjustments
  • You’ll also enjoy greater lender choice as most banks will lend up to 80% LTV

Most borrowers (who have the means) elect to put 20% down when buying a home, as it allows them to avoid mortgage insurance and the much higher pricing adjustments often associated with LTVs above 80%.

Fewer adjustments mean you can secure a lower interest rate on your mortgage. And if you can avoid PMI at the same time, it’s a win-win for your monthly housing payment!

You may also find it easier to get approved, as virtually all banks and mortgage lenders will accept LTVs of 80% or less.

But you don’t necessarily need to put 20% down to enjoy the benefits of a low-LTV mortgage.

Also Get to Know the Combined Loan-to-Value Ratio (CLTV)

Looking at the above example again, if you were to raise the first mortgage amount to $400,000 and add a second mortgage of $50,000, the combined loan-to-value ratio, or CLTV as its known, would be 90%.

Banks and mortgage lenders have both LTV and CLTV limits, meaning they won’t allow homeowners to borrow more than say 80, 90, or 100 percent of the property value.

These limits came down after the Great Recession but are creeping back up again…

Let’s do the math here; again, no mortgage calculator required!

Simple math: $400,000 + $50,000 = $450,000 / $500,000 = 90% CLTV

You would have a first mortgage at 80% LTV, and a second mortgage for an additional 10% LTV, making the CLTV 90%. Simply add up both numbers.

Sometimes borrowers elect to break up home loans into a first and second mortgage, known as combo mortgages.

This keeps the loan-to-value ratio below key levels, thereby reducing the interest rate and/or helping the homeowner avoid private mortgage insurance.

Tip: The undrawn portion of a home equity line of credit (HELOC) typically isn’t included in the CLTV calculation.

Max LTV by Home Loan Type

  • FHA loans go as high as 96.5% LTV (3.5% down payment)
  • Conforming loans (Fannie/Freddie) go as high as 97% LTV (3% down)
  • USDA and VA loans go to a full 100% LTV (zero down)
  • Jumbos, cash-out refis, and investment properties are much more restrictive
  • And there is no maximum LTV in many cases for streamline refinances

There are certain LTV limits based on home loan type, with conventional loans (non-government) typically being more restrictive than government loans.

And mortgage refinance programs often less accommodating than home purchase loans.

At the moment, you can get an FHA loan as high as 96.5% LTV, which is just 3.5% down payment.

You can get a conventional loan as high as 97% LTV, which at just 3% down is higher than it used to be.

In recent history, the maximum was 95% LTV, but now Fannie Mae and Freddie Mac are competing directly with the FHA.

[See FHA vs. conventional for more on that.]

You can get either a VA loan or USDA loan at 100% LTV (which represents no money down).

These are the most flexible loan programs LTV-wise, but they are also only available to veterans or those living in rural areas, respectively. So not everyone will qualify for these types of mortgage loans.

There are also proprietary home buying programs from various private mortgage lenders that allow for 100% LTV financing if you take the time to shop around.

If it’s a jumbo home loan, a cash-out refinance, or an investment property, the loan-to-value will be a lot more limited, potentially capped at just 70-80% LTV, depending on all the attributes.

And finally, those underwater or upside down borrowers you hear about; they owe more on their mortgage than the property is currently worth.

This can happen due to negative amortization and/or home price depreciation.

A quick underwater loan-to-value ratio example:

Property value: $400,000
Loan amount: $500,000
Loan-to-value ratio (LTV): 125%

As you can see, the underwater borrower has a LTV ratio greater than 100% (this equates to negative equity), which is a major issue from a risk standpoint.

For the record, you get 1.25 by dividing 500 by 400.

The problem with homeowners in these situations is that they have little incentive to stick around, even with a modified mortgage payment, as they’re so far in the red that there’s little hope of recouping home value losses.

However, the popular Home Affordable Refinance Program (HARP) allowed millions of underwater homeowners to refinance to lower rates with no LTV limit. And many of these folks are probably now back in the black.

Today, this type of program still exists, but is a permanent option known as a high-LTV refinance, or HIRO for short.

So there are options to refinance and get a lower interest rate, as long as your loan is owned by Fannie Mae or Freddie Mac, no matter the mortgage balance relative to the property value.

Same goes for FHA loans and VA mortgages thanks to the FHA streamline refinance and the VA IRRRL option.

Despite being far behind new homeowners entering the market in terms of building home equity, many of these formerly-underwater borrowers now have lots of equity thanks to rising home prices and several years of paying down their mortgages.

That’s why you have to consider the long-game in real estate and never give up, even when times get tough. This also illustrates why home buying shouldn’t be a quick or hasty decision.

A Lower Loan-to-Value Can Save You Money!

  • A lower LTV generally results in a better interest rate
  • Which means cheaper monthly mortgage payments
  • It puts more of your hard-earned dollars toward the principal balance each month
  • Potentially saving you thousands of dollars over the life of the loan!

As noted, a lower LTV will likely result in big savings thanks to a lower interest rate.

Additionally, you may be able to avoid costly private mortgage insurance, enjoy expanded loan program eligibility, and have an easier time getting approved for a mortgage.

If your LTV is higher than you’d like it to be, there are some creative options to lower it.

Borrowers Can Reduce Their LTV in a Variety of Ways

  • Come in with a larger down payment if it’s a home purchase loan
  • Ask for gift funds to increase your down payment
  • Or break your mortgage up into two separate loans (combo loan)
  • Make extra payments or a lump sum payment for a refinance to get the LTV down before you apply
  • Or simply wait for natural amortization and home price appreciation to lower your LTV over time

If we’re talking about a home purchase, simply bring in more down payment money and the LTV will be lower. Easier said than done, sure, but possible for some.

Perhaps someone will gift you the money or act as a co-borrower?

Alternatively, you can look into breaking up your financing into two loans, with both a first and second mortgage.

If it’s a mortgage refinance, simply pay down the mortgage balance a bit more before you apply, whether on schedule or by making extra mortgage payments.

This can be especially helpful if you’re super close to a certain LTV threshold, or just above the conforming loan limit.

Speaking of, pay close attention to your LTV – if it’s just above 80% or some other meaningful tier, think about adjusting your loan amount down (your loan officer should advise you here!).

Lastly, there’s another way existing homeowners can get their LTV down and it requires no effort whatsoever.

You don’t have to do anything except sit back and watch your property value increase over time, thereby lowering your LTV in the process. Of course, the opposite can happen too if home values drop!

But as noted, real estate should be treated with a long time horizon, so be sure you have the ability to ride the ups and downs and make moves when it’s most favorable to you.

Read more: 10 ways to build home equity.

Source: thetruthaboutmortgage.com

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While it’s hard to compare the current possible housing crisis to the very real one experienced about a decade ago, there are fears of negative market impact due to COVID-19.

We’ve already seen listing prices fall, along with a big jump in delistings, where home sellers pull their properties off the market.

And home purchase mortgage applications continue to plummet, especially in large metros like LA, NY, and Seattle, per the MBA.

Meanwhile, real estate brokerage Redfin revealed via an SEC filing that it was laying off 7% of its workforce, which could result in roughly 236 job losses.

Then we have Wells Fargo curtailing its mortgage menu, and ARMs pricing higher than fixed-rate mortgages.

The number of mortgages in forbearance has also surged 1000%, and is likely to get a lot worse the longer this goes on.

The real estate and mortgage industry certainly isn’t operating as usual, and it’s even reminiscent of times back in the early 2000s.

Temporary Inability to Pay the Mortgage?

  • The housing crisis a decade ago was driven by shoddy financing
  • Such as stated income, option ARMs, interest-only loans, and so on
  • This potential crisis is being driven mostly just by loss of income due to COVID-19
  • As long as it’s temporary it shouldn’t create too many problems for the housing market

This time around, the number one issue is inability to make mortgage payments due to loss of income or unemployment as a result of coronavirus.

Either companies have laid off staff due to a loss of business, or small business owners have taken a hit because they’ve had to close up shop.

Others might just be experiencing a temporary loss of income or a pay cut while companies navigate the uncertain waters ahead.

Whatever the situation, the problem seems to center around capacity to pay, as opposed to being overleveraged, or holding a home loan with some creative financing terms like interest only or an exploding ARM.

Homeowners could mostly afford their monthly mortgage payments before this unforeseen event took place, unlike the crisis that took place in the early 2000s.

Back then, borrowers took out mortgages they couldn’t afford, and serially refinanced them as their inflated home values grew.

Today, many homeowners have a sizable equity cushion, partially because cash out refinance volume has been very low, and also because home prices have risen a ton over the past decade.

This puts them in a much better position than those homeowners from 2006 who purchased a property with zero down financing and stated their income on the application.

That’s the good news. The bad news is many housing markets were already vulnerable before COVID-19 hit, and thus could see some an uptick in foreclosures if this plays out for a long period of time.

Almost Half of the 50 Most Vulnerable Counties Are in Florida and New Jersey

  • 14 of the highest risk counties can be found in New Jersey
  • Several are also located in the NYC suburban area
  • Another 10 are in Florida, mostly in the central and north part of the state
  • Others are scattered along the Mideast coast

So where are the potential foreclosure hotspots, once any coronavirus-related moratoria disappear?

Well, a new “Special Coronavirus Market Impact Report” released by ATTOM Data Solutions found that half of the most vulnerable counties reside in Florida and New Jersey.

They rank market risk by looking at three main factors:

– Percentage of housing units receiving a foreclosure notice in Q4 2019
– Percentage of homes underwater (LTV 100 or greater) in Q4 2019
– Percentage of local wages required to pay for major homeownership expenses

As we know from the prior mortgage crisis, payment default was driven by homeowner equity to some degree, with underwater borrowers often throwing in the towel because they had nothing to lose.

This was further exacerbated if they didn’t have the money to make mortgage payments, or if they were simply overextended.

Finally, if a foreclosure notice was already received before the coronavirus pandemic took place, it’s clearly a bad sign for a situation that likely just got worse.

As for which counties are on alert, there are 14 in New Jersey, such as Camden and Ocean, along with five in the New York City suburban area: Bergen, Essex, Passaic, Middlesex, and Union counties.

And there are 10 counties in Florida, mostly in the northern and central portions of the state, including Clay, Flagler, Hernando, Lake, and Osceola counties.

Additional New York counties include Orange, Rensselaer, Rockland, and Ulster.

There are also a handful of counties in the top 50 in Delaware, Louisiana, Maryland, North Carolina, South Carolina, and Virginia.

Only Seven Risky Housing Markets in the Midwest and West

  • The housing markets in the Midwest and West appear to be stronger overall
  • The only high-risk markets are in Illinois, mostly the Chicago metro
  • Along with Shasta County, CA, which is just south of Oregon
  • And Navajo County, AZ, in the northeast part of the state

Things appear to be a lot better in the Midwest and West, with just seven counties total landing in the top-50 most vulnerable list.

Every single Midwestern county can be found in Illinois, including Kane, Lake, McHenry, Tazewell, and Will.

Most are in the Chicago metropolitan area, a region that has never really seen massive amounts of home price appreciation since the crisis.

In terms of the West, only two counties made the top-50, including Shasta County, CA and Navajo County, AZ. Both aren’t major metros.

The report also revealed that counties where median home prices range from $160,000 to $300,000 account for 36 of the most vulnerable counties.

Meanwhile, counties with median home prices below $160,000 or above $300,000 made up just 14.

This is because those with median prices below $160,000 are among the most affordable, while those priced above $300,000 have some of the highest home equity amounts, and thus the lowest foreclosure rates.

The takeaway here is that most of the country looks pretty good overall with regard to housing market risk.

That could change depending on how long things play out, but there are plenty of mortgage relief programs available, including a 6-12 month forbearance via the CARES Act.

As long as this is somewhat temporary, and most homeowners get back to work, it should be a momentary blip.

Read more: How does mortgage forbearance work?

Source: thetruthaboutmortgage.com

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Welcome to Rockford, a city teeming with rich history and vibrant culture. Whether you’re living in a house in the city or you’re searching for apartments for rent in Rockford, you’re in for a treat. In this Redfin article, we’ll explore the diverse range of museums that this city has to offer. Perfect for art enthusiasts to history buffs, Rockford’s museums provide a captivating glimpse into the past, present, and future. Let’s get started!

1. Discovery Center Museum

Let’s kick off our journey with the Discovery Center Museum, a haven for curious minds of all ages. This interactive science museum offers hands-on exhibits that encourage visitors to explore the wonders of physics, geology, health, and technology. From launching rockets to excavating dinosaur bones, the Discovery Center Museum ensures an unforgettable experience that combines education with entertainment.

2. Rockford Art Museum

Art aficionados will find solace at the Rockford Art Museum, which showcases an impressive collection of contemporary and historical artworks. Featuring exhibitions that highlight local, national, and international artists, the museum provides a platform for artistic expression, fostering creativity and cultural appreciation within the community.

3. Burpee Museum of Natural History

Delve into the world of paleontology and anthropology at the Burpee Museum of Natural History. Discover the wonders of ancient creatures, including the most complete juvenile Tyrannosaurus rex ever discovered, Jane. Unearth the mysteries of human evolution and marvel at the fossilized remains that reveal our fascinating past. The Burpee Museum offers a captivating blend of science, history, and discovery.

4. Ethnic Heritage Museum

Embrace the cultural diversity of Rockford at the Ethnic Heritage Museum, a unique institution dedicated to preserving and celebrating the heritage of various ethnic groups that have contributed to the city’s rich tapestry. With individual galleries representing different cultures, including African-American, Hispanic, Italian, Lithuanian, Polish, and Irish, the museum fosters understanding and appreciation for the city’s multicultural roots.

5. Midway Village Museum

Step back in time at the Midway Village Museum, an immersive living history museum that transports visitors to the late 19th and early 20th centuries. Roam through meticulously recreated period buildings, including a Victorian-era village, and witness the daily lives of the people who shaped Rockford’s history. Engaging exhibits, costumed interpreters, and special events bring the past to life, offering a captivating glimpse into bygone eras.

6. Tinker Swiss Cottage Museum and Gardens

Take a tour of the Tinker Swiss Cottage Museum and Gardens, a beautifully preserved Victorian-era mansion that offers a fascinating glimpse into the life of Rockford’s early settlers. Admire the intricate craftsmanship, period furnishings, and stunning gardens as you uncover the story of the Tinker family. Guided tours provide a deeper understanding of the cottage’s history, making it a must-visit for history enthusiasts.

7. Erlander Home Museum

The Erlander Home Museum invites visitors to explore the heritage of Swedish immigrants who played a pivotal role in shaping Rockford. Step into the past as you wander through the meticulously restored 1871 home of Swedish-American John Erlander. Immerse yourself in Swedish culture, learn about the challenges faced by immigrants, and appreciate the contributions they made to the city.

8. National Museum of the USAF

For aviation enthusiasts, the National Museum of the United States Air Force is an absolute gem. Although located a short drive from Rockford in Dayton, Ohio, it’s worth mentioning due to its proximity and outstanding collection. This awe-inspiring museum showcases an extensive array of aircraft, from vintage planes to modern jets, and delves into the history of aviation and space exploration. Get up close to iconic aircraft like the Wright Flyer, Apollo space capsules, and military planes that shaped the nation’s aerial history.

Source: redfin.com

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Your space reflects your aesthetic and curates your mood.

Dark academia is an aesthetic and cultural movement that draws inspiration from academic and literary traditions, often focusing on introspection, intellectualism and a love for knowledge and learning. It emerged as a trend online and has gained popularity on platforms like TikTok. Maybe you’re inspired by this aesthetic and hoping to decorate your home. Where can you get started with dark academia room decor to enhance the moody, scholastic vibe? We’ll explain more here.

Dark academia in modern media

While dark academia is not an easily spotted decorative style, it’s more prevalent than we think. Shows like “Wednesday” feature dark-toned decor, vintage furniture and an overall dark aesthetic that lends to dark academia. Tim Burton films and Harry Potter movies — along with films like Dead Poets Society and Atonement — famously feature this moody, serious aesthetic as well.

The key features of dark academia room decor

Dark academia is all about embracing the love for learning and intellectual pursuits. It’s showcasing and emulating a deep appreciation for literature, philosophy, history and the arts that really sets it apart from other decor styles. Because of this, there’s also a strong sense of nostalgia that comes with dark academia: Think vintage books and antique furnishings that transport you to a different time. Let’s delve into some of the key characteristics of dark academia decor.

Deep colors

Dark academia room decor features a color palette full of deep, rich tones. Colors like dark brown, burgundy, forest green, navy blue and black create a sense of drama and depth. These colors are often used on walls (when allowed by apartments), furniture and accessories. Elements like furniture colors, wall decor, blankets, pillows, floor rugs and bedding reflect these colors in smaller spaces like apartments.

Antique furniture and vintage tchotchkes

With such baroque influence, antique and vintage furniture are seen in dark academia-decorated spaces. Things like dark wooden bookshelves, leather armchairs, carved desks and unique tables help curate the aesthetic.

The furniture tends to have a sense of history and character, nodding to the sense of nostalgia dark academia creates. These pieces can prove as budget-friendly as they are beautiful, antique furniture is found easily at thrift-type shops, second-hand resale stores and vintage retailers.

Literature emphasis

Books play a central role in the dark academia asthetic, whether this be through floor-to-ceiling bookshelves filled with classic, leather-bound books or smaller, vintage book nooks filled with academic texts. The books are often arranged eclectically and intentionally unorganized, creating a sense of charm and uniqueness.

Artwork

Dark academia decor often includes artwork that reflects classical and intellectual themes. Think of old-world paintings, portraits and other traditional art styles. People can take it one step further by displaying this art in vintage frames or dark frames in a gallery-style fashion. The artwork element really contributes to the overall ambiance of nostalgia and a love for more decadent things in life.

Dark lighting

One of the easiest ways to spot dark academia decor and to create this ambiance is through lighting. Table lamps and floor lamps with warm-toned bulbs create an intimate and cozy atmosphere. Candles and soft string lights add a touch of warmth to living spaces.

The opposing side: light academia

Light academia is a contrasting style to dark academia. While dark academia embraces a moody and dark atmosphere, light academia takes a brighter and more optimistic approach. It embodies the love for learning and intellectual pursuits, just like dark academia, but with a lighter and airier feel.

Libraries, gardens and the beauty of nature offer inspiration within light academia. To curate the desired vibe, people incorporate pastel colors, soft fabrics and floral patterns through furniture, wall decor and plants. You can find this style represented in several shows like “Bridgerton,” “Anne with an E” and “Gilmore Girls.”

Explore this scholarly, gothic style in your apartment

By creating a space that reflects the aesthetic and ambiance of dark academia, individuals can immerse themselves in this realm that celebrates the pursuit of knowledge and the beauty of the past.

Whether through the arrangement of books or by filling the room with vintage furniture, decorating for dark academia combines literature, art and Romanticism perfectly. Find your dream apartment to fill with dark academia today!

Source: rent.com

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The question of whether a car is an asset or a liability has been debated for decades.

The reason for the debate is that there are many types of cars in the world and each car serves different purposes.

In the past, many people bought cars that were used and old to save money, because they believed it was cheaper in the long run than purchasing new ones every few years. This mindset shifted after some studies showed that replacing your car more often actually costs you less over time in terms of maintenance cost and depreciation on your vehicle value when compared to keeping a newer model longer.

Nowadays, most consumers are aware that the car is an asset and are more willing to pay for a new one.

However, there is a huge caveat on how you purchase the car, the age of the car, and the purposes of the vehicle.

All in all, depreciation can eat into your car’s worth.

What’s your take on this debate?

What is Considered an Asset?

The definition of an asset is broad and includes most things that have value. Assets are tangible or intangible property such as land, buildings, equipment, intellectual property such as patents and trademarks, or stocks.

This can be anything from a physical asset such as a house or equipment, to a more intangible asset such as a strong brand name or a loyal customer base.

Is a car an asset or liability?

A car is an asset to its owner because it took money to buy the vehicle. It is also a liability in that the cost of maintaining the car can be high, and depreciation on a new vehicle can eat into a person’s savings.

There is no definitive answer as to whether a car is an asset or a liability. It depends on the specific situation and the person’s circumstances.

For example, if someone needs a car to get to work, then the car would be considered an asset. However, if someone only uses their car for recreational activities, then the car would be viewed as a liability.

On the whole, cars are considered liabilities. They require regular maintenance, insurance, and other associated costs. However, there are a few exceptions. For instance, in some cases, a car can be used as collateral for a loan or as an investment vehicle.

Is a Car a Depreciating Asset?

A car is a depreciating asset because its value decreases over time. The depreciation of a car is based on a number of factors such as the age of the car, the make and model of the car, the condition of the car, and the miles on the car.

Cars are assets, but not smart investments as they will depreciate over time.

Reason # 1 – Wear and tear

Cars require a great deal of care and maintenance in order to keep them running smoothly. This includes everything from regular oil changes and tune-ups, to replacing worn-out parts and fixing dents and scratches.

In addition, cars depreciate in value over time due to normal wear and tear.

Reason # 2- Higher Mileage

The value of a mile decreases the more it is used. This is because the value of something depends on its rarity and when something becomes common, its value decreases.

The average car is only good for 200,000 miles. This is because of both the increased mileage and the cost of repairs as a car gets older.

Reason # 3- Cars become obsolete

Cars are becoming obsolete because new models and makes are constantly being released. This means that people want the newest and latest model, so they trade in their old car for a newer one.

Plus many of the parts for older cars become harder and harder to find. Thus, causing the cost to repair to escalate.

Reason # 4- Cars are not investments

Some people may argue if a house is an investment as well.

When you think of an investment, you want a certain rate of return on your money.

Most people use the stock market as a benchmark of earning 8% of the initial outlay of money. Thus, a car is an investment that depreciates over time. It will lose value as it gets older and the parts wear out.

If you want a return on your money, you should be asking is now a good time to buy stocks?

Can a Car Appreciate?

Yes, vintage cars and luxury sports cars have always been the exception. There are select vehicles that are in pristine condition with little to no mileage. These collector cars have a special fan base willing to spend money on these appreciating collections.

However, for the average car, the answer has always been a resounding NO!

Well, that was up until 2020, when used vehicles started to increase in value due to lack of microchips availability has been scarce causing the production of new cars to be halted. Thus, the supply and demand for new cars have been skewed causing an increase in car worth.

As the supply chain gets back to normal production, this appreciation in our sedans, trucks, and SUVs will be short-lived.

How To Calculate Car Value

Car value is the estimated worth of a car. There are two main methods for calculating this:

  1. The trade-in method, which takes your vehicle’s current market value and divides it by its estimated remaining life span.
  2. The resale method takes your vehicle’s current market price and then subtracts the depreciation rate from that value to get a car’s market value.

To calculate the value of a car, you need to know its make, model, year, and condition.

Personally, I like finding the worth of a car based on its Kelley Blue Book (KBB) value. This is the resource my dad used when he worked in the car industry, so I can trust the information.

The KBB value is updated monthly and takes into account recent sales and modifications.

When it comes time to buy, sell, or trade-in your car, you’ll need to know a fair price.

You can use a variety of methods to calculate your car’s worth, including using online tools, checking with dealerships and other buyers in your area, and looking at recent sales data. Remember to factor in your car’s condition and mileage when calculating its worth–prices will vary depending on the location and condition of your car.

Car Value Deprecation Curve

Before you head out and purchase your car, car value depreciation is a real consideration in your decision.

As KBB states, the first year of owning a brand new car will depreciate the most. While it feels great to drive off the lot in a brand new SUV, you can watch hundred dollar bills float behind you with how quickly the car depreciates.

To calculate the depreciation of a car, it varies depending on the make and model.

However, here is a car value depreciation chart to estimate based on.

  • In year one, most models will depreciate at least 20% or more.
  • From years 2-4, the car depreciates about 10% each year.
  • After five years, a car will depreciate about 60% of the original purchase price.

Car Value Deprecation Curve Example

For example, let’s take the average price of a new car of $47,077 according to Car and Driver.

  • 1st year = car lost $9415.40 in value and is now worth $37,661.
  • 2nd year = car lost another $3,766 in value and is now worth $33,895.
  • 3rd year = car lost another $3,389 in value and is now worth $30,505.
  • 4th year = car lost another $3,050 in value and is now worth $27,464.
  • After 5th year, the car has lost an estimated $28,246 in value and is now worth about $18,830

That is the reason most people do not believe a car is an asset.

That is a depreciating asset. Would you consider an investment if you knew 60% would be wiped away in less than five years? Probably not.

This is why most thrifty people look for cars that are at least 5 years old and lost most of the depreciation. Personally, I have never purchased a new car; everything I owned was new-to-me used vehicle. Even growing up as a daughter of a car salesman and manager, my parents never purchased a brand new car due to deprecation.

Another reason beater cars are super popular!

How Your Car Is An Asset

There are a variety of ways to define what an asset is, and whether or not a car falls into that category depends on the definition used.

In general, most people would say that a car is an asset because it has value and can be sold for money.

However, there are other definitions of assets that may not include cars. For example, some people might say that an asset is something that generates income or increases in price.

A car can be an asset for someone who is making money off of it. For instance, an Uber driver uses his or her car as a business asset. The car is providing them with income, and thus it can be considered an asset.

On the other hand, most people use their vehicles for personal use as a mode of transportation and do not make money off of it. If your car was purchased with cash or paid off, then you can consider it an asset.

Is a paid off car an asset? Yes.

Why is a car not an asset?

A car is not an asset because it depreciates in value the moment you drive it off the dealership lot. While it may be a necessary expense, it is not an asset that increases in worth over time.

Is a leased car an asset?

No, a leased car is not an asset because the asset (car in this case) is the asset of the leasing company. This is 100% liability for you and a monthly payment which you must make.

Leasing a vehicle allows you to drive it for the length of your lease term without the risk of buying and then selling or trading in at the end of your lease. Once the lease expires and if you decide to purchase the car, then it would be considered an asset on your net worth.

How Your Car Is Considered A Liability

The car is considered a liability if the debt exceeds the car’s value.

Simply put… If you have an auto loan, your car would be considered a liability.

Given that most people believe car loans are a part of being an adult, many view cars as a liability and monthly payments normal.

In addition, a car is a liability because, like any other depreciating asset, it will lose its value over time.

The longer you own it, the more money you will likely have to spend on repairs and general upkeep. This means that your car is not only costing you money every month in terms of payments and insurance, but also in terms of the decreasing worth of the asset itself.

Is a car loan an asset?

A car loan is a type of debt that is incurred when borrowing money to buy a new or used car. Thus, the car loans are considered liabilities and the car itself would be considered collateral.

Should I Include My Car in My Net Worth Calculation?

The answer to this question depends on how much your car is worth.

Personally, at Money Bliss, we recommend counting the vehicle as an asset and any auto loan as a liability. That means you would include both in your net worth calculations.

The reason why to include in net worth is if you had to sell your car immediately, you would be in one of two situations:

  1. You have instant access to cash if needed.
  2. You owe more in your car loan and thus, have negative equity. Meaning you would have to pay additional money to get out of your car loan and sell your car.

To keep your net worth accurate, you should adjust the price of your vehicles as they decrease over time.

Is Having a Car the worst investment of your Money?

There are a lot of factors to consider when answering this question.

Owning a car can be a major expense, and there are a lot of costs that come with owning a car, such as insurance, registration, and maintenance. However, a car can also provide a lot of benefits, such as convenience, freedom, and security.

Ultimately, it depends on your individual circumstances.

Know someone else that needs this, too? Then, please share!!

Source: moneybliss.org

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When it comes to college towns in New Jersey, the Garden State boasts a bountiful harvest.

From the ivy-covered halls of Princeton University to the bustling city streets of Newark, each of the college towns featured below provides a unique blend of culture, history and educational excellence. In this article, we’ll take a closer look at some of the best college towns in New Jersey and the attributes that set them apart from the rest. Pick your favorite spot and find your new apartment community in a New Jersey college town.

You can’t have a conversation about college towns in New Jersey without talking about Princeton. This picturesque town, home to the prestigious Princeton University, is the epitome of collegiate charm. Nestled in the heart of New Jersey, this historic town is steeped in tradition and teeming with intellectual energy.

From the moment you set foot in Princeton, you’ll be surrounded by a palpable sense of history and knowledge. The storied campus of Princeton University, with its Gothic architecture and sprawling greens, is a sight to behold in and of itself. However, the town has much more to offer than just its prestigious school. Princeton’s bustling downtown is lined with quaint shops, cozy cafes and a variety of eateries, perfect for students and longtime locals alike.

For those interested in the arts, Princeton’s McCarter Theatre Center and the Princeton University Art Museum are must-visits. Overall, Princeton is a charming and inspiring college town that will leave you with a newfound appreciation for higher education and American history.

Home to Rutgers University, Piscataway is another one of the many vibrant college towns in New Jersey. This town is brimming with energy and enthusiasm, thanks to its diverse population and the university’s dedication to research and innovation.

Located near the Raritan River, Piscataway offers a variety of recreational opportunities. Students can unwind by taking a walk along the scenic riverfront, or visit one of the town’s many parks for a day of picnicking and relaxation. The Rutgers Gardens, a sprawling 180-acre botanical garden, is a great place to escape the hustle and bustle of campus life and soak up some natural beauty.

Foodies will appreciate the diverse dining options in Piscataway, ranging from mouthwatering international cuisine to comfort food at local diners. The town also has a thriving arts scene, with the Zimmerli Art Museum and the Rutgers Geology Museum offering unique and engaging exhibits. Overall, Piscataway provides a dynamic and enriching environment for students and visitors alike.

Newark is home to several colleges and universities, including Rutgers University-Newark, the New Jersey Institute of Technology and Seton Hall University. With such an eclectic mix of educational institutions, it’s no surprise that this bustling metropolis is a hub of intellectual activity.

In Newark, you’ll find a vibrant arts scene, anchored by the New Jersey Performing Arts Center and the Newark Museum of Art. The city also boasts an impressive selection of dining options, from gourmet restaurants to casual eateries, where you can savor the flavors of cuisines from around the world. Don’t forget to stop by the historic Ironbound District, known for its rich Portuguese and Brazilian heritage, and sample some of the delicious fare at the area’s many restaurants and cafes.

Newark is not just a center for the arts and gastronomy; it’s also a great place for sports enthusiasts. The Prudential Center, home to the NHL’s New Jersey Devils and various concerts and events, is a popular destination for locals and visitors alike. For those who prefer the outdoors, the beautiful Branch Brook Park offers a stunning display of cherry blossoms in the spring, as well as plenty of space for jogging, biking and so much more.

Situated on the banks of the Delaware River, Camden is home to Rutgers University-Camden and the Cooper Medical School of Rowan University. Despite its reputation as a city facing various challenges, Camden is a college town on the rise with a rich history and a promising future.

One of the city’s most significant attractions is the Adventure Aquarium, where visitors can get up close and personal with aquatic life. The nearby Camden Waterfront, with its stunning views of the Philadelphia skyline, offers a picturesque setting for a leisurely stroll. Another notable destination is the Battleship New Jersey Museum and Memorial, a fascinating exhibit that pays homage to the state’s proud naval history.

Camden is also home to a burgeoning arts scene, as shown by the city’s many colorful murals and the thriving Rutgers-Camden Center for the Arts. With its combination of history, culture and scenic beauty, Camden is an underrated and unconventional college town in New Jersey.

Madison is a picturesque town that houses Drew University and the College of Saint Elizabeth. This charming, tree-lined town is known for its historic architecture, quaint downtown and strong sense of community.

Downtown Madison is filled with unique shops, cafes and restaurants, providing a welcoming atmosphere for students and locals alike. The town’s commitment to the arts is evident in the Shakespeare Theatre of New Jersey, located on the Drew University campus, which offers engaging productions for theater lovers of all ages.

Nature enthusiasts will be delighted by the nearby Great Swamp National Wildlife Refuge or the close proximity to picnicking in one of the town’s many parks. With its rich history, vibrant arts scene and beautiful surroundings, Madison is a hidden gem among college towns in New Jersey.

Located just across the Hudson River from Manhattan, Hoboken is home to Stevens Institute of Technology, a prestigious engineering school. This lively city offers a unique blend of urban excitement and small-town charm, making it one of the most distinctive college towns in New Jersey.

Hoboken’s waterfront boasts stunning views of the New York City skyline, as well as numerous parks that pepper the waterfront area. The city’s vibrant downtown is packed with trendy boutiques, delectable restaurants and lively bars, making it a popular destination for students and young professionals.

As the birthplace of Frank Sinatra, Hoboken has a strong musical heritage that is still evident today. The city hosts various live music events throughout the year, and local bars and clubs often feature up-and-coming musicians. With its close proximity to New York City and its own unique charm, Hoboken is an undeniably exciting and dynamic college town.

Nestled at the foot of the Watchung Mountains, Montclair is home to Montclair State University, one of New Jersey’s largest public universities. This picturesque town is known for its vibrant arts scene, diverse dining options and beautiful natural surroundings.

Art lovers will appreciate the Montclair Art Museum, which showcases an impressive collection of American and Native American art. The town is also home to numerous art galleries and performance spaces, including the Wellmont Theater and the Studio Playhouse, which host a variety of concerts, plays and other live events.

Montclair’s downtown is filled with eclectic shops, cafes and restaurants, offering a taste of cuisines from around the globe. For the outdoorsy types, the town’s many parks and nature reserves provide ample opportunities for hiking, biking and taking in the stunning vistas in peace.

There’s a new apartment in a New Jersey college town just for you

From the charming streets of Princeton to the lively waterfront of Hoboken, the best college towns in New Jersey perfectly cater to students, residents and visitors alike. Each of the towns mentioned above boasts its own unique blend of history, culture and natural beauty, making them perfect destinations for those seeking both intellectual stimulation and a taste of the quintessential college-town atmosphere.

Whether you’re a prospective student, a curious visitor or a lifelong resident, we encourage you to explore these enchanting college towns in New Jersey and discover the boundless opportunities for growth, inspiration and fun that they each have to offer.

Source: rent.com