What to Expect
Financial advisors offer a variety of services that range from helping you create a long-term financial plan (at a cost of between $500 and $2,500 or more, depending on complexity) to smaller issues, such as setting up a child’s college fund (for as little as $150). If an advisor manages your investment portfolio, which involves things such as investing your money in stock and bonds, she may charge up to 2 percent of the amount she’s investing for you.
Before You Buy a House
A mortgage lender can preapprove you for a home loan based on current income and debt, but a financial advisor can help you determine how much of your income is feasible to spend on a mortgage payment and how large a down payment you can afford, while still having enough for an emergency fund and a savings account. An advisor may recommend that you spend a little less on a house so you don’t live paycheck to paycheck.
Before Starting a Family
Soon after buying a home, couples often think about starting a family—a great time to chat with a financial advisor who can help you set up a fund for the future child’s college education. Ad adviser will also let you know how much you can expect to pay annually for clothing, food, school fees, and other child-related costs.
Trading Up to a Bigger Home
Ready to move on from your starter home, now that you’ve got some equity? A financial advisor can help you decide how much down payment to offer to maximize savings. For example, if your down payment is at least 20 percent of the loan amount, you won’t have to pay private mortgage insurance, which runs approximately 1 percent of the loan amount, or $1,000 for every $100,000, annually. The advisor can also help you decide which type of loan will be more beneficial, a 10-, 15-, or 30-year loan.
When You’re Ready to Downsize
After the kids are grown and gone, empty nesters often feel that a large rambling home is too much to care for. By this time, the mortgage is often paid and homeowners stand to save thousands of dollars annually in insurance, property taxes, and utility bills by downsizing to a smaller home. An advisor can assess your retirement savings and other assets to help you decide how best to invest any profit from the sale of your home.
Getting an Inheritance
If you receive an inheritance when a loved one passes, you may not be in the best state of mind to make the right decisions about the money, stocks, bond, real estate, or even the artwork you’ve come into. A financial advisor can help you understand how to make the most of your inheritance, showing you whether you should invest the money, keep or sell assets (like houses and cars), and perhaps figure out a way you can use a portion of the money to travel or pursue some other long-delayed desire.
Considering a Reverse Mortgage
For homeowners who haven’t been able to save a sizeable nest egg or invest wisely, retirement can be a scary proposition. In that case, you might be wondering if a reverse mortgage—which would allow you to stay in your home while the bank pays you—is the way to go. But reverse mortgages aren’t ideal for everyone. A financial advisor can assess your assets and your needs, and then help you decide whether this type of loan is right for you, or whether you’d be better off selling your current home and downsizing.
Before Buying a Vacation Home
Investing in a mountain cabin or beach house is a dream for many homeowners who love to get out of town on weekends. But you’ll probably have to pay cash for your retreat, since lenders rarely make loans for vacation homes. That may mean liquidating other assets to come up with the money, and a financial adviser can help you figure out the smartest way to do so.
Before Building an Addition
With the soaring price of new construction, you may wonder if it makes sense to build an addition on your existing home rather than selling and moving to a larger place. A financial advisor can help you determine how much return on investment (ROI) you’ll get if you sell, and also help you figure out how to finance an addition. You’ll find out whether you’ll be money ahead to add on or sell and move away.
Buying a Rental Property
Owning rental property can be a great investment, but before you sign on the dotted line to buy a house, duplex, or apartment building, consult a financial pro. An advisor can help you work out how much profit you’re likely to make after paying the mortgage, repair costs, and utility bills (called the “cap rate”) and can also tell you how much the property is likely to appreciate over time.
It’s always recommended to contact an attorney when drawing up a will, but this is also a great time to chat with a financial advisor who can analyze your assets and help you determine the best way to disburse them after you pass. A financial advisor will work closely with your attorney to set up trusts and retirement accounts. If you have an investment portfolio, the advisor will also remain active in investing your money to ensure your heirs inherit as much as possible.
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