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Homeownership

Homeownership

Whether you’re saving for your first home, refinancing, or eyeing a second property, these fundamentals will help you roll out the welcome mat. We’ve got you covered from down payment to home improvements.


Hawaii National Bank Celebrates American Housing Month with Practical Advice for ‘Aging in Place’

 

The vast majority of older Americans want to remain in their homes as they grow older, also known as aging in place. Hawaii National Bank is offering the following tips for those considering this option:

 

Take a hard look at your finances. Arrange a meeting with a trusted family member or friend and a banker. It’s critical to understand your financial resources, how long they’ll last and what housing options are the most cost effective for you. Be sure to consider all costs associated with aging in place, including:

  • Home modifications
  • Transportation to medical appointments, shopping and other errands
  • In home caregiver for house upkeep and medical purposes

 

Consider a reverse mortgage. Though not for everyone, a reverse mortgage loan can provide monthly cash payments based on your home’s equity. 

  • Shop around. Be sure to check with multiple lenders. You can use sites like www.reversemortage.org, sponsored by the National Reverse Mortgage Lenders Association, to find lenders in your area.
  • Make sure to read all loan documents carefully. There are a number of actions that could cause the loan to become due.
  • For more information on reverse mortgages, visit aba.com/consumers. 

 

Assess your home and determine what modifications are necessary. While staying in your home is preferable for many, there are often design changes that must be made to ensure it’s also safe and comfortable.

  • Make sure there is at least one step-free entrance to your home.
  • Update lighting inside and outside of the house so that all walkways and stairs are well lit. Clear pathways throughout house and firmly secure all carpets to the floor to prevent tripping.
  • If a bedroom and bathroom does not or cannot exist on the first floor, consider installing an elevator or chairlift. At a minimum, make sure you have handrails on both sides of your stairs.
  • Install grab bars in the bathtub, shower, or near the toilet.

 

Make security a priority. Older Americans are often targets for scams and other criminal behavior. Be cautious about who you allow in your home and disclose sensitive information to.

  • Install up to date and easy to use locks. Make sure your front door has a peep hole or a security monitor so you can see who is outside. 
  • Consult someone you trust when hiring a contractor, financial advisor, etc.

 

Look into community resources. If mobility is limited, look in to services offered in your area. Many communities have established non-profit programs that offer transportation and food delivery to assist older Americans at a reasonable cost. 

 

Be prepared for possible emergencies.

  • Keep a list of all emergency contacts on your refrigerator or by a phone.
  • Consider a Personal Emergency Response System. Transmitters can be worn as a bracelet or around your neck and require the simple push of a button to send a signal to a call center.
  • Have your address number visible from the street so emergency responders can easily identify your home.

 

Reevaluate every six months to make sure all needs are being met. As you age, your needs inevitably change. Take time twice a year, or as needed, to sit down with your trusted family or friend and make sure your current living situation is still the right one. 


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Now that you’re settling in to your new home, there are some important things you need to consider. Hawaii National Bank recommends the following tips.

 

1. Create a budget.

The key to a good budget is including as much information as you can, so that you can adequately prepare and plan. It's important to keep accurate records of your spending so you can spot places to save money and know how much you can reasonably spend. The American Bankers Association’s budgeting worksheet (also available in Spanish) will help you document and categorize your expenses.

 

2. Protect your property.

Whether you’re a homeowner or a renter, you need insurance to protect your belongings. Check with your local insurance agent, you might be able to get a discount if you have things like dead bolt locks, an alarm system, or smoke detectors, or if you already have a policy with that company, like car insurance. Also, find out if you’re in a flood zone. If you’re concerned about flooding, you will need to purchase a separate flood insurance policy. Learn more at floodsmart.gov.

 

3. Protect your safety.

Make sure all of the locks on your doors and windows work properly. If it makes you more comfortable, look into having an alarm system installed. Also, check your fire and carbon monoxide alarms once a month to be sure they’re working. If you have a dryer, clean the lint from the entire system, from the dryer to the exterior vent cap. Lint is extremely flammable and poses a fire risk.

 

4. Take your tax deductions.

Be sure you know all the tax deductions associated with your move and new home. If you use a portion of your home for business purposes or moved for a new job, you may be able to take deductions. Homeowners can deduct mortgage interest, property taxes and loans for home improvements.

 

5. Make your house – or apartment – your home.

Decorating your space will make it more comfortable and personal. If you’re a tenant, check with your landlord before making major changes like painting the walls or changing the appliances. Renters should take photos of the rental space before moving in to document the existing condition and insist on a final walk-through with the landlord. If you own your home, be smart about where you invest your money on improvements to ensure you’re building equity in your home. For example, updates in the kitchen and bathroom usually provide the best return on investment.

 

6. Save up for a rainy day.

Although life may be sunny now, it’s a good idea to create a rainy day fund. The fund should have at least three to six months of living expenses in case you or someone in your household loses a job or becomes ill and unable to work.

 

For more information, visit aba.com/consumers

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An important step to finding a home, whether you’re renting or buying, is ensuring that you have a good credit history. The American Bankers Association suggests the following tips to improve your credit score:

1.Request a copy of your credit score report – and make sure it is correct. Your credit report illustrates your credit performance, and it needs to be accurate so that you can apply for other loans – such as a mortgage. Everyone is entitled to receive a free copy of his or her credit report annually from each of the three credit reporting agencies, but you must go through the Federal Trade Commission’s website or call 1-877-322-8228. Note that you may have to pay for the numerical credit score itself.

2.Set up automatic bill pay. Payment history makes up 32 percent of your VantageScore credit score and 35 percent of your FICO credit score. The longer you pay your bills on time, the better your score. Avoid missed payments by setting as many of your bills to automatic pay as possible.

3.Build credit through renting. VantageScore’s scoring model, created by the three major credit bureaus, will now weigh rent and utility payment records. This will allow it to score as many as 35 million people who previously couldn’t get a credit score.

4.Keep balances low on credit cards and ‘revolving credit.’ Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. You often can increase your scores by limiting your charges to 30 percent or less of a card's limit.

5.Apply for and open new credit accounts only as needed. Keep this in mind the next time a retailer offers you 10 percent off if you open an account. However, if you need a new line of credit, don’t jump at the first appealing offer; compare rates and fees offered through mail solicitation, on the Internet or at your local bank.

6.Don’t close old, paid off accounts. According to FICO, closing accounts can never help your score and can in fact damage it.

7.Talk to credit counselors if you’re in trouble. Using legitimate, non-profit credit counseling can help you manage your debt and won’t hurt your credit score. For more information on debt management, contact the National Foundation for Consumer Credit.

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Before you can make the transition from renting your home to owning your home, you will need to have a substantial down payment, typically 5 to 20 percent of the home’s value. The American Bankers Association suggests the following tips to help save:

 

Develop a budget & timeline. Start by determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month – that will help you gauge when you’ll be ready to transition from renter to homeowner.

Establish a separate savings account. Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash. 

Shop around to reduce major monthly expenses. It’s a good idea to check rates for your car insurance, renter’s insurance, health insurance, cable, Internet or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts.

Monitor your spending. With online banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (e.g. nice meals out, vacations, etc.) and instead put that money into savings.

Celebrate savings milestones. Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $30,000 total, consider treating yourself to a nice meal every $5,000 saved. This will help you stay motivated throughout the process.

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Moving into your own place can be exciting and frightening at the same time. The American Bankers Association suggests considering the following questions when choosing your own home.

How much money do you have saved up?

Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals are usually about one month of rent and more if you have a pet. But be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.

How much debt do you have?

Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 percent of your gross monthly income. Recent regulatory changes limit debt to income (DTI) ratio on most loans to 43 percent.

What is your credit score?

A high credit score indicates strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/consumers.

Have you factored in all the costs? Create a hypothetical budget for your new home. Find the average cost of utilities in your area, factor in gas, electricity, water and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs like replacing the air filter every three months. If you are planning to buy a home, factor in real estate taxes, mortgage insurance and possibly a home owner association fee. Renters should consider the cost of rental insurance.

How long will you stay?

Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility to move and fewer maintenance costs. Carefully consider your current life and work situation and think about how long you want to stay in your new home.

 

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