Money Management

The average home in California is worth twice the national average. Learn what programs can help first-time home buyers afford a home there. 

Living in California has its perks — good weather, great beaches — but buying your first home in the Golden State can be tough. After all, this is the most populous state of all 50 with roughly 39 million people calling it home, and its average home value is more than double the national average: $741,790 versus $348,100, according to Zillow.

It’s a challenge, but first-time home buyers can find some relief through specialty programs that lower the amount of down payment you need or help you with closing costs. If you need some help buying your first home in Cali, let’s take a look at three of the top first-time home buyer programs in the Golden State.

1. Forgivable Equity Builder Loan

What is it? A forgivable loan that gives home buyers up to 10% of the home’s purchase price. The loan is forgiven after five years, as long as you live in the home as a primary residence.

How does it help? This is perhaps one of the most generous loan programs available. As long as you meet requirements, you can get up to 10% of your home’s purchase price — essentially a 10% down payment — as a loan that can be forgiven after five years. Once the five years are up, you’ll have 10% of your home’s equity.

Who’s it for? First time home buyers who plan to occupy the home as a primary residence and complete a home buyer education course. Applicants must also meet income requirements.

2. MyHome Assistance Program

What is it? A deferred loan that helps you with closing costs or down payment. You can receive up to 3.5% of the purchase price or appraised value (whichever is less) if you’re financing with a government loan (FHA), or up to 3% on a conventional loan.

How does it help? The program can help you put more money down or pay closing costs. The loan doesn’t have to be repaid immediately, only when the home is sold or refinanced or the first mortgage is paid off. The loan does accrue interest, however.

Who’s it for? First-time home buyers who plan to occupy the home as a primary residence and who have completed a home buyer education counseling course. Applicants also have to meet certain income limits to qualify and the home must meet property requirements.

3. CalHFA Zero Interest Program

What is it? A second mortgage that offers up to 3% of your first mortgage in closing cost and down payment assistance.

How does it help? Like MyHome Assistance, the Zero Interest Program gives you a deferred loan to help you cover necessary costs with buying your first home. The difference, however, is that this loan doesn’t accrue interest. You’ll pay the loan if you sell, refinance, or pay off your first mortgage, but you won’t have to pay any more than what you borrow.

Who’s it for? First-time home buyers and disaster victims who are buying a principal residence.

Still need help buying your first home?

If you’re interested in the programs above, reach out to a local mortgage lender and see if they offer them. You can also check out federal first-time home buyer programs, as well as low- or no-down-payment mortgages, such as:

FHAVAUSDA

These programs can help qualified home buyers finance homes with mortgages that have lower barriers to entry, such as lower credit score and down payment requirements. Better yet, you can use these loans with any of the programs mentioned above. It may not make homes in California cheaper, but a combination of these two can certainly bring homeownership within reach.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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A $2 million nest egg may seem like enough to retire on. Learn how much $2 million will last and if you’ll need more. 

Retiring on $2 million doesn’t sound half bad, right? It’s $1 million more than what most financial experts have traditionally recommended and roughly 684% more than what most Americans have saved by the time they reach retirement age, which is about $255,200, according to the Federal Reserve. But will $2 million really last you the full length of your retirement or should you be saving more? Let’s take a look.

It depends on your annual expenses

The best way to determine how long $2 million will last is to estimate how much you’ll spend each year in retirement. Easier said than done, but to get a rough idea you can use the 80% rule, which states you’ll need about 80% of your pre-retirement annual expenses for each year of retirement.

By way of example, let’s look at how much the average American household spent in 2021, which was about $67,000, according to research from The Ascent. If we take this number as your pre-retirement expenses, then 80% would be $53,600. Assuming that’s how much you’d spend in retirement, you could live for about 37 years on $53,600 per year with a nest egg of $2 million (assuming that $2 million is earning 0% and not factoring in Social Security). If that holds true for you, you could retire at 63, and live on $53,600 each year until you turned 100.

Not bad, right?

Of course, that doesn’t factor in inflation. In fact, if you were to retire even 15 years from 2021, $53,600 would be about $79,544 in 2036 dollars, assuming a 2.5% inflation rate from now until then. Using that as your annual expenses, you could retire for about 25 years on $2 million. Still not bad, but retiring at 63 would mean you would outlive your retirement savings if you lived past age 88.

Another potential limitation with using the 2021 average household expenses is that it includes $1,885 for housing and $913 for transportation. Some retirees, however, will have paid off their homes and cars and will no longer need to commute for work, drastically reducing how much they spend on both. Conversely, the estimate may not be enough for food ($691) or healthcare ($454), so the expenses you scrap could be balanced by new expenses.

So is $2 million enough to retire?

The golden number here might be $57,000. If you were to retire at 65 and live for at most 35 years, you would need to keep your annual expenses at or below $57,000 to live on a $2 million nest egg, assuming you don’t live past 100.

This would put you in a great position to retire comfortably. In fact, according to research by the Motley Fool, the average retiree today spends about $48,872 per year in retirement. At $57,000, you would have more than enough, with about $8,000 as a cushion.

As noted above, inflation could make this tricky, as the longer you live, the less spending power your money has. Fortunately, you can use certain income-producing assets, like annuities and CDs, that have low risks and can help you at least keep pace with inflation and hold on to your purchasing power for longer. You’ll also likely be eligible for Social Security.

As far as saving $2 million for retirement, it’s a challenge. You’ll likely need to open a brokerage account and invest a portion of your annual income in stocks, bonds, and various types of funds, like ETFs and mutual funds. It’s also a good idea to take advantage of employer-sponsored retirement plans, like 401(k)s, especially if your employer will match some of your contributions.

The earlier you start investing, the more time you give your money to grow. You might not be able to sock away $2 million from your salary alone, but with the power of compound interest, you could amass a significant amount to retire comfortably.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The majority of Americans either buy or sell pre-owned items. Keep reading to learn six ways it can enhance their lives. 

When the online mobile marketplace OfferUp released its 2022 Recommerce Report, it contained a few surprising statistics. The first was that 82% of Americans buy and/or sell pre-owned goods. That’s approximately the same number who own a smartphone. Sure, 93% say inflation helps influence their decision to buy second-hand, but more people have realized the real benefits of buying gently used rather than new. Here are six of them.

1. You’ll save money

Depending on what you purchase, you can save between 25% and 50% off the item’s original price. And it’s not just on clothes. The OfferUp report found that 76% of items bought and sold pre-owned aren’t clothing, but fall into one of these categories:

ElectronicsFurnitureHome goodsHome improvementSporting goodsOutdoor equipmentAuto parts

Let’s say you’re in the habit of shopping second-hand before hitting retail stores. When you need a new sofa for the family room, you check out your online neighborhood marketplace. You shop for dishware at a local thrift store and home improvement items at a nearby Habitat for Humanity resale store. And when you need auto parts, there’s an auto part recycling shop near your home. If the items purchased annually have a retail value of $4,000 and you save between 25% and 50%, you’re saving $1,000 to $2,000 annually.

That’s money you can use to build an emergency savings account, pay down debt, or invest for retirement.

2. You’ll waste less

Think of all the times you’ve paid full price for children’s clothing, only to watch the child outgrow the item in months, or purchased a new Halloween costume online that is only worn once. Buying quality second-hand clothes allows you to keep up with growth spurts without breaking the bank.

If you’re quickly bored by your home decor, shopping second-hand shops and online marketplaces for pre-owned picture frames, lamps, throw pillows, and artwork means paying less. What’s more, selling the items you’re tired of could easily bring in enough cash to cover your new purchases.

3. You’ll have options not otherwise available

You may not typically have enough money in your bank account to spring for designer or name-brand products. But second-hand shopping offers you the opportunity to pick up high-end brands at a bargain price.

4. You’ll gain knowledge

It takes little time for most bargain shoppers to learn to recognize quality brands. Whether it’s blue jeans or vintage flatware, second-hand shopping will familiarize you with what’s valuable and what’s not. Not only will you learn to look for the deepest discounts, but you’ll know when a bargain is too good to pass up.

5. You’ll support small businesses

Small business owners own and operate most small thrift stores, second-hand shops, and online marketplaces. By checking with those shops before heading to a department store, you’ll help small businesses become established and grow.

6. You’ll help the environment

An article called “The Benefits of Buying and Reusing Secondhand Clothes” by Dr. Glenn Agung Hole, recently published on LinkedIn, lays out three great reasons for shopping or pre-owned clothing.

Reduces carbon footprint: The fashion industry is responsible for significant carbon emissions, water usage, and waste generation. Buying second-hand clothes means reducing the demand for new clothes and reducing the carbon footprint associated with clothing production.Minimizes resource usage: Each time you make a second-hand purchase, you help conserve natural resources like water, energy, and land. Here’s why: To produce cotton — one of the most commonly used materials in the fashion industry — large amounts of water, fertilizers, and pesticides are used.Reduces waste generation: The fashion industry generates approximately 92 million tons of textile waste annually. Buying second-hand means helping to reduce the environmental impact of waste disposal.

As most of us actively seek ways to reduce spending and save money, second-hand shopping is a clear choice. After all, what’s not to love about saving money and saving the planet at the same time?

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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A $25,000 personal loan can come with payments of differing amounts depending on a few factors. Read on to learn how to calculate your monthly bill. 

Borrowing $25,000 is a major financial commitment. There are times when you may need to take out such a large loan, such as if you’re funding home improvement or consolidating debt. But before you do, you need to understand how much your loan will cost you.

So, what exactly are the monthly payments on a $25,000 personal loan? It depends on the interest rate that your lender charges you as well as the loan repayment term you choose. Here’s what you need to know about how much you’re likely to pay out of your checking account each month to your personal loan lender.

Here are the monthly payments on a $25,000 personal loan

As of May 2023, the average interest rate on a personal loan was 11.48%. If you took out a personal loan at this rate and paid it back over a decade, your monthly payments would be $351.20 per month and your total interest costs over the life of the loan would be $17,144.31.

Of course, not everyone borrows at the average rate. Some people can qualify for more affordable loans because they have excellent credit. But others may have to pay more to borrow because they don’t have a great credit score or because their income is a little lower, so lenders are more nervous about default.

So, how does interest and repayment timeline actually affect your loan payments and total interest costs? Here are a few examples of what this would look like if you had different terms for your $25,000 in debt:

As you can see, your loan payment is heavily affected by both interest rates and payoff time, so you’ll want to compare your options carefully. If you can shop around for rates among different personal loan lenders, you may be able to score a less expensive loan and potentially save thousands of dollars in interest over time.

What should your personal loan term be?

Your interest rate is largely determined by credit score, loan term, and income. While you can do things to change it, such as shopping around for lenders and trying to improve your credit score by picking up extra hours at work and paying down existing debt a little more, it can take time to make a big enough difference in your financial credentials to make a meaningful impact in your rates.

You can, however, have an immediate impact on your personal loan payments by choosing either a shorter or longer payoff time when you borrow. To make this decision, consider the following:

Is it more important to be debt-free ASAP or to maintain low monthly payments? If you’re worried about your payments becoming unaffordable, lower monthly payments may be the priority even if you have to pay more over the life of the loan. But if you want to keep interest costs as low as possible and becoming debt free is your major goal (even if that means temporarily sacrificing to make higher payments), a shorter payoff time makes sense.Would you prefer more flexibility? If you take out a loan with a longer payoff time, you always have the option to pay it off early by making extra payments (as long as your lender doesn’t charge prepayment penalties). But once you’ve committed to a shorter payoff time, you can’t just decide to make it longer if your payments become a hardship. If you’d rather have the flexibility to make payments that fit with your immediate budget, choose a loan with a longer payoff time.

By considering these issues, you can decide what type of $25,000 personal loan is right for you. No matter what you do, though, make sure you calculate the payments before you commit to borrowing so you will know exactly what obligation you’re taking on in your specific situation.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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