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Is buying a condo the same thing as buying a house? How does it impact my credit?

Is Buying a Condo the Same as Buying a House?

By | Credit Scores

Shopping around for a new home is an exciting and daunting time. As you comb through listings and compare amenities, you may be wondering about the differences between condos and houses. Condos offer a middle ground between houses and apartments that presents a range of modern conveniences. Single-family, detached homes — the traditional choice for many — come with their own benefits and drawbacks. Beyond the fact that you’ll owe a mortgage in either situation, condos do not share much in common with single-family houses. Let’s take a look at what sets condos apart from houses — and what factors you should consider as you take the plunge into homeownership.

Cost

Typically, the cost is cheaper for buying a condo versus buying a house — although the prices can vary widely depending upon the market and the area where you’re looking to buy. Make sure you also factor in the monthly or quarterly condo association fees — and what services they cover. When you own a house, you will likely pay for water, trash, and sewer services separately. Remember that a condo fee might cover those services.

Features

The upkeep of a house’s interior can be more demanding. You may have to invest additional funds in remodeling certain rooms to suit your lifestyle. A condo comes equipped with modern, luxury features and floor plans. However, you’ll lack the space and freedom to grow that a house offers — and if you decide those tile countertops aren’t your style, you can’t do anything about it, per condo association rules.

Land

Because you pay dues to a condo association, a condo relieves you of the obligation to do yard work, remove snow or mow your lawn, or foot the bill for maintenance repairs. A major expense for a repair would be shared equally among all owners of a condo. An owner of a single-family detached house might have to spend hours each week maintaining the outside appearance of the house and lawn.

Location and Amenities

Condos are typically located in urban and suburban areas, often within walking distance of restaurants, shopping, and cultural activities. Some condos, especially those located within a large condo neighborhood, will offer access to amenities such as swimming pools, gyms, and shared outdoor space. Houses, on the other hand, will offer far fewer amenities but provide more room for self-expression. You will be able to add a pool or tend a garden to your heart’s content — without incurring the wrath of the condo association. You may also need to drive further to access certain establishments, depending on your location.

Neighborhood

Regardless of which option you choose, you will be interacting with neighbors — so consider whether you prefer a little distance from your closest cohabitants, or would enjoy a lot of social encounters. A single-family home offers some space and privacy from the next closest neighbor. A condo, conversely, packs you in with a slew of other condo dwellers, similar to an apartment situation. You’re more likely to run into your fellow condo neighbors, who might share common interests — as certain condo neighborhoods tend to attract similar demographics, such as young professionals or older, retired couples.

Additional Fees

A monthly condo association fee, when added on top of a mortgage payment, can be a major drawback for condos. You might also be stuck ponying up more than your share of the condo fees if some of your neighbors don’t pay up. Single-family houses come with their own set of additional costs, such as unexpected repairs — which you may have difficulty budgeting for in advance.

Restrictions

If you chafe at the thought of someone else dictating what kind of flowers you can display on your front porch, whether you can grill outside, or the type of pets you can have, steer clear of condos. Some condo associations impose very strict guidelines for their residents. When you purchase a single-family dwelling, you’ll have to abide by town or city ordinances or codes — but the requirements will be much more relaxed.

Selling

When the time comes to put your property on the market, you might find the house to be easier to sell than a condo. Here’s why: Because all condos in a neighborhood are the same as the others, there won’t be anything to differentiate yours from the rest. And if a nearby resident sells an identical unit, that could negatively affect the value of your own unit.

Bottom Line

As you prepare to choose between buying a condo versus buying a house, make sure your credit report is in stellar shape for those mortgage applications. We can help you address any lingering credit issues and snag you a higher credit score. Get started with a free consultation at Ovation Credit.

Are credit card reward points taxable? Find out here.

Do You Have to Pay Taxes on the Credit Card Rewards You Earn?

By | Credit Cards

You’ve been piling up those credit card rewards and points, maximizing the value of your rewards cards and applying those earnings toward everyday purchases and travel expenditures. The rewards you collected are yours to keep — right? Not so fast. Before you finalize your tax returns, make sure you are following the correct protocol for credit card reward taxes. Unfortunately, the IRS has yet to present any clear-cut instructions on this topic, but it’s important to review your usage of credit card rewards every year and avoid the possibility of an unexpected tax bill. Ultimately, your own personal situation will determine whether you keep those hard-earned rewards to yourself, or if the government is legally entitled to a piece of the pie. Here’s what you need to know about credit card reward taxes —and when you do and don’t have to report them as income.

When to Report

When you take advantage of a credit card’s generous sign-on bonus – such as $200 if you spend $1,000 in the first three months as a cardholder — the IRS considers that income. Here’s why: The IRS deems income to be anything you earned that isn’t directly related to a purchase you made. If instead of receiving cash back, you earned a bonus in the form of points or miles, the same logic would apply. The tricky part is determining the value of the airline miles or points, so you know how much to report as income. Since the actual value of those rewards can vary depending on when and how you use them, you may want to consult a tax professional in this situation to properly calculate the dollar amount of your miles or points bonus.

When Not to Report

The good news is that you do not have to pay credit card reward taxes in most situations. The majority of people collect their credit card rewards by using their plastic over a long period of time. You’re basically spending money and earning a rebate. So if your credit card issuer offers 3 percent cash back on all purchases and you spend $100 in a month, you’d stand to earn $3 back in rewards — which the IRS considers a discount on those purchases, not income. Since you spent money in order to qualify for those rebates, those rewards are yours to keep. If you racked up airline miles or rewards points instead of cash back, the same situation applies. The IRS deems those rewards as a version of a discount, and they don’t fall under the taxable category as defined by federal government standards.

Check Your Credit Card Agreement

Some credit card issuers have begun disclosing in the cardholder agreement that they may report credit card rewards to the IRS if they meet a certain threshold, generally $600. If you’re concerned about credit card reward taxes, check your credit card agreement to find out if your issuer might be among those that report to the IRS. Still, unless you fall in the sign-on bonus bracket, your credit card rewards likely wouldn’t be reportable.

Business Expenses

You need to be a little more cautious when you’re using a rewards credit card for work-related expenses that you plan to deduct as business expenses. If, for example, you make a $750 purchase and earn 2 percent cash back, you are only allowed to deduct the actual amount you paid, including the cash-back “discount” — which would be $735.

Got a 1099?

While it’s rare to receive a 1099 from a credit card company, it’s entirely possible that you could if you earned more than $600 for a sign-on bonus. In that case, make sure you do report the credit card reward taxes that are subject to the 1099. If you simply toss the 1099, you could end up with a hefty tax bill and penalty. And if you earned less than $600 over the course of a year in the form of sign-on bonuses, you won’t receive a 1099 — but tax experts advise you to report the amount anyway. Your best bet: If you earned a sign-on bonus, report it as miscellaneous income. You’re better off erring on the side of caution where the IRS is concerned.

Here’s More Help

It can be tricky trying to decode the mysteries of credit card reward taxes, but don’t let credit card rewards add to your stress at tax time. For more guidance, browse through the rest of our blog posts in our Education section. Then let us know how we can help you brighten your credit outlook with a free consultation here at Ovation Credit.

Planning on some fun summer activities? Make sure to make sure to create a budget!

7 Ways to Stick to Your Budget This Summer

By | Uncategorized

The care-free days of summer are fast approaching — but be careful not to let those warm-weather vibes spill over into your finances. When you’ve already resolved to follow a budget, summer plans can sometimes derail that commitment. Outdoor events and summer vacations quickly upend even the most well-designed budget plan and inflate your credit card bills all year long. So, how do you stick to a budget when the days are longer, the weather is irresistible, and adventure is calling? We’ll show you the best ways to keep your spending — and your stress levels — in check with these tips to follow your budget this summer.

1. Plan Low-Cost Day Trips

The average week-long vacation costs $1,928 and the average expense for a weekend getaway is $564, according to a 2018 survey from Twine. If you haven’t already been squirreling away savings for a summer vacation, avoid racking up debt by charging a trip to your credit card — and choose a destination close to home. Plan a trip to a national park or a local beach, or even explore the downtown section of a nearby city. To sweeten the deal, pack a picnic lunch that will save you from shelling out money for food while on the road.

2. Check out Free Local Activities

Chances are your surrounding area plays host to different outdoor activities that are either free to the public or charge a nominal fee for admission, such as parades, carnivals, music festivals, and art shows. Check out your local newspaper, your town’s parks and recreation department website, and the area’s tourism bureau to find out about upcoming events. Your local library can also be a treasure trove of information on events in surrounding areas. Exploring your local community doesn’t have to cost a dime and it comes with the bonus of elevating your cultural awareness.

3. Entertain Friends at Home

Summertime is the prime season for barbecues and impromptu backyard gatherings. You may wonder how to stick to a budget when you need to plan meals and spruce up your space for entertaining guests. However, you can easily enjoy the company of your family and friends without risking your budget. Propose a game night or movie night, and ask that your guests each bring a food or dessert to share.

4. Save Small Amounts Every Week

If you haven’t already, start squirreling away a small part of your paycheck each week to put toward unanticipated summer expenses or save for a future vacation (even if you won’t reach your goal amount this year). The amount can be small enough — such as $10 to $20 — that you won’t risk stretching your budget. Try out an app like Digit, which links up to your checking account and designates a small amount to withdraw from your checking account each month. Or you can even try an old-fashioned change jar and drop in spare change that you find around the house. Over time, the savings will add up.

5. Cash Out

Make sure your budget accounts for a little spending money for weekend adventures. You may want to withdraw that amount in cash and keep it in an envelope designated specifically for your planned excursion. Then make a list of your top affordable destinations or day trips, along with an estimated price for each. Challenge yourself to stay within the amount you budgeted each time.

6. Maximize Credit Card Rewards

Now’s the time to cash in on any credit card rewards you have earned over the course of the year. Points and miles could snag you deeply discounted airline tickets or hotel stays. You can also take advantage of cash-back offers on gas — which comes in handy on long car trips. Some credit card companies offer discounts or cash back on movie tickets, amusement parks, sporting events, and shows. Just make sure you aren’t using your credit card excessively only to score rewards and discounts and always aim to pay off your bill in full every month.

7. Minimize Electricity Usage

Sky-high bills from increased air conditioner usage can also sink your budget. Try only to turn on the A/C when absolutely necessary and crack a few windows instead to allow for comfortable sleeping at night. Spend more of your evenings outside in the extended daylight, and give your lights and screens a break.

Check in With Your Credit

Don’t let those summertime vibes destroy your budgeting — or your credit. Whether you’re contemplating how to stick to a budget during the summer or looking to tune-up your credit report, now is a great time to take stock of your financial situation. Get in touch with the pros at Ovation Credit, where we’re always willing to lend a hand. Contact us for a free consultation today.

Living a minimalistic life can lead to more riches both personally and with your finances.

How to Marie Kondo Your Finances

By | Personal Finance

Whether you’ve picked up her book at your local bookstore or seen her hit show on Netflix, there’s no doubt that Marie Kondo is fueling an entire movement of minimalism and mindfulness. By truly taking stock of what you have and honing in on the things that truly spark joy in your life, Marie Kondo’s methods are a phenomenon in bringing more joy into your home, along with an extra dose of gratefulness.

In addition to tidying up your closets and drawers, you can Marie Kondo your finances as well. Check out these tips to declutter your bank accounts for a more fulfilling financial future.

Be Grateful

When Marie Kondo tackles any cluttered home, the first thing she advises her clients is to give thanks for what they have, before they begin the purge process. This simple act sets the tone for a stress-free session of decluttering and the same can be said when you Marie Kondo your finances.

No matter what your current financial outlook is, be grateful for where you are and what you have in this moment. Understand that knowledge is power and that the process you’re about to implement will ultimately open a clear path to action. You’ll be able to see what steps you need to take for credit repair, paying down debt, bolstering your savings, or whatever other goals you may have.

Start by taking a moment to pause and be grateful for the abundance and experience you have today, knowing you’re about to give yourself an even greater gift of financial security.

Spark Joy With Your Money

Marie Kondo’s main criteria for deciding whether or not to keep an item is determining if it sparks joy for you. She advises clients to hold each item and really think about how it makes them feel.

While you don’t need to physically hold every dollar you have, here are three steps you can take to make sure every aspect of your finances is working to providing you with joy, rather than stress.

1. Take Stock of What You Have

Just as you would pile all your clothes at once to see what you own, you can do the same thing in order to Marie Kondo your finances. Divide this process into at least four different sections: income, savings, credit, and debt.

Income: Look at your bank statements for the last three months and determine how much income you’ve actually brought in. If your earnings fluctuate, find an average of what you can reasonably expect each month. This number gives you a baseline for how to make your money work for your current stage in life.

Savings: Next, take stock of each savings account you have in your name. This should include both liquid accounts, like regular bank savings accounts, and long-term retirement accounts.

Credit: Another important step is to analyze your credit and see if it needs to be improved. Check your credit report for accuracy and dispute any credit errors you find.

Debt: Access each credit card and loan statement you have to truly understand the debt you currently carry. Many people don’t know the exact amount they owe, but it’s a crucial piece of information if you want to Marie Kondo your finances.

2. Organize Spending

Once you have all of those numbers compiled, it’s time to organize your spending. Look at your income and monthly expenditures to create a realistic budget. You can look at all of those bank statements you pulled to see where your money really goes.

Start by assigning budget lines to expenses you can’t change right away, like your housing payments, student loans, or car payments. Then challenge yourself to minimize discretionary expenses like food and other shopping.

In true KonMari fashion, also streamline all of your financial paperwork. Sign up for e-statements to minimize bulky statements in the mail, and create a simple filing system for the papers you do need to keep on hand. This keeps you on track and makes it easy to find the information you need.

3. Create a Long-Term Plan

Once you have a better handle on your day-to-day finances, consider your long-term goals. You may decide to focus on fixing your credit to improve your future financing opportunities. Alternatively, you might set up automated savings so that you prioritize those funds with each paycheck.

Keep the Momentum Going

Ready to make room for change in your financial life? Sign up for a free consultation with Ovation Credit to see if we can help.

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