What Is a Home Equity Loan? How It Works vs. a Home Equity Line of Credit

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What is a home equity loan? If you own a home, you can borrow money based on its value to pay other expenses such as home improvements or college tuition. You receive a lump sum upfront, then repay it in monthly installments—plus interest—over a period of time lasting typically from five to 15 years.

Home equity loans are a popular option for homeowners because their interest rates are much lower than those for other common forms of borrowing, such as personal loans or credit cards, says Tendayi Kapfidze, chief economist at Lending Tree. And since home equity rises alongside real estate values, they’re a boon to many homeowners.

“People have been gaining home equity at an extremely fast rate,” says Ryan Kelley, CEO at TheHomeLoanExpert.com. As a result, many homeowners are turning to home equity loans to pay for a variety of things.

“We’ve seen, in the last two years, an increasing demand for home equity loans,” says Jon Giles, head of home equity lending at TD Bank.

Here’s how to decide if a home equity loan is right for you.

What is a home equity loan? How to use these funds—and why

When you get a home equity loan, you can spend that money anyway you choose. However, there are some primary ways people use their funds.

According to a recent Lending Tree study, 43% of home equity loan applicants said they planned to spend the money on home improvements.

Meanwhile, 38% of applicants said they’d use the cash to consolidate debt. That’s often a smart use, “particularly if you’re moving higher-interest debt to lower-interest debt so that you can pay off your debt more quickly,” Giles says.

Using home equity loans for education is also common, given the skyrocketing costs of college education. Plus, families with higher incomes may not qualify for grants or government-backed student loans, but they can qualify for home equity loans.

Additionally, some borrowers put the money toward a down payment on a vacation home or investment property, while others use the funds to buy a car or pay for emergency expenses.

Unfortunately, some people squander the money, obtaining a home equity loan to fund their discretionary spending. Not a great idea!

“Tapping your home equity to take a vacation, buy a yacht, or get plastic surgery would definitely be a misuse of the funds,” says Greg McBride, senior vice president and chief financial analyst at Bankrate.com.

Home equity loan vs. home equity line of credit: What’s the difference?

Many people confuse a home equity loan with a home equity line of credit, or HELOC. Essentially, a HELOC functions more like a credit card, where you’re allowed to borrow up to a certain amount of cash and then pay it off or reborrow as needed over the term of the loan (usually five to 20 years). In fact, your lender will issue you a small plastic card that looks just like a credit card, to allow you to access your money easily.

HELOCs generally have a variable interest rate, whereas home equity loans typically have a fixed interest rate. Because the interest rate is fixed on a home equity loan, you know exactly what your monthly payments will be. Meanwhile, monthly payments on a HELOC can go up or down depending on economic factors, warns Dan Green, founder at Growella.com, a mortgage education website for millennials.

Some HELOC lenders offer a low introductory rate, which lasts for a matter of months. But after that, the interest rate can fluctuate—so if you prefer steady payments, a home equity loan is a better choice for you.

How to qualify for a home equity loan

Naturally, in order to tap your home’s equity, you need to have a sufficient amount of equity built up. Most mortgage lenders will allow you to borrow up to 80% of your home’s equity when you obtain a home equity loan, says Kapfidze.

So, say your home is worth $250,000 and your mortgage balance is $200,000. In this case, you’d have $50,000 in home equity, which means you’d be able to borrow up to $40,000. (Note: Some lenders let you borrow up to 90% of your home’s equity, Kapfidze says.)

But, in order to qualify for a home equity loan, you also need reasonably strong credit.

“For most mortgage lenders, you need a credit score in the upper 600s or higher to qualify,” says Giles, adding that a credit score in the mid-700s and higher will help you qualify for the best interest rates.

And, as with a regular home mortgage, you’ll need to have an adequate debt-to-income ratio—a simple equation of your monthly debt payments divided by your monthly income—in order to qualify for a home equity loan. Generally, your DTI ratio cannot exceed 43% of your gross monthly income.

Should I get a home equity loan?

Home equity loans offer some attractive features. Most notably, “a home equity loan is a great option if you want to know exactly how much money you wish to borrow on Day 1, and you want a fixed interest rate,” Giles says.

Moreover, “having a fixed interest rate can be a big benefit when you’re in an economic environment where rates are rising like they are today,” Kapfidze points out.

Also, home equity loans can offer a nice tax break. Under the new Tax Cuts and Jobs Act, you can deduct the interest paid on up to certain amounts ($750,000 for a married couple or $375,000 for an individual), so long as you use the loan to buy or improve your first or second residence, Kapfidze says. (Read: You won’t qualify for a tax deduction if you spend the money in a different way.)

Making timely payments on a home equity loan will also improve your credit score, McBride adds.

Nonetheless, “make sure you understand how a home equity loan is going to affect your overall financial picture, and figure out a plan for how you’re going to pay back the money before you get one,” Kapfidze advises.

For more smart financial news and advice, head over to MarketWatch.

 

Posted by Daniel Bortz on realtor.com

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How to Sell a Home Fast—Even Before the Holidays!

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Need to know how to sell a home fast, even though the holidays are speedily approaching? If you’re thinking of throwing up your hands and giving up hope until the new year, we’re here to offer hope: There’s still time!

Because here’s the deal: As eager as you may be to sell your home before the holidays, plenty of people out there are dying to buy a place before the holidays descend, too. So if you play your cards right, it is entirely possible to not only find a buyer, but also close the deal and move out before Santa’s sleigh starts making the rounds.

Here are some insider secrets on how to sell a home fast, even during the hectic holiday rush.

Polish your online listing

Because the weather outside is “frightful,” as they like to say (or at least will be soon enough), buyers want to do much of their looking online. With that in mind, focus on making your home so alluring they’re willing to put on those parkas and check it out in person.

“Make sure that your home has an online listing that’s up to date and has optimal photos available, since buyers usually don’t like to go out in cold weather,” advises Ray Sturm, CEO and co-founder of AlphaFlow.

“Most home buyers vet potential homes through online listings before reaching out,” Sturm continues, “so ensuring your home is presented in the best light online is a good way to attract potential buyers.”

Play up the holiday features

Buyers want to envision themselves settling into a home in time to celebrate that first Thanksgiving or Christmas, says home expert Lauren Mak, who has appeared on TLC’s “Trading Spaces” and ABC’s “Fab Life with Tyra Banks and Chrissy Teigen.”

Mak suggests accenting architectural features such as a fireplace or sweeping staircase to showcase how great your home could look for the holidays.

“Add twinkle lights to a fireplace or table decorations to your dining room to help potential buyers visualize their future home,” she says. “If you have something like a bay window where a Christmas tree might be, clear the clutter before showing your home.”

Suzy Minken, an agent with Berkshire Hathaway, agrees. “For sellers with a spacious dining room, the table can be decorated for holiday entertaining,” she says. “This is an ideal opportunity to create that ‘wow’ moment among buyers, so sellers may want to consider purchasing new tableware and accessories that are trending in home design. This gets buyers excited about making the house their new home just in time for the holidays.”

Home decor aside, Gill Chowdhury of Warburg Realty recommends writing a property description that highlights the features that really count during the holidays. For example, “spacious dining room, ideal for Thanksgiving or Christmas dinner” will appeal to a buyer’s emotions.

But don’t overdo the holiday decor

While it’s good to be jolly, don’t go over the top, says Dawn Houlf, real estate coach and owner of EXIT Realty Number One in Las Vegas.

“Homes do look their best during the holiday, but simple is best,” she says. “Too big or too many adornments can crowd your home and distract buyers.”

Be flexible with showings

If you want buyers bidding for your home, they’re going to want to check out every nook and cranny, so you’d better be ready and willing to let ’em.

“The best thing that sellers can do during the holiday search is keep the home clutter-free and stay open and available for last-minute and short-notice showings,” says Shayna Goldburg, broker and chief human resources officer at SetSchedule.

“What I have noticed is that it is harder and harder to view homes during the holiday season,” Goldburg says. “Oftentimes homeowners go out of town, guests come to visit, or owners have their own entertaining schedule, and prefer not to have showings to interrupt this time. At the end of the day, the more open, available, and flexible you are as a homeowner for showings, the more your home will be seen and greater your chance for a sale.”

Make sure your home is move-in ready

Having your home pre-inspected before you list can accelerate your sale in three key ways, says Steve Wadlington, president of WIN Home Inspection.

  1. It makes your house more marketable: Buyers feel safer making an offer on a home thats an open book during the home-selling process.
  2. It can save you money: Once you know what issues need to be fixed, you can have those problems taken care of before you list. The cleaner and more issue-free you can make your home, the faster its likely to sell, which can save you money in the long run.
  3. It allows you to highlight your homes assets: New flooring or granite counters installed? Electric wiring redone? Brand-new appliances or furnace? “These are huge selling points, and your home inspection report will reflect all of the improvements and upgrades youve made,” Wadlington says.

Make curb appeal a top priority

“As the leaves begin to fall, maintaining the exterior of your home becomes even more important,” says Houlf. “Bare trees equal a more exposed home, so touch up the paint, clean the gutters, and spruce up the yard. Paint the front door, hang a decorative wreath, and [add] a decorative welcome mat. In addition, keep buyers’ safety in mind as well by making sure stairs and walkways are free of snow, ice, and leaves.”

And don’t forget to highlight the outdoor features buyers can enjoy year-round. If you have a fire pit or hot tub, show it off.

Offer incentives

While competition is greatly reduced around Thanksgiving, that alone may not be enough to encourage offers, notes Sophie Kaemmerle, communications manager for NeighborWho.com.

“Incentives put you ahead of the pack,” she says. “Offer what you can, ranging from updated appliances to paying closing costs, offering extras like TVs, and be flexible with negotiations.”

Plan a themed open house

“Since you are so close to the holiday, why not host a Thanksgiving or holiday-themed open house,” Kaemmerle suggests. Think: an early tree-trimming, or offering up some homemade holiday treats.

“Not only is this a fun way to show off a home, but also you will stoke buyers’ holiday and home-buying excitement,” she says.

Just keep in mind that timing is important this time of year, Kaemmerle adds: “Not many people will ditch family dinners for an open house on an actual holiday.”

Buying a home as well? Check out how to buy a home before the holidays!

 

Posted by Liz Alterman on realtor.com

Ready to sell? Click HERE to get started!

3 Steps to Creating an Organized Entryway (Even If You Don’t Have the Space)

With a little inspiration and organization, you can create an entryway that makes coming and going a breeze.

Drop zones, mudrooms, utility rooms, entryways, “places to leave your stuff.”

Whatever you call them, these spaces are a spot to kick off your shoes, drop your keys and keep everything you’ll need for the next day right where you left it.

But without organization, entryways can quickly become a clutter catch-all. Shoes usually end up piled in front of the door, and an array of backpacks, mail, dog leashes and knickknacks can quickly accumulate and crowd the space.

A dedicated, organized and stylish drop zone for all of your daily needs — and to welcome your guests — is absolutely achievable, no matter the size or design of your living space.

Try these tips to establish a functional entryway in a home of any size.

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1. Make a little room

Since it’s generally not possible to remodel or add on to a rental apartment, you must work with what you have.

Try a narrow console table for tight hallways as a place to drop your keys or leave your outgoing mail.

If space is really tight and all you have is the wall behind your door, hang hooks for coats and bags so they stay off the floor.

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Another small-space trick: Temporarily remove your coat closet’s door, and add a stool or small bench inside as a place to sit and take off your shoes — and still have room for coats.

If your apartment is inside a secure building, you may be able to leave out a basket or tray for shoes in the shared hallway.

2. Add functionality

A mirror can also go a long way in opening up and brightening tight areas by reflecting light and giving the illusion of more space.

Retailers like IKEA sell pieces that can be modified to fit narrow spaces or hung on the wall. Measure your desired entryway space, and find furniture that will make the most of the room you have.

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A dedicated space for accessories also makes your drop zone a functional center. A devoted bowl or hook to hang your keys, a folder to sort your mail, and a basket to keep your shoes in really makes a difference in the flow of your day.

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3. Leave a message

Bump practicality up a notch by having a message center in your drop zone where you can pin important reminders or leave messages for family members. It’s a great way to keep everyone connected as they go in and out.

A docking station to charge all your electronics can also be useful here. Look for compact and small accessories that will fit your space, yet serve the purpose you need.

By customizing your drop zone with features you need that will fit your home, you’ll keep everything streamlined and accessible when you need it.

 

Posted by Erica Sooter on Zillow

Should I Buy Now? Or Wait Until Next Year? [INFOGRAPHIC]

Some Highlights:

  • The cost of waiting to buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
  • Freddie Mac predicts interest rates to rise to 5.2% by the third quarter of 2019.
  • CoreLogic predicts home prices to appreciate by 5.1% over the next 12 months.
  • If you are ready and willing to buy your dream home, find out if you are able to!

Posted by The KCM Crew

 

Where Are Mortgage Interest Rates Headed In 2019?

The interest rate you pay on your home mortgage has a direct impact on your monthly payment; the higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.

Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily over the course of the next year.

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

According to CoreLogic’s latest Home Price Index, national home prices have appreciated 6.2% from this time last year and are predicted to be 5.1% higher next year.

If both the predictions of home price and interest rate increases become a reality, families would wind up paying considerably more for their next homes.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth, so don’t wait until next year! Let’s get together to evaluate your ability to purchase your dream home now.

 

Posted by The KCM Crew

Start looking for your next home today! Click HERE

House of Brokers Reveals 25 Year Time Capsule!!

On Wednesday, September 19th, House of Brokers Realty, Inc. commemorated 25 years at their 1515 Chapel Hill road location by unsealing the time capsule that was buried after their Grand Opening in 1993.

Attending were agents at House of Brokers present and past, staff members present and past, family members, friends of House of Brokers and business associates.  Fifty licensees moved into the new office at the time of opening, along with 4 staff members.  House of Brokers currently has 72 licensees and 10 staff members.  In 2005 a second building was added on the site next to the original office approximately doubling House of Brokers office capacity. 

The memorabilia contained in the time capsule was most interesting and highly entertaining.  Items included pictures, business promotional items, future predictions, a newspaper, a Sears catalog, toys, artifacts and many more items too numerous to mention.

Fifteen of the original 50 agents and 1 original staff member are still active members at House of Brokers. 

House of Brokers has been a business leader in the community since it was founded in 1981.  The Company prides itself on its reputation for top quality and trustworthy service. 

 

The Perks of Buying a Home in the Fall

Editor’s Note: This post was originally published on September 16, 2015. Housecall continues to share this piece due to ongoing requests and reader interest.

As we close out a summer marked by rising home prices and limited supply, we’re conditioned to expect the inevitable end-of-season slowdown. But the change of season doesn’t mean activity drops off completely – in fact, fall’s arrival presents opportunities for homebuyers, in part due to a “back-to-school mentality,” according to a survey by ERA Real Estate.

If you’re a prospective homebuyer, tap into that renewed sense of motivation – and consider the following perks – while hunting for a home this fall.

You can enjoy year-end tax breaks. Buying before the year’s out allows fall homebuyers to take advantage of tax breaks such as the mortgage interest and property tax deductions. “There are certain deductions that can be claimed by homeowners only,” explains 1040Return.com Founder John Gregory. “If you have taken out a homeowner’s loan, consider these deductions as Uncle Sam’s gift to you.” To learn more about the tax benefits available to homeowners, click here.

You can sidestep the multiple-bid minefield. Bidding wars dominated low inventory markets this summer, but competition tends to wane as activity slows in the fall. With fewer folks searching for homes, fall homebuyers can spend less time chasing supply and more time finding – and getting – the perfect home.

You may have more bargaining power. Aside from less competition, fall homebuyers may have the opportunity to purchase their home of choice at a reduced price, especially when negotiating with sellers who had hoped to unload their homes over the summer.

Related Link: If Your Home Didn’t Sell This Summer, Don’t Despair – Fall and Winter Are Great Times to Sell, Too

You’ll be home for the holidays – literally. As ERA reports in their survey, fall homebuying activity is also fueled by emotional motivation. “As vacations wind down after Labor Day and people become more focused, the desire to be in a new home for the holidays is a historically strong driver of fall home sales,” says ERA President and CEO Charlie Young.

 

Posted by Suzanne De Vita on RISMedia’s House Call

Ready to buy your next home? Click HERE to get started!