Home Equity: How to Use It

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Let’s look at the different ways you can use your home’s equity.

Refinance: In essence, this is a way of paying off your current mortgage and getting cash out based on how much       equity (the difference between the market value of your home and what you owe on it) you have in your home. This     is a great way to lower or lock in your mortgage interest rate. This is the way to get large sums of money – $30,000   or more – because you have 15 to 30 years to pay it off.

On refinances, you may have to pay closing costs; discount points (used to increase the lender’s yield or profit on the loan and equal to one percent of the loan amount); appraisal fees; application or loan processing fees; document prep and recording fees; origination or underwriting fees; lender or funding fees; loan broker fees; and miscellaneous other fees (i.e. overnight mail charges, etc.).

A home equity loan, a.k.a. a second mortgage, is good for homeowners who don’t need quite as much cash and whose mortgage interest rate is already competitive. The term is much less than a conventional 30-year mortgage – five to 15 years. These installment loans are paid out in one lump sum, so they’re good for repaying credit card debt or remodeling projects, even buying a new vehicle.

You must be sure you will be able to pay this loan back, because it’s easier to foreclose on a second mortgage than on a federally insured first mortgage. Find out about closing costs and points in advance, as well as balloon payments, hidden fees, or credit or property insurance tacked on.

A home equity line of credit works like a credit card – you agree to a pre-set limit and then borrow as you need to, or in the event of an emergency, usually for up to 10 years. These lines of credit are good for expenses like debt consolidation, major home improvements, college tuition and expenses, and unexpected expenses. The beauty of this is that you don’t make payments unless you use the money, but you have the security of knowing money’s there if you need it.

Some credit lines have variable interest rates, with no cap on how high they go. Make sure you read the fine print and find out exactly how much it could increase, then do the math. And if you’re an impulse buyer, this may not be a wise choice. A home equity line of credit shouldn’t be used for frivolous luxury items, unless it’s a one-time purchase and not a pattern of behavior.

Real Estate Trends

Real Estate Trends

Home prices have risen nationally three times faster than incomes since the turn of the century, which has made home ownership an impossibility for more Americans than ever before.

In many cities, home prices have outpaced income. In Miami, for example, incomes have risen 16 percent, while home prices have increased 58 percent since early 1998. New York’s Long Island suburbs have seen just a 14 percent rise in incomes as compared to an 81 percent increase in home prices. Boston home prices have gone up 89 percent, while incomes have increased only 22 percent.

Even with a downturn in the real estate market looming on the horizon, home sales are still headed for another record year.

The first sector to show slowing is the high-end home market. Because of “overpersonalized” big-ticket properties, the pace of house auctions nationwide has surged.

Low interest rates are the only continuing positive trend of the housing market. with rates less than 6 percent for 30-year fixed-rate loans, the lowest since the 1960s.

Real-estate analysts believe that if the housing market stalls, some areas will continue to grow modestly while other markets gradually go soft, rather than pop.

In Arizona we have continued to see steady growth.   As of October, the adult communities are up over last year with Sun City leading the way at 9.7%, Sun City West at 6.0%, Surprise at 7.7%, Peoria at 7.2%.  While Phoenix is at 5.2% and Scottsdale coming in at 3.6%.