November 2007 Vol.2 No.11

 Should You Tap Into
Your Home Equity?
 November's Home Value Improver  About Us

 

Should You Tap Into
Your Home Equity?

If you are staring at a high credit card bill wondering how you are ever going to get out from under the debt with the high interest payments, you may have thought about using your home equity to help. It may be a good idea. However, if you're looking for a way to fund that impulsive Caribbean cruise, think again. While home equity may be a good way to help finance home improvements, education, or debt, it's not intended for impulsive or extravagant purchases. Now that we have that out of the way, let's assume you have a good reason to take out a home equity loan.

There are a few different ways of tapping into your home equity. A straight home equity loan (HEL) is a lump sum with a fixed interest rate. A home equity line of credit (HELOC) offers the flexibility of taking what you need when you need it. However, the rate on a HELOC is variable.

Benefits of Using Home Equity

  • The interest rate is low.
    Since you're sort of borrowing your own money, the interest rate is often the lowest you will find anywhere. Think about this: If you owe $10,000 on a credit card with a 14% interest rate, you will pay about $3,500 in interest over four year's time. Meanwhile, an 8% rate on your home equity will cost you about $1,300 in interest in roughly the same time frame. (That does not include the tax advantages.)
  • Up to $100,000 of interest on your loan is tax deductible.
    That can translate into some major savings at tax time. If you're sending a child to college, not everyone can write off student loan interest, but almost everyone can write off home equity loan interest.
  • It's a good way to finance needed home improvements.
    Since many home improvement projects usually add value to your home, you may get the money back when you sell your home, if that is your goal.

Risks

  • The collateral is your house.
    Yikes! You always knew that you could lose your house if you stopped paying your mortgage. But, your home equity loan is also a mortgage, so your house is at risk if you stop paying that, also. It is worth it for a fabulous new bathroom or some fancy landscaping?
  • It can be a slippery slope.
    If you use it to pay off credit card debt and you think you may be apt to repeat this, think again. Approximately 45% of all home equity loans are taken out to pay off credit card debt. Perhaps a credit card with a short-term super-low interest rate will be better for you to pay off the debt, as it won't tempt you to keep piling up the purchases.
  • Bigger bills.
    Obviously, taking out a loan for whatever reason is going to increase your monthly bills and give you less wiggle room. If you have the option of not taking on more debt, consider it.

What you should do depends greatly on your situation. If you are considering a home equity loan, give me a call and I'll be happy to work with you and help you to make the decision.



November's Home Value Improver



Making the Most of Small Spaces

Although mortgage company advertisements may make you think that everyone lives in huge houses, reality is a little different. That is especially true in the Boston area where many of the homes are older and smaller and real estate prices are considerably higher than most of the country. However, small spaces do not have to be cluttered spaces. With some good planning and minimal investing, you can fit yourself and all your stuff into a smaller space comfortably and efficiently. Careful planning and using all the space you have is key. Consider some of these ideas:

Kick Back - On Some Storage
The right ottoman can serve two, three, or even four purposes. An ottoman with storage inside of it will hold items that tend to make a mess such as blankets, toys, or whatever else clutters your room. You can also put your feet up on it when you're lounging, and with a tray, it can serve as a coffee table. It can also be a perfect seat when you have company.

Built-In Ideas
A wall of built-in shelves looks cool and can hold an amazing amount of stuff. If you're worried about the wall looking like a cluttered mess, invest in some containers that you can put on the shelves. Just remember what you decided to put in which containers!

Make the Most of Your Closet Space
There's a reason why professional closet organizing companies are so expensive - organized closets offer much more storage than your typical hanging bar with a couple of shelves. If a professional closet organizing system is not in your budget, try placing clear drawers on the floor beneath where your clothes hang. Over the door shoe holders can hold a lot more than shoes, depending upon your storage needs. You'll save time as well as space if you reduce the time you spend searching for stuff on your closet floor.

Hook Up for Convenient Storage
An empty wall in a hallway or other area is wasted space (if the hallway is wide enough). Hang hooks on the wall for added storage. If you're really handy, or the person hanging your hooks is, try something stylish like old doorknobs.

Examine Your Doorways
If you have an area that is really tight but has a lot of doors, think about removing the doors. Space that allows doors to open and close can be wasted space if you really need more storage. You may be able to put up a tall shelf next to a doorway that previously was used to hold a swinging door.

Keep What You Use - Not What You Don't
That big, bulky breadmaker may have seemed like a wonderful gadget when you bought it in 1998, but when was the last time you made bread? Try to keep only what you use frequently enough to warrant precious storage space. If you're not up for holding a yard sale, consider a donation to a local church, preschool, or other organization that is looking for flea market items. Or log on to freecycle.org. You can list items there for free, and someone who wants it for free will come and pick it up.

 

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Did you know that you may qualify as a first- time home buyer even if you have owned a home?

The key is that you may fall under the definition of a displaced homeowner: an individual who is an adult, who has owned a home only with a spouse, who is legally separated from a spouse, and who does not currently own the home previously owned with the spouse.

This information can benefit both men and women who are going through divorces, since there are some really great programs available for first-time homebuyers.

Please feel free to call or email anytime for more information on this or any other mortgage topic!

Best regards,
Debbie Siegel
President
Westchester Mortgage

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Click here to read my Mortgage Minute in ForeclosuresMass.com's monthly newsletter. This month's column: No Closing Costs: Too Good To Be True?



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