Monthly Archives: December 2016

All About Home Equity Line of Credit (HELOC)

How Does HELOC Work?

Home equity line of credit (HELOC) works like a credit line. You will receive special “equity” checks that can be used to advance yourself a loan up to your approved available balance. Simply write the loan amount you need.

Some lenders will also provide credit card-like access to your HELOC line account. You can use this like a credit card and all transactions will be posted to your home equity line account.

QUICK TIP: Over the life of a loan, remember the loan with an overall lower APR is less costly than a loan with a higher APR.
One word of caution. Even though your account is protected against fraudulent use, the last thing you need is to have your home exposed to potential fraud in the event you lose your card or someone obtains access to your card numbers.

It’s recommended that you use the special equity checks to access your HELOC account. Keep and protect them in your home. Never carry these checks with you.

When you need to access your home equity line of credit account, write the loan amount you need with your equity check and deposit it in your bank checking or money account. Then use the debit or check card that came with your money account to charge transactions at retail and other establishments.

How Are HELOC Rates Determined?

Home equity line rates are variable and indexed to the PRIME RATE or some other rate index. This means your rate can increase or decrease whenever the PRIME RATE changes. The rate (APR) is calculated by taking a margin (percentage) and adding it to the PRIME RATE.

Whenever the PRIME RATE increases, your monthly payment due will likewise increase. Whenever the PRIME RATE decreases, your monthly payment due will likewise decrease.

The interest (APR) that will be charged to your home equity line of credit account will be only on the amount you actually use, not on the total amount of your credit line.

If the lending institution uses an index other than the “PRIME RATE,” request to view historical changes for the index rate being used. Compare this trend against the historical trends for the “PRIME RATE” to note frequency changes in APR and how high the interest rate has climbed.

All HELOC accounts must list the rate cap for the account. This cap may vary by state.

What Are HELOC Payment Terms?

Minimum payment terms for home equity lines of credit may include one of the following plans:

Interest only plus any penalty-related fees
Percentage of the principal plus interest and any penalty-related fees
Keep in mind that any principal repayment will not reduce your balance to zero at the time your HELOC account closes. You must pay an additional amount to reduce your balance to zero over a repayment term.

These repayment terms may vary by lender. You should be able to pay down your home equity line account at any time without prepayment penalties. If not, find another lender.

With most programs, you can advance yourself a loan as many times as your like, as long as the advance does not exceed your approved available balance:

The advance feature is usually available for 5-10 years at most lending institutions, at which time you may renew your home equity line option, pay off the loan amount, or convert your home equity line balance over to a fixed rate equity loan amortized at repayment terms set by the lender.

Again, these terms may differ by lender. Some lenders do not offer a renewable feature or allow conversion of the home equity line balance over to fixed-rate amortized loan.

Be sure to review the terms before making your final decision.

Home Equity Loans

How Do Home Equity Loans Work?

The home equity loan is a fixed rate loan. The money is advanced to you when you close your equity loan. This advance is a one-time loan, with no further advances made on your account.

How Are Home Equity Loan Rates Determined?

Home equity loan rates are fixed and set by the bank. The rate will not go up or down during the repayment period of the loan.

What Are Home Equity Loan Payment Terms?

Your monthly payments are fixed. The amount and number of payments depend on the repayment terms of your loan. Lenders offer a range of repayment terms, generally from 5-20 years.

You may pay off your home equity loan at any time, but you should check the lender’s prepayment terms. Some lenders will charge a prepayment penalty under certain circumstances.

How Much Can You Borrow with HELOC or a Home Equity Loan?

The approved available home equity line or home equity loan balance is secured by the equity in your home. The total amount approved depends on your LTV position, which is determined by taking a percentage of the appraised value of your home and subtracting the balance owed on the existing mortgage.

How To Preparing Your Home for the Market

Before you put your house on the market, set aside some time to spruce it up and maximize its sales appeal. Houses that are clean, uncluttered and in good repair sell faster.

A few weeks prior to listing your house, do an inspection tour, trying to look at things through the eyes of a stranger. Make a list of things that need to be cleaned and repaired and estimate the time, cost and priority of each chore. Take a particularly good look at your bathroom(s) and kitchen. Time and money invested in painting and refurbishing these key rooms will have maximum impact. Click this link to use a home inspection to your advantage.

Real estate agents who are interested in listing a home often provide recommendations for increasing its sales appeal. Pay attention to their suggestions. They know what matters to buyers and can be objective about your home’s flaws.

To-do list for sellers

Prior to showing your house:

Get rid of clutter on shelves, countertops and closets. Consider packing seldom-used items you don’t want to discard in boxes and storing them until you move.
Put excess furniture and items that are showing wear in storage until you move.
Rearrange the remaining furniture attractively. (Ask your agent or a friend to help you decide what goes where.)
Wash and/or paint walls that are dirty or chipped.
Wash blinds and clean curtains.
Shampoo carpets.
Fix leaky faucets and appliances that don’t work.
Get rid of junk that’s accumulated in your basement and garage. (You’ll have to do this before you move anyway, so why not get a head start?)
Consider having a yard sale.

While your house is on the market:

Keep the house clean. Tidy up, vacuum and dust daily, if possible, and do laundry before it piles up.
Keep the house clean. Tidy up, vacuum and dust daily, if possible, and do laundry before it piles up.
Keep a list of things to do and places to go while prospective buyers are viewing your house.
Cut or buy fresh flowers every few days.
Bake cookies or a pie on weekend mornings when you expect a lot of traffic, and before open houses, to make your home more welcoming and cozy.

After your house is sold:

Make sure you keep everything clean and in good working order.
Do any repairs you’ve agreed to look after in the sales contract.

If you have small children and find it hard to keep the house tidy, think about hiring a cleaning service or a neighboring teen to help you. You can also ask your real estate agent about the possibility of intensively marketing your home for a short period of time, then holding an auction to reduce the period during which it will be on view.

If you have older kids, ask them to keep their rooms tidy and to take on chores like daily vacuuming and dusting.

How To Prepare Your House for Sale

You want to sell your home for the best price. Start by enlisting a real estate agent and making a list of needed projects, to maximize the potential of your home.

Use this list to determine what to do before listing your home for sale:

1. Enlist a Real Estate Agent

An agent experienced with the market in your neighborhood is the most qualified person to determine how potential buyers will perceive your house.

2. Evaluate Your Curb Appeal

Curb appeal is critical because many prospective buyers will only drive by your home. Ideally, you want every person who stops and looks at the house from the curb to be sufficiently enamored that they want to come in to see more.

Curb appeal is made up of three primary components:

Front entrance
Landscaping
The rest of the front of the house
Front Entrance
The front door, porch and any surrounding windows and structures form the focal point for your home. A freshly painted door and polished door hardware can make it more attractive. Easy-to-read house numbers, a freshly painted mailbox and functioning porch lights are also important. The doorbell should work reliably. Sometimes a drab entrance can be dressed up with a couple of potted plants.

Landscaping
Another major component of curb appeal is landscaping. This includes the lawn, plants and such structures as retaining walls, walkways and steps. The trees and shrubs need to be well trimmed. Garden beds should be well defined and freshly mulched.

And, keep in mind that many homes have overgrown shrubs that hide the house and make it look smaller.

Also, consider power washing the concrete surfaces to make them appear new again.

Home’s Exterior
Look at the rest of the front of your house. Is the siding clean? Is the paint in good shape? Are the windows clean and clear of spider webs? Are the gutters clean and hung securely?

3. Update the Interior

Kitchens and Bathrooms
Kitchens and bathrooms can present problems. The question is whether renovating a kitchen or bath (or adding a bath) will ultimately pay for itself. If a kitchen is not updated, but is on par with the other houses on the market, no major changes need to be made.

Often a fresh coat of paint, a new countertop and a new floor are sufficient to bring a kitchen up to speed without great expense. The same is generally true of bathrooms.

Reduce Clutter

The next major issue to consider when getting your house ready for sale is often the least expensive and the most troublesome: getting rid of clutter. This is where the advice of an honest outsider, or better yet, a professional organizer, is important. If you are unable to take on the clutter problem immediately, the best thing to do is to put things into storage until you’re ready to sort through them or move.

Walls, Floors and Countertops

Regardless of the surface, if you are going to refurbish it, choose neutral colors. With paint, that nearly always means off-white. With floors, stick to lighter colors. In most cases, if you haven’t done much painting recently, it makes sense to repaint the entire interior.

If carpets are in good shape, a professional cleaning will usually suffice. If they are old or stained, you are better off either replacing them, or removing them and refinishing the floor underneath.

In the bathroom and kitchen, replacing an older vinyl floor can easily brighten things up. Use quality materials and avoid patterns and colors that are busy. Also note any tile or caulking problems.

Fixtures and Outlets

To check electrical fixtures, go through each room and try each electrical outlet by plugging in a portable lamp. Test every light switch, replacing bulbs when necessary. Test the faucets in the kitchen and baths. Note any that are leaking or otherwise in need of servicing.

4. Prioritize Your List of Home Improvement Projects

You have now identified everything that you will need to do to prepare your home for sale. Look at your overall list and decide on the things you want to handle yourself. Nearly all do-it-yourself projects take longer than you think, so be realistic about what you can accomplish on your own.

Determine the projects you are unable to do yourself. Group the projects by category. Many times service professionals prefer to receive larger projects, and you will save money by having everything repaired and updated simultaneously.

5. Remember to Use Patience

Complete your list of repairs before listing your home on the market. Your house will be more desirable to potential buyers and command a higher selling price. Avoid putting yourself in the position of showing the house before it’s ready.