CONSIDERING A HOME EQUITY LINE in 2012..WHAT YOU NEED TO KNOW http://ping.fm/kJgxB

CONSIDERING A HOME EQUITY LINE in 2012..WHAT YOU NEED TO KNOW

 

 

CONSIDERING A HOME EQUITY LINE: WHAT YOU NEED TO KNOW

If you are in the market for credit, a home equity plan is one of several options that might be right for you. Before making a decision, however, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risks. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home.
What is a home equity line of credit?
A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.
With a home equity line, you will be approved for a specific amount of credit. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75%) of the home's appraised value and subtracting from that the balance owed on the existing mortgage. For example:

In determining your actual credit limit, the lender will also consider your ability to repay the loan (principal and interest) by looking at your income, debts, and other financial obligations as well as your credit history.
Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years.
Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line.
There may be other limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) or keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.

What should you look for when shopping for a plan?
If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. Remember, though, that the APR for a home equity line is based on the interest rate alone and will not reflect closing costs and other fees and charges, so you’ll need to compare these costs, as well as the APRs, among lenders.
Variable interest rates
Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate). In such cases, the interest rate you pay for the line of credit will change, mirroring changes in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time, plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past. It is also important to note the amount of the margin.
Lenders sometimes offer a temporarily discounted interest rate for home equity lines--an "introductory" rate that is unusually low for a short period, such as 6 months.
Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if the index drops.
Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or let you convert all or a portion of your line to a fixed-term installment loan.

Costs of establishing and maintaining a home equity line
Many of the costs of setting up a home equity line of credit are similar to those you pay when you buy a home. For example:

• A fee for a property appraisal to estimate the value of your home; 
• An application fee, which may not be refunded if you are turned down for credit; 
• Up-front charges, such as one or more "points" (one point equals 1 percent of the credit limit); and 
• Closing costs, including fees for attorneys, title search, mortgage preparation and filing, property and title insurance, and taxes. 

In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line.
You could find yourself paying hundreds of dollars to establish the plan. And if you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs.

How will you repay your home equity plan?
Before entering into a plan, consider how you will pay back the money you borrow. Some plans set a minimum monthly payment that includes a portion of the principal (the amount you borrow) plus accrued interest. But, unlike with typical installment loan agreements, the portion of your payment that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest only during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the payment plan ends.
Regardless of the minimum required payment on your home equity line, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.
Whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends, you may have to pay the entire balance owed, all at once. You must be prepared to make this "balloon payment" by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.
If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10% interest rate, your monthly payments would be $83. If the rate rises over time to 15%, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period.
If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.
Lines of credit vs. traditional second mortgage loans
If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. This type of loan provides you with a fixed amount of money, repayable over a fixed period. In most cases, the payment schedule calls for equal payments that pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.
In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:

• The APR for a traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges. 
• The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges. 

Disclosures from lenders
The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not to enter into the plan because of the change.
When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the 3-day period. The lender must then cancel its security interest in your home and return all fees--including any application and appraisal fees--paid to open the account.

What if the lender freezes or reduces your line of credit?

Plans generally permit lenders to freeze or reduce a credit line if the value of the home "declines significantly" or, when the lender "reasonably believes" that you will be unable to make your payments due to a "material change" in your financial circumstances. If this happens, you may want to:

• Talk with your lender. Find out what caused the lender to freeze or reduce your credit line and what, if anything, you can do to restore it. You may be able to provide additional information to restore your line of credit, such as documentation showing that your house has retained its value or that there has not been a "material change" in your financial circumstances. You may want to get copies of your credit reports (go to the Federal Trade Commission's website for information about free copies) to make sure all the information in them is correct. If your lender suggests getting a new appraisal, be sure you discuss appraisal firms in advance so that you know they will accept the new appraisal as valid. 
• Shop around for another line of credit. If your lender does not want to restore your line of credit, shop around to see what other lenders have to offer. You may be able to pay off your original line of credit and take out another one. Keep in mind, however, that you may need to pay some of the same application fees you paid for your original line of credit. 

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Congrats to my Prudential Rubloff office for award this week for 2011 Gold Coast/Lincoln Park highest volume. Thanks to my colleagues/friends/clients for an inspiring year in real estate and the start to a successful 2012.

...highest affordability index@ an all time high while interest rates@an all time low.."the perfect storm"

Carpe Diem.. Great time to buy from motivated sellers and uplifting and realistic time to sell to educated buyers
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Congrats to my Prudential Rubloff office for award this week for  2011 Gold Coast/Lincoln Park highest volume. Thanks to my colleagues/friends/clients for an inspiring  year in real estate and the start to a successful 2012.
...highest affordability index@ an all time high while interest rates@an all time low.."the perfect storm"
Carpe Diem.. Great time to buy from motivated  sellers and uplifting and realistic time to sell to educated buyers

 chicagoluxuryrealty.com

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Ron Goldstein, MBA
Transnational Referral Certified(TRC)
Quality Service Certified(QSC)
Broker Associate
Prudential RUBLOFF Real Estate
office(312)264-5846
rgoldstein@rubloff.com
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NEW YEAR'S RESOLUTIONS FOR YOUR HOME

NEW YEAR'S RESOLUTIONS FOR YOUR HOME

 

 

5… 4… 3… 2… 1: Happy New Year! January is the perfect time for a fresh start. But with beginnings also comes reflection on the year that just passed. For homeowners, it's a fitting occasion to take stock of the improvements on or repairs to your home or condo you made last year, and the things that were on your to-do list that never got done.
Here are a list of resolutions for homeowners to keep their place running smoothly and their home value up in the New Year:
I resolve to keep my paperwork organizedOf course you got a new roof two years ago last fall… or maybe it was three? Without having a central system to keep track of what was done, by whom, and when, it can be downright impossible to make sure all the yearly maintenance and big-ticket improvements that need to be done on the house actually get accomplished. Your organization method doesn't need to be fancy. You could create a folder on your desktop computer or buy file folders to keep track of your receipts for improvements or repairs throughout the year. It's not only for your peace of mind to know your go to guy for bathroom repairs, or when the last time was you got the furnace repaired. You'll need to know the value of home improvements over your entire ownership when the time eventually comes to sell.

I resolve to do regular maintenanceTo keep your home in working order, every year you should you have your furnace cleaned and serviced, have the chimney cleaned, have the roofs cleaned, check decks, porches or balconies to ensure they are not rotting and check the crawl space underneath your home to make sure there are no major pest infestations or water. If you live in a condo, it's important to ask at condo association meetings the schedule for common area building maintenance issues, such as cleaning the roofs and chimney. To drive the pricing on some of these services down, try to organize the entire association to have these yearly maintenance services done at the same time. Every few months homeowners should clean the gutter and inspect weather stripping around doors and windows to determine if air is getting in and you need to re-caulk those areas. Every month you should change your furnace filters to prevent fire hazards.

I resolve to restore harmony to my homeYes, no one can see the inside of your drawers, but you know the frustration you feel when you're hunting for your favorite shirt in the morning, and it's seemingly nowhere to be found. So clean out your drawers and closets to bring order to your bedroom. Organize your pantry and your refrigerator so that food is both within reach and no one in your family tempts fate by eating an item that has passed its expiration date.

I resolve to be safeMake sure smoke detectors and carbon monoxide detectors are in working condition. An easy way to remember to change the batteries is to do it twice a year, during the spring forward and fall back time changes. Check electrical systems for worn or exposed wires, and check heating systems and appliances for gas leaks and adequate ventilation. You can't put a price on your family's safety.

I resolve to keep minor repairs just thatDespite the time and money involved, roof repairs, functioning doors and windows, safe plumbing and safe electrical fixtures are all non-negotiable home repairs. Ignoring the problem or putting it off until later might not only be costly, but also dangerous.

I resolve to beautify my homeIn the chaos of daily life, keeping up with keeping your home clean may seem both impossible and a drag, but remember the feeling you get when you survey a sparkling room and feel fortunate to live there. Dirty windows, for example, can make the entire place look filthy. It may not be an ideal way to spend a Saturday, but the end result of your cleaning will make you feel great when you see how much brighter and larger the entire room looks. And by maintaining the cleanliness of your home on a regular basis, straightening up will feel like a much more manageable task than if you don't clean at all for a few weeks, and have to spend hours and days picking up and putting things away.

CARPE DIEM Real estate Update... January 2012

Diem.CAR..Real Estate Update

 CARPE DIEM Real estate Update... January 2012

MAKING SENSE OF HOME VALUE NUMBERS

From various media reports, you may be confused by stories that say home prices are up, home prices are down and home prices are stable.

All of those things may be true, depending on which data you're citing. Different groups collect different statistics, one reason why they get different results.
    Bankers: Home prices won't recover before 2020
If median sale price is measured, for example, it could rise in a month when a lot of expensive homes were sold and fall in a month where there were mostly sales of lower-priced homes, yet still not mean home prices in general are falling.
Plus, home prices vary widely from neighborhood to neighborhood, and statistics may look at entire cities or metropolitan areas. One great example is South Florida, where homes on average have fallen in value 50% since the market peak in 2006.
Yet the Miami-Fort Lauderdale area is home to the city where homes have risen in value the most since President Barack Obama took office in 2009 and the city where homes have fallen the most in value.
In Weston, a high-end suburb of 65,000 people west of Fort Lauderdale, home values increased 15.1% from February 2009 to August 2011, the best appreciation in the nation, according to data gathered by Zillow for Bloomberg/Businesswe?ek. That same data show that in Homestead, a working-class city 50 miles away, home values have dropped 48.8%, the biggest drop nationwide.
Of course, statistics are most meaningful when looked at over time. A month-to-month price change is less significant than a year-to-year price change. The statistics also are more useful for measuring trends than for determining the value of a particular house.
SmartMoney recently took a look at the three major home-price indexes and pointed out how you can use them. The San Diego Union-Tribune did the same last year, looking at four indexes.
In brief, here are their conclusions:
The Federal Housing Finance Agency statistics are more meaningful if you are in a lower-priced area without too many distress sales to cash buyers. The FHFA measures sales to buyers who got mortgages backed by Fannie Mae and Freddie Mac, now about two-thirds of people who get mortgages. But those data don't include cash sales or jumbo mortgages.
The National Association of Realtors statistics may be most helpful in drilling down into your local market, especially if your local organization makes data available for smaller geographic areas. The NAR numbers includes sales through the multiple listing service but don't include sales that didn't involve real-estate agents. The NAR also provides data on more cities.
The Standard & Poor/Case-Shiller statistics are useful when measuring the value of higher-priced houses in larger cities. The data include only 20 cities, but they look at different price points.
The Union-Tribune also mentions MDA DataQuick, which pulls data from a variety of public records and offers prices per square foot, and Zillow, which uses a computer model to estimate the value of all homes, not just those that have sold. The Zestimates provided by Zillow have gotten more accurate over the years. They are most on target in areas with lots of data to draw from.
    Survey: 42% of buyers expect 7% annual return on their home