Lisa Oleksak-Sullivan's Blog
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No homeowner wants to borrow more money. However, if you’re experiencing hard financial times or looking for a way to fund a home improvement project, there are ways to borrow money with your home as collateral.
In this article, we’re going to talk about home equity loans and home equity lines of credit (HELOC). We’ll explain how they differ and break down their benefits and risks.
Before the bubble
Before the financial crisis of 2007-2008, many homeowners were borrowing readily based on the equity of their home. Interest rates were low on home equity loans, encouraging homeowners to leverage their portion of homeownership.
During the recession, however, all of that changed. People owed more money on their mortgages than their homes were worth, and banks became reluctant to lend.
In recent, years, however, house prices have been creeping back up, and banks and homeowners alike have gained confidence in the equity of their home.
As a result, a growing number of homeowners are turning back to home equity loans and lines of credit as a source of low-interest financing.
So, what exactly are these loans and credit lines?
The difference between a home equity loan and a line of credit
A home equity loan is a lump sum of money that you borrow which is secured by the value of your home. Typically, home equity loans are borrowed at a fixed rate. Lenders take into consideration the amount of equity you have in your home, your credit history, and your verifiable income.
A home equity line of credit (HELOC) is a bit different. Like a credit card, you are able to borrow money as you need it via a credit card or checks. HELOCs often have variable interest rates, which means even if you’re approved for an initial low rate it could be increased. As a result, HELOCs are better suited for borrowers who can withstand a higher leverage of risk and variation each month.
Is now a good time to borrow?
If you’re a homeowner, there’s an understandable temptation to use the equity you’ve built over the years to your advantage. In some cases, home equity loans and HELOCs can earn you better interest rates than other forms of borrowing.
However, as with other loan types, it’s important for homeowners to realize that HELOCs and home equity loans are not the same as having cash in your savings account.
Another danger that borrowers face is the potential for foreclosure if things go badly. While most lenders won’t seek foreclosure after a few missed payments, your home has been put up as collateral for repaying the loan. Most lenders will choose to sell a defaulted loan to a collections company rather than seek foreclosure.
Ultimately, the best course of action is to avoid borrowing unless it will help you out financially in the long term. However, for those with high home equity who may, for one reason or another, need to borrow, a home equity loan or line of credit might be the best choice.
Evaluating the buyer's perspective is a must for anyone who want to achieve the optimal results during the house selling journey. Because if you understand the buyer's perspective, you can promote your residence to the right groups of individuals at all times. And as a result, you should have no trouble generating lots of interest in your house.
Now, let's take a look at three tips to help you analyze the buyer's perspective before you list your residence.
1. Review Your House's Strengths and Weaknesses
Your home may be an attractive option to dozens of potential buyers. Meanwhile, if you identify your house's strengths and weaknesses, you can determine what separates your home from other available residences in your city or town. You also can explore ways to transform assorted home weaknesses into strengths.
Oftentimes, it helps to conduct a home inspection. This evaluation enables a property expert to analyze your home's interior and exterior. After the inspection is complete, you will receive a report that details your house's strengths and weaknesses.
Thanks to a home inspection, you can obtain comprehensive insights into any underlying home problems. You then can take steps to address these issues, and ultimately, boost the likelihood that buyers will fall in love with your residence as soon as they see it.
2. Assess the Local Housing Market
Take a close look at the local housing market – you'll be glad you did. With real estate market insights in hand, you can map out your house selling journey accordingly.
Generally, it helps to differentiate a buyer's market from a seller's market. If you evaluate the local housing market, you can determine if a buyer's or seller's market is in effect.
In a buyer's market, many homes may be available, and they may require several weeks or months to sell. Or, in a seller's market, houses may sell shortly after they become available.
By differentiating a buyer's market from a seller's market, you can create a plan to showcase your residence to buyers. Once you have this plan in place, you'll be better equipped than ever before to streamline the house selling journey.
3. Consult with a Real Estate Agent
When it comes to evaluating the buyer's perspective, you may want to work with a real estate agent. This housing market professional can offer homebuyer insights that you may struggle to obtain elsewhere. Best of all, a real estate agent will help you quickly sell your house and ensure you can maximize your home sale earnings.
Furthermore, a real estate agent is an expert resource that you can rely on throughout the home selling journey. And if you ever have home selling concerns or questions, a real estate agent is ready to respond to them at your convenience.
Perform an in-depth analysis of the buyer's perspective – use the aforementioned tips, and you can gain the insights you need to stir up buyers' interest in your residence.
If you have the opportunity to design and build your own home, you have the freedom to compile the features you desire and join them together into the perfect house. As you work together with a builder or architect, you may find that some details need to be cut from your plan to stay within budget. Even if you’re unable to complete everything immediately, it is wise to lay the groundwork for future improvements. Here are two major features you should plan for during the building process.
You may not be able to finish your basement as a game room or den right away. If your builder knows how you plan to use the space in the future, they can build in components that will make that transition easier to work through. If you are planning a walk-out basement, build the framing for an exterior door. If you plan to add a washing machine, utility sink or bathroom to your basement, running electricity and plumbing during initial construction can get you set up for success.
Installing solar panels will help you save on home utility costs over time, but the initial purchase can be a considerable expense. If you know you will add solar paneling to your home at some point, prepare for it by running electrical in your attic and roofing now. Invest in a solid roof structure so you can manage minimal upkeep and keep your roof in shape for adding in the panels when you’re ready.
If you can’t afford some of the home features you desire during your initial build don’t just forget about them completely. Always speak to your builder about what you want and get their advice on cost-saving measures you can take now to set yourself up for augmenting your home after the build is complete.