Maximize Your Home Equity Loan

3 Ways You Can Maximize Your Home Equity Loan

max-i-mize [verb] : 1. to increase to the greatest possible amount or degree
2. to represent at the highest possible estimate; magnify
3. to make the greatest or fullest use of.

Your home is your greatest asset, and you can maximize that asset by tapping into its equity with a home equity loan. But you already knew that. It is not enough, however, to maximize your home’s (real estate) equity if you do not maximize your home equity loan. Here are three ways that you can get the most out of your home equity loan and make your home work to its greatest potential for you:

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Should You Tap into Your HELOC to Pay for Gifts

Around this time of year, it’s hard to ignore that little voice telling you to shower those you care about with love.  Even more confusing is figuring out how that voice seems to find its way from your heart to your wallet every year as you run up your bills trying to purchase items that show precisely how much you care.  (Of course, those advertisements flaunting cars and jewelry boxes donning pretty ribbon bows don’t help either.)

In looking for another method of payment, you may think that using a home equity line of credit (HELOC) may be a good alternative route to use to pay for your gifts.  But how appropriate is it to use your HELOC to pay for gifts this holiday season?

A HELOC is typically attached to an interest rate which is linked to the prime lending rate.  The interest rates on are usually the prime rate plus a margin that financial institutions determine.  However, if you have excellent credit, sometimes you can qualify to receive the prime rate.  Use the Internet to shop for the most competitive offers on HELOCs.

Because of this variable rate, frequently the overall benefits of HELOCs are dependent, in part, on the rate environment.  For example, if you had a HELOC between July 2003 and March 2004, your rate would have stayed relatively steady because the prime rate hovered at 4%.  On the other hand, if you had a HELOC from March 2004 to July 2006, your rate would have more than doubled from 4% to 8.25% (Source: Federal Reserve Board).

This potential interest rate fluctuation is one reason HELOCs should be meant for short term spending.  By keeping your HELOCuse short term in nature, you can help avoid paying more than necessary for unexpected prime rate increases.

If you want to use your HELOC to pay for your holidays this season, try using it to pay off your credit cards.  Since HELOCs tend to have lower interest rates than credit cards, by using your HELOC to pay off your credit cards, you should save money by lowering the interest paid overall.  Furthermore, the interest paid on HELOCs may be tax-deductible.  Always check with your tax preparer for full details.

Remember that you don’t have to spend a lot this season to show your friends and family that you care.  You can spend thousands of dollars on gifts, but the best things in life are free.  Spending time together should be a higher priority than spending dollars.  This season, be sure the gifts you give are wrapped in love.

Source: Informa Research Services

Home Equity Loans: By the Figures

The equity in your home is a frequently overlooked asset and it is not typically the first option people consider when they need some cash.  Here are a few interesting figures about home equity loans to consider the next time you are seeking financing for various projects and purchases:

$1,019 Billion - The volume of home equity loans has reached $1,010 billion according to the 2006 U.S. Census.  This figure is up from $314 billion in 1995 and $500 billion in 2001.  If you are going to join the masses and tap into your home equity, be sure to secure the best rate by using the Internet to research available rates (Source: Harvard Joint Center for Housing).
 
91% - Ninety-one percent of homeowners consider the equity in their primary home “a useful financial asset” according to a 2006 survey by Harris Interactive for Countrywide (Source: Countrywide Home Loans).  Given the competitive interest rates and potential tax benefits of taking out a home equity loan upon a primary residence, it’s no wonder so many people consider their equity an asset.  To enhance these benefits, you should try to find a home equity loan that has the best rate. 
 
55% - Fifty-five percent of those surveyed stated that they used their home equity loan to repair their home, as stated in the Home Equity Lending Monitor 2006, published by Synergistics Research Collaboration.  Other purposes included debt consolidation (32 percent), vehicle purchase (24 percent), appliances or furnishings (15 percent), and travel (8 percent) (Source: Synergistics Research Corporation).
 
1 in 4 - Approximately 1 in 4 households have first mortgages and home equity loans according to the 2006 U.S. Census.  This figure has increased by 4 percent from 2 years ago (Source: U.S. Census).
 
18% - Eighteen percent of those surveyed considered understanding the opposite sex easier than understanding the home buying process according to a study by Harris Interactive for Countrywide in 2005.  Those surveyed also considered programming a DVR or TiVo (55 percent) and taxes (28 percent) easier than understanding the process of purchasing a home (Source: Countrywide Home Loans; ConsumerAffairs.com).
 
7.83% - The current national average for a $50,000 home equity loan with a 15-year term is 7.83 percent.  The national high rate and low rate are 11.75 percent and 5.63 percent, respectively (Source: Informa Research Services).  Shop online for the best rates.

Source: Informa Research Services

Treat Yourself to an Improved Home

Has the list of desired repairs and renovations become so long that it sends chills up your spine?  A few improvements may be exactly what you need this season, and with the recent rate cut, this may be a good time to open up that home equity line of credit to improve your home.  Here are a few ideas to help you get started:

• Repair your roof.  In preparation for the rough winter weather ahead, this may be a good time to get any leaks or damage on your roof repaired.  To help cover the costs, consider using your home equity line of credit to help fund this project. Read more

Could Your Home Be the Key to Your New Car Purchase

Could using your home equity as your auto loan provide you with some extra gas money?  For many homeowners, the answer is yes.  Because many people frequently overlook this huge asset in which they reside, they end up spending thousands of dollars more in interest and finance charges.  However, using a home equity loan (HEL) to finance your new car purchase is not entirely risk-free.  Thus, a clear understanding of what exactly the process entails is necessary to avoid becoming a victim of a financial hit-and-run. Read more

Home Equity Loans with Frequent Flyer Programs

Use Your Home to Get Away: Home Equity Loans with Frequent Flyer Programs

Just because you’re paying off an unexpected expense by using a home equity loan or line of credit doesn’t necessarily mean that vacation needs be out of mind.  Many financial institutions partner up with airlines to offer customers a way to earn miles while conveniently using the wealth they’ve built through the equity in their homes to pay off emergency medical expenses or fund a remodeling project.

The rewards offered by these companies range from 1,000 to 5,000 miles upon taking out a home equity loan or line of credit.  While these won’t automatically get you flying first class to your destination of choice on your dream vacation, they will get you at least part way there.

However, before enrolling in a mileage program and applying for a home equity loan or line of credit, check out the lending organizations.  A few thousand miles are nice, but if there is a better deal somewhere else (or even better, somewhere else that offers miles as well), you will regret having not done your research first. Read more

Use Equity for College

Use Your Home to Send Your Child to Their Home Away from Home

We’ve all seen those stickers that proudly boast “University of Southern California Mom” or “Harvard Dad.”  What they should really say is “Pay to the Order of USC” or “Sending the Checks to Harvard University.”  If you’ve ever funded the college education of any loved one, then you know the feeling.  While you may not have much of a say as to where your money goes, you can choose where that money comes from, and one option to help fund a college education is a home equity line of credit.

With a home equity line of credit, you have a certain amount of funds available to you (depending on how much equity you have in your home), but you do not have to receive them all at once, which is the case with a home equity loan.  Instead, you can withdraw money whenever you need it and only pay interest on the amount you borrow.  Also, the interest that you pay on a home equity line of credit is usually tax-deductible.  Check with your tax advisor for more details.

If you are still a little uneasy with the thought of using your home equity to pay those hefty college bills, think of it as an investment.  Using home equity to fund home improvement projects to increase a home’s fair market value is not uncommon.  Similarly, funding your child’s education will theoretically help him or her in the job market, just as home improvements are intended to increase your property’s value in the real estate market. Read more

What a Fed Rate Cut Could Mean for You

Informa Research Services Says “Don’t Panic!”: What a Fed Rate Cut Could Mean for You

Rest assured, the world is not coming to an end because of a possible Federal Reserve discount rate cut.  On Tuesday, the Federal Open Market Committee will meet to discuss whether or not to lower the discount rate.  But despite the seemingly ambient anticipatory anxiety currently erupting from most business and economic media outlets, the sky is not falling.  Rather, this possible decrease is just a small acorn falling off a tree.  So take a deep breath, sit back, and relax.  Here are some pointers to help you make the most out of next week’s decision. Read more

3 Mistakes to Avoid Home Equity Loan

3 Mistakes to Avoid When Applying for a Home Equity Loan

A home equity loan can be a great resource to homeowners who need some extra money to do a renovation project, pay for college tuition, or even make a large purchase. However, there are three mistakes that you as a homeowner might make that, if avoided, can make the application process run smoothly and give you a better experience:

1. AVOID being unaware of the differences between a Home Equity Loan and a Home Equity Line of Credit. It is important that you understand the differences between the two types of home equity loans so you will know which one is better for your situation. A home equity loan is paid out in one lump sum and it usually has a fixed interest rate and term. A home equity line of credit, on the other hand, can be drawn on whenever you need money, interest is paid only on the amount you borrow, and it usually has a variable interest rate. Ascertaining how you will use the funds, what type of interest rates you would prefer, and how you can afford to repay the loan will force you to research these loans very carefully and will allow you to make the best decision. Read more

Is a Home Equity Loan Right for You

Is a Home Equity Loan Right for You?

One major asset that many homeowners tend to overlook when seeking a way out of a financial hardship is right under their noses… or perhaps more accurately, right over their heads: their home.  Your home is an investment and there’s no reason it can’t yield valuable returns for you. 

A home equity loan (HEL) is a loan that uses the equity built up in your home as collateral and it might be just what you need if your circumstances are right.  However, because home equity options are not created equal, here are a few tips to keep in mind before placing your property on the line: Read more

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