Home Equity Line of Credit

Home sweet home? Now is the time to leverage your home equity, says Thrivent, by Staff Report, Alexandria Echo Press

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Given the economic turbulence of the past several years, the greatest asset that many Americans have is their home. With interest rates still near historical lows, now might be the time to tap into your home equity to help consolidate debt, embark on a home improvement project, start an emergency savings fund or even help pay for college.

Home equity loans and home equity lines of credit (HELOCs) are two of the most common ways for homeowners to borrow money by leveraging the equity they have in their home. Each offers its own unique benefits and both can offer considerable tax benefits, according to Thrivent Financial Bank.

The first step in determining which home equity product is right for you is to answer one simple question: How will I use the money?

“Many people are aware that now might be a good time to borrow against the equity in their home,” said Jill Aleshire, executive vice president of Thrivent Financial Bank. “However, slowing down and taking a closer look at how to best use that equity is the best thing you can do to start the process. “

Thrivent Financial Bank offers the following tips to help you decide if tapping your home equity is the right choice for you.

Appreciating assets

Home equity loans and HELOCS are meant to improve your long-term financial well-being, so think about how best to use the equity toward assets that will increase in value (appreciating assets). Ask yourself, “Will this earn value in the long run?” A college education or a home improvement project can be justified as appreciating investments if they result in a higher lifetime income or property value.

Emergency reserve savings

Home equity loans and lines of credit can be a good option if you are in need of protection against job loss, medical emergencies or home and vehicle repair.

First-time debt consolidation

One of the most common uses for home equity loans and lines of credit is debt consolidation. Because the interest paid may be tax-deductible and the interest rates can be lower than many creditors’ rates, some homeowners borrow against the value of their home to pay off debt.

Needs, not wants

Using your hard-earned equity for extraneous purchases is not a good use of your loan. If you don’t need the funds now, consider waiting to take out a home equity loan until you have a specific need. Borrowing once against the equity in your home can be a great way to strengthen your finances if used wisely, but be careful not to make a habit of borrowing. Limiting your loan spending to needs, not wants, is a good way to keep yourself in check.

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New Low Cost Reverse Mortgage Product Coming in October says HUD, Reverse Mortgage News Daily

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During a conference call with industry leaders on Thursday, the Department of Housing and Urban Development said it hopes to roll out a new reverse mortgage product on Oct. 4, 2010.

The new “HECM Saver” will be a low cost reverse mortgage product insured by the Federal Housing Administration.  Unlike the standard HECM, which has a 2% upfront Mortgage Insurance Premium (MIP), the HECM Saver lowers the cost of entry for borrowers by charging only 0.01% upfront MIP.  The product will also have an annual MIP of 1.25%.

Offered as both a fixed and adjustable rate, the HECM Saver will have principal limit factors roughly 11-23% lower than the standard product.  While it doesn’t provide as much in proceeds to borrowers, it’s designed as low cost alternative to a home equity line of credit (HELOC).

During the call, HUD described the HECM Saver as “merely a different pricing option,” noting the rest of the product will remain the same as the HECM standard.  However, many in the industry see it as a big opportunity to broaden the appeal of reverse mortgages by offering a low cost product to consumers.

HUD said a Mortgagee Letter describing the HECM Saver should be out before September 14th.

http://reversemortgagedaily.com/2010/08/26/new-reverse-mortgage-product-coming-in-october-says-hud/

Beware home equity credit freezesBy WAYNE HAVRELLY, kgw.com

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PORTLAND, Ore. — It wasn’t long ago when people were tapping the equity in their homes to pay bills.

Now many of those home equity loans are being frozen by lenders because home values are dropping.

It happened to Debbie Inguagiato who runs a massage therapy business out of her home. She says after 15 years of never missing a loan payment and creating a very high credit rating, shes about to lose her house.

“I don’t think i have ever been this scared in my entire life”, said Inguagiato.

She said a mortgage broker gave her some terrible advice as she was going blind from an eye disease.

Inguagioto said, “I was advised by someone who said she was living off equity of her home for 25 years. She told me she knew what she was doing and she led me through this process of getting a home equity loan.”

Inguagioto used the loan to help pay her first mortgage and start her massage business which has been very slow.

Then, late this summer that home equity loan was frozen because her lender claimed her home plunged in value.

Mortgage companies based in other parts of the country are not always fair when they freeze home equity loans in the Northwest according to realtor and attorney Holly Hummel.

“Your dealing with someone in another part of the country pulling up data on a desktop appaisal that may not take into consideration that you have a brand new kitchen,” said Hummel.

She says while real estate values have certainly dropped in suburban communities like happy valley homes in much of Portland have held up well. Debbie’s home is in one of North Portland’s hottest neighborhoods.

Her home was appraised at $430,000 when she took out the equity loan 2 years ago. However, she says her lender told her the value had dropped to just $262,000, so they froze her loan.

Debbie doesn’t buy it and nor do Portland real estate experts who say the best thing homeowners in this situation can do is immediately contact their lenders.

Hummel said, “I have seen people renegotiate with their lender and have their lender come around to their way of thinking, that in fact their house has not dropped to that level.”

Ronald Stroble, Vice President of Oregon based Umpqua banks mortgage division, said lenders are now working closely with homeowners looking to avoid foreclosure.

Stroble said, “In the old days people thought they cant call lenders because they didn’t want them to know they were having financial trouble. The message to everyone in this financial meltdown is please, call your lender. Find out what options you have.”

Debbie has sent her lender comparable sales in her neighborhood and a new appraisal showing her home is still worth about $420,000.

She’s still waiting to hear back from her lender, Popular Mortgage Servicing Inc.

The New Jersey based company did not return calls from Newschannel 8.

Inguagiato said, “I’ve never been homeless, I plan not to be, but the reality is I don’t know how long a legally blind person would make it out there on the street and I don’t want to learn.”

The mortgage crisis is close to claiming another victim, but Inguagiato is not giving in without exploring every possible option.

If you find yourself in the same home equity loan is frozen and your lender won’t renegotiate, another viable option is to approach local banks and credit unions.

Most local financial institutions had light sub-prime loan exposure and still have plenty of money to loan if you qualify.

 

http://www.kgw.com/business/money/stories/kgw_110708_special_report_home_equity.18e3d6f85.html