Home Equity Loan Lowdown

The 10 Most (and 10 Least) Valuable Home Improvements when Preparing to Sell your Home

When you're selling a home, you want it to be attractive to prospective buyers. For many sellers, this means taking on renovations. You want these home improvements to add up to profit when it comes time to sell. Otherwise, you're just throwing money down the drain. Check out these home improvements to learn what helps attract buyers and what's a lost cause.

Helpful

1. Tidy up your kitchen: You probably don't need to renovate your entire kitchen to add value to your home; it’s enough to make strategic improvements. It makes sense to replace fixtures and appliances that are old or broken, but don't spend too much money on items that won't appeal to a broad audience.

2. Beautify your bathroom: If your home has just one bathroom, consider adding a new one when you’re planning to sell. Give your existing bathrooms a new look by replacing faded tiles and rusted faucets. If you cannot afford a complete bathroom makeover, scrub your fixtures and tiles until they shine like new. Be sure to remove personal paraphernalia when showing your bathroom to buyers and agents.

3. Perk up the paint: One surefire way to make your home look brand new is to give it a fresh coat of paint on the inside and outside. Wash the grime off before you start on the paint work and keep your choice of colors neutral so that most people will be attracted to them.
 
4. Work on your windows: Replacing your windows, whether vinyl or wood, will add more appeal to your home when you’re planning to sell it.

5. Step up the curb appeal: Potential buyers are more attracted to your house if the exterior is neat and uncluttered. Clean up your lawn, trim your shrubs, rake dead leaves away, and re-seal your driveway.

6. Add air conditioning: Most buyers take it for granted that all homes come with central air conditioning systems. Installing one makes perfect sense when you wish to raise your home’s value. If your present system is outdated, consider upgrading it; your prospective buyers will appreciate the savings on energy bills.

7. Sort out those spaces: Many homes look smaller than they are because of clutter and unnecessary furniture. When you're selling, you want your home to look as large as possible. Make it appear bigger by removing excess furniture and knick-knacks. If your rooms are too small, consider taking down a wall to make a larger space. Make sure that the wall you tear down is not a supporting structure. If your home does not have a garage, see if you can convert a part of your garden or lawn into one without incurring too much expense.

8. Build into your basement: If you have empty, open areas like a basement, attic or loft, clear out the rubbish you store in there and consider turning them into utility rooms. If your home does not have enough bedrooms, create one, or better still, leave the space clean and freshly painted so that the new owners can turn it into their own personal space.

9. Put on a patio: Add a patio or deck to the space outside your home. Any place you can relax outdoors certainly adds more appeal and value to your home.

10. Stretch those stories: If your home is too small, but you still want to expand, try going up. Consult architects to find out if adding a floor will work out for you.

Hurtful

1. Removing relics: Don't get rid of things just because they're old. Many buyers appreciate original home fixtures like fireplaces and antique bathtubs. Retain the charm of the house by keeping these relics around.

2. A face-lift for your floor: Floor replacement is not always the most sensible of ideas. Often, buyers have their own plans for flooring, so they may want to change the new hardwood you've just invested so much money on. As an alternative, you can offer a flooring allowance that will enable buyers to do what they please.

3. Building more fireplaces: Just because a fireplace looks good in one room doesn't mean you need to add one to every other room. Most buyers are not looking for a fireplace in every room, and will not be willing to pay more just because they exist.

4. A swimming pool: While pools are useful when you throw a party or need to relax, they are high maintenance and do not add value when you’re looking to sell your home, especially if you live in a neighborhood where no one else has a pool.

5. Banking on a bar: Home bars are a personal preference that not all potential buyers will appreciate. It’s a bad idea to spend money on installing a bar just to make your place more lounge-worthy.

6. A Jacuzzi: Jacuzzis and hot tubs are not for everyone. You may see that fancy built-in MP3 player, radio or aromatherapy fixture as a valuable improvement, but most others would be reluctant to pay more for such trivialities.

7. Taking on technology: Before you splurge on the latest in elevators, home theater systems and stereo systems than echo all through the house, stop and work out the costs involved. Most technology is soon outdated, and you don’t want to be left holding the bill for something that the next owners do not appreciate.

8. Forget the fancy fittings: If you want to sell fast and at a good price, don't bother with personalized fixtures. Fitting your home with fancy aquariums or customized rooms and cages for pets is not the way to raise your home’s value.

9. Replacing the roof: Roofing is expensive and not a large focus for home buyers. Unless your roof is in need of repair, replacing it will not bring in any extra money when you sell your house.

10. Go easy on your garden: All you need to do to your garden is keep it neat and well-maintained. Forget the decorative fountains, elaborate sculptures and ornamental birdhouses and let the greenery speak for itself.

'RAM' Into Your Home's Equity

If you are a senior person, then you probably need to know about reverse annuity mortgages (RAM). These mortgages were created to allow older Americans to tap into the equity of their paid for or nearly paid for home. Homeowners receive a tax-free payment each month, and the mortgage is paid when the home is sold. Bestsyndication.com reports:

The major difference between a RAM and a home equity loan is when the loan balance is due. With a RAM, the mortgage balance is due when you stop living in the residence. You don’t have the monthly payments of an equity loan. With a RAM it is easier to qualify for the mortgage since you don’t have to have income to make monthly payments.

Read more: Reverse Annuity Mortgage – Tapping Into Your Equity

Tips To Repay Your Home Equity Loan

Taking a home equity loan is all very fine. You can do a lot of things with that loan like renovate your home, make additions to your kitchen, bathroom or bedrooms, pay off other loans, use it to pay for your child’s student loans. Whatever the reason, a home equity loan offers you the benefit of a loan at a much lower rate than any other kind of loan. However, before entering into a plan, you must consider how you will pay back the money you borrow. I know, it is easy for us to forget that the money needs to be reapid some time. But isn’t it better to finish it off when you can.

There are a few plans that set minimum payments. This covers a portion of the principal (the amount you borrow) plus accrued interest. The only problem here is that in such a loan, the portion that goes toward principal may not be enough to repay the principal by the end of the term. Then there are other plans that allow payment of interest alone during the life of the plan. This means that you pay nothing toward the principal. So, once your loan period is over, you will owe the amount of the principal. You could also choose to pay more, or you could pay down the principal regularly.

Whatever your mode of payment, it helps to remember that at the end of your loan period, you have to pay the entire balance owed, all at once. In case you are unable to make this huge, one-time payment, you could refinance it by obtaining a loan from another lender, or by some other means. If you are unable to make this final total payment, you could lose your home.

Home Loan Tips For First Timers

So, you are out to take your very first home-equity loan. You probably want to make renovations or additions to your house. Or probably you want to use the money to invest somewhere. Whatever the reason for taking the loan, once you’ve decided on your course of action; it is but natural to be excited. You can barely control your excitement and just want to get the loan and finish off with that process. According to experts, this is the stage where most people make mistakes – big mistakes that could cost them their home. So, it is best to go slow at this stage.

Taking a loan is not a simple procedure and the only thing that will stand you in good stead is your knowledge of the market and how it operates. So, take your time and learn about the market. Ask around and if necessary go online to know more. The two basic rules of getting yourself the best home loan possible: Educate yourself and shop around. You could find out the best rates available in your area or you could go online to get a better idea of the rates available. It could be one of the biggest financial decisions of your life and you would benefit if you get into it with your eyes wide open.

Watch out for those special deals. Follow this rule: if it seems too good to be true, then it probably is. This rule will help you avoid the traps laid by predatory lenders. Another thing you could do to increase your knowledge is enroll into a Community Homebuyer Investment Program. This program teaches you everything from budgeting, and home care, to loan processing rules.

You Can Convert Your Equity Line To Fixed Rate

Have a floating-rate home equity credit line? It has probably risen to uncomfortably high monthly payment levels as a result of the Federal Reserve's interest rate increases over the past two years. You probably have the choice of sticking with your credit line and risking further jumps in payment or, you could refinance your first mortgage and pay off your credit line. But there is a better solution to this problem. Baltimoresun.com reports:

Most major players in the home equity arena will now allow credit-line customers to escape the Fed's rate increases and freeze their rate on a portion - or all - of their outstanding balances. Some banks will even turn your floating-rate credit line into a smorgasbord of tax-deductible financial planning choices, fixed-rate and variable-rate.

Read more: Banks ease converting equity line to fixed rate

Is A Home Equity Loan Better Than Second Mortgage?

Most people who own a home first think of cashing in on their home’s equity when in need of funds. There are two ways you can cash in on your home – you could consider a second mortgage or a home equity loan. The problem arises when you cannot decide which of these types of financing will be beneficial to you. It actually boils down to your exact needs and your repayment capacity.

If you have a one time big expense to cover, you are probably better off with a second mortgage. However if you have recurring expenses, then you might not want a second mortgage because a home equity loan will work out better for you. The second mortgage is best for large amounts of money at once while recurring expenses like tuition are better paid for with a home equity line of credit. Bestsyndication.com reports:

You will also need to consider your ability to repay and which option will suit you best. A second mortgage can be financed similarly to your first mortgage, while the home equity loan can be paid back more like a credit card.

Read more: Second Mortgage Vs. A Home Equity Loan

Missed A Home Payment? Here’s What You Can Do

I know you’ve heard the warning that it is not good to ignore payments on home equity loans and that your home is a collateral, blah, blah… Well, we all know this fact, but there is another pressing fact – lack of funds or funds not being sufficient enough to stretch through the month. In such and other circumstances, you may be forced to miss a home payment.

What should you do when you miss a payment?

1. The first thing to do is NEVER try to ignore it – one missed payment is the first step of a downward spiral that could end up with you losing your home.
2. Next, immediately call your lender and inform them, and explain the reasons for missing the payment.
3. Thirdly, try to come to some arrangement with the lender: you could make the payment the following month or in installments if it is a large sum.
4. If you think you still cannot handle the payments, you need to sit down with your lender and discuss other options like for instance a new payment plan with a lower sum.

Try Not To Get Carried Away By That Loan

Despite rates rising for home equity loans and HELOC, they are still more lucrative than credit card borrowing which as a rule has higher interest rates. That said, it is a good thing to remember that you can easily get carried away with your spending when using a home-equity loan, so it is good to be careful. Orlandosentinel.com reports:

It's not free money. When you use your home-equity line to pay off your credit card bills, you're betting the house that you'll keep up on the payments. You also could take 10 to 30 years to pay off last year's holiday spending. Use your loan responsibly, and if you use it to pay down old debts, don't use it as an excuse to run up new ones.

Read more:Questions, answers reveal financing dilemmas today

Tips To Tap Into Your Home's Equity

A home equity loan is a good idea when you know what you want to do with that money. However, it is important to know how to borrow the money so you can get the best deal possible. Msn.com reports:

If you have an excellent score of 760 or above, you should be able to win a home-equity line of credit for half a point below the prime rate, said Chris Larsen, CEO of E-Loan. A good score of 700 to 759 should win you a rate equal to prime. (To see current rates on lines of credit and loans by credit score, visit the Loan Savings Calculator at MyFico.com.) People with mediocre to poor credit can pay 1 to 5 points over prime, or more.

Read more: 5 tips for wisely tapping your home equity

You May Not Need That Loan

Have you heard about the parents who wanted to give their son the best grad gift ever? They financed the new SUV, which their son fancied. And guess where the money came from? The loving parents took a loan against the equity of their home!

I didn’t believe it and still don’t. I mean I can understand a parent loving his/her child but going to such an extent just shows how short sighted the parents really are. It’s one thing to love your children and shower them with gifts. But there are limits to everything. And here, they crossed the limit when they took the loan for this vehicle.

I know this sounds a bit preachy but do you really believe that the roof over your heads is irremovable. Imagine the plight of these parents if they are unable to repay the loan. They’ve lost their home and for what? A vehicle?

There has been an increasing trend among people to cash in on their home’s equity for the simplest of reasons. I know of a woman who wanted to go to the Bahamas on vacation. However, her financial situation was not too good. So what does she do? She goes straight out, takes a loan against her home, and is on the next flight to the Bahamas.

Now with interest rates rising on these loans, it is not too difficult to imagine such people finding it difficult to make their payments. But guess what, it needn’t be this way. Just because these loans are easily available, you don’t have to take them. Borrow against your home only if you have a need that is important like refurbishing your home or completing your education – anything that will help you in real terms.