Wednesday, February 1, 2023
  • Home
  • Marketing Strategies
  • Privacy Policy
  • Contact Us
Business News
  • Home
  • Personal Finance
  • Business Trends
  • Business Ideas
  • Marketing Strategies
  • Stock Market
No Result
View All Result
Business News
Home Personal Finance

Your House is Worth More Than Ever. Should You Take Out a HELOC?

citof_l7l8ib by citof_l7l8ib
February 21, 2020
in Personal Finance
0
Your House is Worth More Than Ever. Should You Take Out a HELOC?
0
SHARES
70
VIEWS
Share on FacebookShare on Twitter

Home values are up. Way up. According to the real estate website Zillow.com, the average home's value has shot up 6.8 percent in just the last year. That may not sound like a lot, but if you had a house worth $300,000 last year, if it's as high as the national average, it's now worth more than $320,000. That's a serious chunk of change. Naturally, a lot of banks are advertising home equity lines of credit, or HELOCs, and suggesting you use the additional funds to upgrade a kitchen or bathroom or pay for your kids' college. Should you? As with so many situations, the answer is: It depends. But there are some questions you should ask yourself if you are considering it.[See: 10 Ways to Reduce Your Housing Costs in Retirement.]Would a home equity loan or refinancing be a better option? These days, probably not. Just to review, a HELOC is like using your home as a credit card. You might have a home equity line of credit for $30,000, for instance, but only actually borrow $10,000 or $5,000.A home equity loan is for a specified amount of money. If you take out a home equity loan for $30,000, you get $30,000 in cash, pulled from the equity in your home – and then, of course, you have to pay it back in monthly payments like any loan.Refinancing, as you likely know, is when you change the terms of your home loan. Generally, this is done when you want to lower your monthly payments. Some consumers apply for a cash-out refinance. Maybe you owe $100,000 on your house and want $30,000 to go back to graduate school. Ideally, you'd get smaller monthly payments (but not necessarily), and you would receive $30,000 in cash from your equity.That can have its downsides, points out Mike Kinane, head of U.S. Home Equity Products for TD Bank, which is headquartered in Cherry Hill, New Jersey."Mortgage lenders will typically charge a higher rate for taking cash out – generally one-eighth to three-eighths of a percentage higher than the prevailing mortgage rate, in addition to passing the appraisal, title and closing costs to the borrower," Kinane says.He adds that because mortgage rates have been pretty low for the past five years or so, odds are, you've already refinanced or purchased your home at a low rate, and you may not be able to do much better than you already have. For most homeowners, Kinane says, there is a pretty good chance that the math will work out better if you get a HELOC.[See: Is Your Home Alone for the Holidays? How to Keep Your House Bandit-Free.]Do I have a specific plan for paying back what I borrow? That wouldn't be such a bad idea."Just before the Great Recession, many people were treating the equity in their homes as free money. These loans aren't meant to be used frivolously, unless the borrower can afford to do so," says Chris Diaz, who is based out of Orange County, California, and is vice president of HomeUnion Lending.He adds: "Usually, there is a 10-year, interest-only draw period, followed by a conversion to a fully amortized 20-year adjustable rate. Depending on the size of the loan, that payment adjustment can range in the thousands of dollars. Depending on how one handles their finances, these types of loans can build wealth or a become a debt burden." All of this means that you do want to be careful about what you use the line of credit for. If you actually do use it like a credit card and pay off what you borrow every month or so, and you owe nothing after 10 years, then it was probably a good idea. If you use the loan to buy a car, and you still owe money on the loan after 10 years, then it probably wasn't a good idea, says Casey Fleming, a San Francisco-based mortgage advisor and author of the book, "The Loan Guide: How to Get the Best Possible Mortgage.""Buying a car with your HELOC gives you a lower payment, and it may be tax-deductible, but your car will be used up in 10 years, and if you've made interest-only payments, you still owe the full amount," Fleming says.But Fleming says it makes more sense to finance long-term home improvements, like that kitchen upgrade. Unlike the car, the kitchen isn't going anywhere. [See: 8 Apartment Amenities You Didn't Know You Needed.]Do I want to take out a HELOC to get rid of my massive credit card debt? You might. Many personal finance experts will tell you that it is smart to use a HELOC to pay off credit card debt, because a HELOC is going to have a lower interest rate than credit cards. (The average $30,000 HELOC is currently 5.45 percent, according to Bankrate.com; the average credit card interest rate is currently 16.69 percent.)But that does you little good if you use a HELOC to pay off your credit cards, and then you just run those cards back up again, says Glenn Phillips, CEO of Lake Homes Realty in Pelham, Alabama."Then the home equity loan is just a big hole they may never dig out of without bankruptcy. This is a common trap of those who may mean well but lack the self-discipline to manage money. This will eventually cost them thousands and thousands of dollars they did not plan to spend and for which they derive no value," Phillips warns.It would be especially terrible if you run the credit cards up – and you don't manage to pay off the line of credit before that payment adjustment.Which isn't to say that Phillips is against HELOCs. He just says, "Regardless of the market conditions, homeowners need to have very specific, smart ideas of why they are taking such a loan."As Phillips says, "This is a great time for a home equity line for the right people, and an awful idea for others."The challenge, of course, is to know if you're one of the right people – or one of the others.7 Things First-Time Homebuyers Wish They'd Known.

Related posts

How This Texan Paid Off $50,000 in Debt in 5 Years

How This Texan Paid Off $50,000 in Debt in 5 Years

February 21, 2020
If the Payday Lending Industry Goes Out of Business, What Will Replace It?

If the Payday Lending Industry Goes Out of Business, What Will Replace It?

February 21, 2020
Tags: Banking and CreditDebtGeoff Williamshome priceshousinghousing marketmoneypersonal financereal estate
Previous Post

Asian Stocks Rebound From Early Losses as Virus Toll Grows

Next Post

How to Stay Debt-Free During the Back-to-School Shopping Rush

Next Post
How to Stay Debt-Free During the Back-to-School Shopping Rush

How to Stay Debt-Free During the Back-to-School Shopping Rush

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

RECOMMENDED NEWS

Is There Really Such a Thing as ‘Good’ Debt?

Is There Really Such a Thing as ‘Good’ Debt?

3 years ago

4 Places to Start if You’re Thinking About Outsourcing

3 years ago
9 Small-Cap Stocks to Buy for Big Gains

9 Small-Cap Stocks to Buy for Big Gains

3 years ago
US Consumer Prices up 0.1% in January; Gasoline Prices Fall

US Consumer Prices up 0.1% in January; Gasoline Prices Fall

3 years ago

FOLLOW US

BROWSE BY CATEGORIES

  • Business Ideas
  • Business Trends
  • Marketing Strategies
  • Personal Finance
  • Stock Market

BROWSE BY TOPICS

Amazon.com Apple Inc. Associated Press Banking and Credit Best Stocks Business Growth Business Ideas Business News Business Planning Business Trends Collections Business Collections Political Collections Top News Collections US Collections World Debt Facebook Finance Ideas Financial Advisors financial literacy Geoff Williams Google interest rates investing Investing 101 John Divine loans Local Marketing Management news Marketing Strategies Marketing Tips Maryalene LaPonsie money personal budgets personal finance picks Small Business Trends stock market Stock Market News stock portfolio student loans Susan Johnston Taylor Susannah Snider technology Wayne Duggan

POPULAR NEWS

  • 20 Things Your Business Still Doesn’t Get About Hyperlocal Marketing

    20 Things Your Business Still Doesn’t Get About Hyperlocal Marketing

    0 shares
    Share 0 Tweet 0
  • US Consumer Prices up 0.1% in January; Gasoline Prices Fall

    0 shares
    Share 0 Tweet 0
  • Spain Disputes Tech Show Was Canceled for Health Motives

    0 shares
    Share 0 Tweet 0
  • 5 Reasons Your Local SEO Company Isn’t Providing Results

    0 shares
    Share 0 Tweet 0
  • Why Hyperlocal Advertising Works So Well for Local Businesses

    0 shares
    Share 0 Tweet 0
Business News

Citof.com is a collection of innovative and powerful news brands that deliver compelling, Push the latest news, videos, and photos on finance, industry trends, money, and more.

Follow us on social media:

Recent News

  • 20 Things Your Business Still Doesn’t Get About Hyperlocal Marketing
  • US Consumer Prices up 0.1% in January; Gasoline Prices Fall
  • 5 Reasons Your Local SEO Company Isn’t Providing Results

Category

  • Business Ideas
  • Business Trends
  • Marketing Strategies
  • Personal Finance
  • Stock Market

Recent News

20 Things Your Business Still Doesn’t Get About Hyperlocal Marketing

20 Things Your Business Still Doesn’t Get About Hyperlocal Marketing

February 21, 2020
US Consumer Prices up 0.1% in January; Gasoline Prices Fall

US Consumer Prices up 0.1% in January; Gasoline Prices Fall

February 21, 2020
  • Home
  • Advertise
  • Privacy Policy
  • Contact Us

© 2020 Small Business News. All rights reserved

No Result
View All Result
  • Home
  • Personal Finance
  • Business Trends
  • Business Ideas
  • Stock Market
  • Marketing Strategies

© 2020 Small Business News. All rights reserved

Login to your account below

Forgotten Password?

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In