Home Equity Loan vs Home Equity Line of Credit

Homeowners who need cash may qualify to borrow against the equity in their homes. Home equity is generally defined the current value of the home minus the amount of liens against it -- like mortgage balances. If your home is worth $250,000 and your mortgage payoff amount is $125,000, you would have approximately $125,000 in home equity. When considering home equity financing, it's important to shop and compare your options.

Home Equity Loan vs Line of Credit: What's the Difference?

A home equity loan is sometimes called a second mortgage. It works in the same way as your primary (also called your first) mortgage; it's issued for a specific amount and repaid with fixed monthly payments. Home equity loans typically have fixed interest rates and are fully amortized, which means there are no "exotic" loan features such as interest only payments or negative amortization. A home equity line of credit (HELOC) provides a line of credit and allows you to draw funds up to your maximum credit line as needed. HELOC loans require monthly payments, but may allow interest-only payments for a specified time. When the repayment period is up, you'll be expected to pay off any balance due on your line of credit. The way that you draw and repay funds for a line of credit is similar to the way you draw and repay funds for other revolving lines of credit, such as credit cards. Home equity lenders provide debit cards or checks to use for HELOC loan withdrawals.

Benefits of Home Equity Financing

The appeal of both of these loans is their interest rate, which is almost always lower than those of credit cards or unsecured bank loans. That's because your home serves as collateral for either a home equity loan or line of credit. In addition, the interest you pay on a home equity line or loan may be tax deductible. Please consult a tax advisor to find out if this applies to your circumstances. Lower interest rates on home equity loans and lines of credit may make either option a good choice for consolidating consumer debt. Consumers should review interest rates and finance charges for all accounts considered for consolidation. The goal of debt consolidation is to convert multiple payments to one payment with a lower interest rate than the interest rates of the accounts you consolidate.

Home Equity Loan or HELOC Loan: Your Choice!

When you consider home equity loan vs line of credit, your reason for borrowing is a key factor. If you have a large one-time expense or want to consolidate a specific amount of debt, a home equity loan is your best bet. That way, you can pay for the expense and not have the temptation of available credit remaining. If you expect recurring expenses, such as payments made to contractors during home renovation, a HELOC loan allows you to "pay as you go." You are only charged interest on amounts drawn against your credit line and can spread out your use of a HELOC as needed rather than borrowing the full amount and paying interest on it in advance of your needs. A HELOC also allows the flexibility of having funds available without having to pay until you draw against your credit line; this can provide ready cash in case of an emergency.

Home Equity Loans vs Line of Credit: Comparing Costs

When comparing a line of credit vs loan, the home equity loans and HELOCs both carry higher interest rates than first mortgages. Home equity loans generally come with fixed rates, but adjustable rates may also be offered. While adjustable rates are often lower than fixed rates, they can change according to the terms of the home equity loan or HELOC. Home equity lines of credit almost always have adjustable rates; however, once the drawing period has ended and the repayment period begins, some of them allow the borrower to convert them to fixed-rate loans. Home equity loans require borrowers to pay for closing costs, including escrow fees, title work, a home appraisal and document recording fees. HELOCs don't require a formal closing and have lower upfront costs than home equity loans.

Foreclosure Risks

The Federal Trade Commission (FTC) advises that home equity loans and HELOCs are secured by your home, and either can be foreclosed according to state law. Second lienholders including home equity lenders are typically notified if you fall behind on your first mortgage. This may cause your home equity lender to advance payment to the first mortgage lender and require immediate reimbursement from you. Failure to reimburse your home equity lender can also lead to foreclosure. While home equity financing provides convenient source of cash, it can also tempt you to incur more debt than you can repay. World travel and a garage full of toys won't be worth it if you lose your home.

Article by Lendingtree.com

Courtesy of First Choice Title Services & Escrow, Inc.

First Choice Title Services & Escrow, Inc

3 SW 129th Avenue, Suite 202

Pembroke Pines, FL 33027

Phone (954) 433-7680

Fax (954) 433-7355

maria@firstchoicetitleservices.com

First Choice Title - December 2015 Newsletter

Are Extended Warranties Worth the Cost? 

Extended warranties offer consumers longer terms of coverage on service, repair and replacement for their home's appliances than the standard out-of-the-box warranty from the manufacturer. These warranties are highly profitable for retailers, as they can run up the total cost of your purchase by $100 or more, with very few claims being filed per year. Are they actually worth it?

You can argue the benefits both ways.

In the fast paced world of home electronics, by the time the extended warranty expires, future technology will far outclass today's. Digitaltrends.com states that household electronics have seen great improvements in product reliability, making the price of most extended warranties about the same as a repair bill. The same is true with most appliances today too.

Consumerreports.com agrees. Their data concludes that the likelihood of most home appliances needing repairs in the first three years is less than one in five. And most defects will reveal themselves within the first year of use, while the manufacturer's warranty is still good.

That said, extended warranties should be purchased for some items, including those that are difficult to repair or high-priced items that would be painful to replace. These include high ticket items like a $6000 Viking gas range or pricey hi-definition plasma TVs, suggests smartmoney.com

Since extended warranties do make so much profit for retailers, they are very aggressive about selling them to customers. If you're tempted, follow this rule -- the cost of the warranty should be no more than 10% of the purchase price.

And if you decide to skip the warranty, be prepared to shoulder the cost for assessment (service calls), repair (time in labor plus parts) and shipping. Though it's more of a hassle, this can be the most cost-effective measure. If you have a warranty option of $250 and you experience only one instance in the life of your appliance where it needs $100 of work, you could save $150, or 60%.

Ultimately the choice and risk are yours to assume. Extended warranties can be worth the cost in terms of peace of mind, but only if it's for a product you don't intend to change for a few years. 

By Realtytimes.com

Mantel Decorating Do's and Don'ts 

Mantels are usually the focal points of any rooms they're found in, and there's nothing like creating an eye-catching display to really make the most of them. They're the perfect spot for everything from flowers to candlesticks to photo frames and treasured objets. Here are some important tips to remember when decorating a mantel. 

DO treat the mantel as you would a piece of furniture. Consider its shape, structure, color and style before you decide how you're going to decorate it. 

DON'T forget to make sure your mantel display is in keeping with the overall style of the room. Whatever you have on it needs to compliment the mantel itself and the rest of the room. 

DON'T use a completely random assortment of items in your display. Find items that compliment each other in some way.

The objects should connect to each other through color, style or theme. 

DO use items of different shapes and sizes. Start with taller items at the back and use smaller items as you work your way forward. 

DO layer items in front of each other. Layering creates depth and that's important in every kind of vignette or display. 

DON'T completely hide items when layering. Items in the foreground should overlap those behind - but you still need to be able to see the item in the back. 

DO create a formal display with symmetry. A very classic look is to place one significant item in the middle and then flank it on either side with matching items (vases or candlesticks for example). 

DON'T think that a balanced display has to consist of matching items.

Several lightweight items on one side can be balanced with one visually heavy item on the other. 

DO give your display room to breathe. You don't want so many items that it looks crowded or cluttered. When too many items are forced together they get lost and no longer stand out. 

DO remember that in most displays odds are usually better than evens.

Placing similar objects together in a group of three or five usually works better than grouping them in pairs. 

DON'T just put any old items on your mantel. Include things that have meaning to you in some way.  

DO lean items like framed art and mirrors against the wall. It creates a relaxed and casual type of display. 

DON'T use items that are all the same shape. Create balance by mixing shapes within a display. For instance, a stack of elegant boxes can be topped with a small sculptural item to give a little more interest to the overall look. 

DON'T use too many materials at one time. For instance don't mix gold, silver, pewter, glass, wood, or more at any one time. Try to limit it to two or three finishes at a given time. Ultimately, trust your own eye. It will tell you when enough is enough. 

DO change your mantel decor with the seasons. Mantels are focal points all year round, but the great mantle displays that can be created in the fall and around the holidays can't be beat! 

DON'T fret if you don't have a mantel. Beautiful second-hand mantels are available at second hand stores like the Habitat for Humanity Restore, or you can make a DIY faux mantel. 

By About Home

Broward County Residential Sales in November 2015

  

Real estate sales statistics for November 2015, show the number of sold homes increase by 16.23% compared to the same time last year. The average sales price increased by 15.90% to $378,852 for the month of November. The median sales price increased by 6.54% to $285,000, and market times dropped by 9 days compared to November 2014.

First Choice Title Services & Escrow, Inc

3 SW 129th Avenue, Suite 202

Pembroke Pines, FL 33027

Phone (954) 433-7680

Fax (954) 433-7355

maria@firstchoicetitleservices.com