The Home Buyer's Korner

Information presented should be used for educational purposes only.

June 9th, 2015

Guy looking up in color

GREATER PEARL CITY HAWAII

The Home Buyer’s Korner

Google+ RE Community

Google+ Mortgage Lender Community

Google+ General Contractor Communities

Home Equity Loans or HELOC

images (3)After being nearly shut down with the collapse of housing prices during the Great Recession, lenders are once again offering attractive second lien/home equity loans against the value of your home.

While still only a fraction of its pre-crash levels—the latest estimates for home-equity lending is estimated at $60 billion, compared with its peak of $430 billion in 2006. Rising home values in recent years are putting more equity in borrowers’ hands, while a gradually stabilizing economy is giving lenders more confidence to lend.

If you’re thinking about securing one, here are a few other things you’ll need to know.

You’ll need equity, of course. Equity is the percentage of a home’s value, less any current mortgage or liens. So, if your home is valued at $650,000 and you still owe $570,000 on your mortgage, you have $130,000 in equity, or 20 percent and more commonly known as a loan-to-value ratio.

Generally speaking, lenders today want you to have at least an 80 percent loan-to-value remaining after the home-equity loan. That means you’ll need to own more than 20 percent in equity before most lenders are willing to offer a home equity/second lien mortgage.

There are two main types of home-equity loans. The first is the standard home-equity loan, where you borrow a single lump sum. The second is a home equity line of credit, or HELOC, where the lender authorizes you to borrow smaller sums as needed, up to a certain fixed amount. The type you choose depends on why you need the money.

If you’re looking at a single, major expense—such as replacing the roof on your home—a standard home-equity loan is usually the best way to go. You can get these in either as fixed or adjustable-rate terms and repaid over a predetermined length of time, generally they come in 15, 20, 25 and even 30 year amortization schedules. You’ll also be required to pay some closing costs, like an appraisal fee, doc preparation fees and title search, but they’re much less than you would see on a first lien mortgage.

If you need to access various amounts of money over time, such as if you’re doing a home improvement project over a few months, for example, or to support a small business you’re starting—a home equity line of credit (HELOC) may be more suitable to your needs.

With a HELOC, you’re given a predetermined limit to borrow against as you wish. You only pay interest on what you actually borrow and you don’t have to begin repaying the loan until a certain period of time, known as the draw, which is typically after 10 years has elapsed. With HELOC’s there are seldom any closing costs, although you may be required to pay an annual fee. Interest rates are offered as adjustable rate terms and you don’t get the predictability offered as with a fixed-rate home-equity loan, though many lenders often conversion option to a fixed rate once the draw period ends.

Home Equity loans aren’t particularly useful for borrowing small amounts of money. Lenders typically don’t want to be bothered with making small loans and $10,000 is about the smallest you can get, but more commonly lenders will required a minimum of $25,000.

If you don’t need quite that much, opt for a HELOC and only borrow what you need. Remember however, you still may be charged an annual fee for the duration of the draw period.

Even if you plan to use only a fraction of your line of credit, say $5,000 out of a $20,000 HELOC, you’ll still need to have enough equity in your home to cover the full amount. So if the smallest home-equity loan or line of credit your lender will allow is $20,000, you’ll need to have at least $20,000 in home equity over and above the 20 percent equity you’ll need left after taking out the loan.

It’s easy to forget sometimes, but a home-equity loan or line of credit is a type of mortgage, just like the primary home loan you used to fund the purchase of your home. And as a mortgage, it offers certain advantages and disadvantages.

One of the advantages is that the interest you pay is usually tax-deductible for those who itemize deductions, the same as regular mortgage interest. Federal tax law allows you to deduct mortgage interest on up to $100,000 in home equity debt or $50,000 apiece for married persons filing separately. There are certain limitations though, so check with a tax adviser to determine your own eligibility.

Additionally, because it is a mortgage secured by your home, the rates tend to be lower than you’d pay on credit cards or other unsecured loans. They do tend to be somewhat higher than what you’d currently pay for a full mortgage, however.

Remember that you’re borrowing against your home and you’re putting your home at risk if you fail to make the payments, just like a first lien mortgage. The difference is that in a foreclosure, the primary mortgage lender is paid off first, and then the home-equity lender is paid off out of whatever is left. So, you want to treat a home-equity loan with the same care you do with first lien mortgage.

VISIT OUR GREATER PEARL CITY AREA

HOMES FOR SALE LISTINGS

Livingston Homes for Sale

FIND HOMES THROUGHOUT PEARL CITY HAWAII

HUD FORECLOSED HOMES IN & AROUND THE GREATER PEARL CITY HI AREA

USDA FORECLOSED HOMES IN & AROUND THE GREATER PEARL CITY HI AREA

FNMA HOMEPATH FORECLOSED HOMES IN & AROUND PEARL CITY HI

FIND MORE FORECLOSURES IN & AROUND PEARL CITY HI

HAWAII HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

START YOUR PATH TO HOME OWNERSHIP TODAY

FNMA HomeStyle FNMA My Community Mortgage FHA One-Time Close Construction Portfolio or VA home loan Homes for Sale REO Short Sales FNMA HomePath Properties HUD Homes USDA Homes Condominiums Co-OpsTownhomes Manufactured Homes Modular Homes Mobile Homes Log Homes Second Homes Investment Property 2-4 Family Custom Home Builders Custom Built Homes Luxury Homes General Contractors Home Improvement Experts Kitchen & Bathroom Renovations Real Estate Brokers & Agents Mortgage Lenders Federal Credit Unions Community Bankers Real Estate Listings Pearl City Heights-Crest-Crown Estates Hoomaemae Street Estates Pearl City Ewa-Schofield Junction Kalauao Pacific Palisades Waiau A Rd Aalii Pl Aamaka Pl Aamanu St Aamomi St Aaniu Loop Aaniu Pl Aapi Pl Aapi Way Acacia Rd Aeo Pl Ahaiki Pl Ahaiki St Ahakapu St Ahakuhina Pl Ahakuka Pl Ahamoa St Ahapule St Aikoo Pl Ailolo Pl Aimama Pl Akaikai Loop Akalakala St Akepa St Akeukeu St Akiki Pl Alaulau St Aloha Ave Aluka Loop Amikamika Pl Amikuku Pl Amokemoke Pl Amokemoke St Amoomoo St Anakole Pl Anapanapa St Anihinihi St Anini Pl Anini Way Aniuniu St Apaakuma Pl Apaakuma St Apapa St Apoepoe Pl Apoepoe St Ashley Ave Auhuhu Pl Auhuhu St Aumakua St Austin Ct Awahiwa St Awalii St Awikiwiki Pl Awikiwiki St Birch Cir Cedar Dr Coral Ave Curtis Ct Date Dr Elm Cir Elm Dr Etcell Ct Farm Ave Farm St Haawi Way Hila Pl Hinu Pl Hoohaaheo Pl Hoohai Pl Hoohai St Hoohakanu Pl Hoohaku Pl Hoohaku St Hoohale St Hoohalia St Hoohalike St Hoohamo Pl Hoohana Pl Hooheke St Hooheno Pl Hooheno St Hoohiamoe St Hoohie Pl Hoohiki Pl Hoohiki St Hoohoa Pl Hoohoihoi Pl Hoohoihoi St Hoohonua St Hoohuali Pl Hoohui St Hoohulili St Hoohulu Pl Hoohulu St Hooia St Hooikaika Pl Hooiki St Hookahi St Hookahi Way Hookahua St Hookala St Hookani St Hookano St Hookena St Hookiekie St Hookoe St Hookumu Pl Hookupa St Hoola Pl Hoolaa Pl Hoolaa Way Hoolana Pl Hoolana St Hoolaulea St Hoolauna St Hoolawa Pl Hoolehua Pl Hoolehua St Hoolele St Hooli Cir Hooli Pl Hooluu St Hoomaemae St Hoomahie Loop Hoomahilu St Hoomaike St Hoomailani St Hoomalimali St Hoomalolo St Hoomalu St Hoomoana Pl Hoomoana St Hoomoana Way Hoomoe Pl Hoomoe St Hoona Pl Hoona St Hoonipo St Hoono St Hoopai Pl Hoopai St Hoopuloa Pl Hooui Pl Hoowae St Hoowali St Hualau Pl Huaono Pl Hugh St Huikahi St Inia Pl Kalai Pl Kalauipo Pl Kalauipo St Kaleilani Pl Kaleilani St Kaluamoi Dr Kaluamoi Pl Kamahao Pl Kamahao St Kanaeha Pl Kanihi St Kauhihau Pl Kaulike Dr Kaumahana Pl Kaumoli Pl Kaumoli St Kaweloka Pl Kaweloka St Kawelu St Kipaipai St Kirkbride Ave Kirkbride Pl Koaheahe Pl Koaheahe St Komo Mai Pl Kuahaka St Kuahao Pl Kuala St Kuleana Pl Kuloko St Kumano St Kumoana St Kuokoa St Laauhuahua Pl Laauhuahua Way Lanikeha Pl Lanikeha Way Laniwai Ave Lehua Ave Leomele St Ley Ct Loch St Lowella Ave Luehu Pl Luehu St Maiha Cir Maiha Pl Maiki Pl Makamua Pl Makamua St Makolu St Maluawai St Mililani Cemetery Rd Mililani Memorial Park Rd Nanakai Pl Nanakai St Noelani Pl Noelani St Nola St Paaaina Pl Paaaina St Paailuna Way Paakamaa St Palamoi St Palekaiko St Palm Ave Panee St Parker Ct Pearl City Exit Rd Puananala St Puu Alani Way Puu Hina Pl Puu Kala St Puu Kipa St Puu Kula Dr Puu Momi St Puu Poni Pl Puu Poni St Puu Ulaula St Robinson Ave Upalu St Victor Wharf Access Rd Wahinani St Waianiani Ct Waiauau Ct Waiawa Rd Waiea Ct Waihona Pl Waihona St Waikahe Ct Waimano Home Rd Waipuna Ave

Join us at Real Estate Social

Comments are closed.