Monthly Archives: October 2017

How to use your home’s equity to your advantage

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Your most valuable asset is around you all the time. It is above you, it is below you and in many cases you do not realize how much it can do for you.

According to the Urban Institute in Washington, D.C., “Americans have a staggering amount of untapped equity in their homes.” How much? Altogether, $11,030,000,000,000. That is 11 trillion, 30 billion dollars.

Yet despite this huge wealth possessed by homeowners, using it is not as simple as writing a check. You have to capitalize on your home’s equity.

What Is Home Equity?
Your home’s equity represents the difference between its current market value and the money that you owe on it.

Let us say, for example, your home has a market value of $200,000, you made a down payment of $40,000 and you took out a $160,000 mortgage. At that point your equity is $40,000. You can always calculate this number by taking your home’s initial price and subtracting the amount you still owe.

Now, let us say 10 years later you have paid off $60,000 of your $160,000 mortgage. At this point you still owe $100,000 on your home’s initial price of $200,000 so your equity is $100,000, assuming the home’s value has remained the same.

A little at a time
Each month when you make a mortgage payment, some of your money goes toward interest, some goes toward real estate taxes and homeowner’s insurance (if the lender is collecting for these and making the payments on your behalf), and some goes toward paying off the mortgage itself. This last portion grows your equity because it subtracts from the amount you still owe.

Your home equity can also grow if your home increases in value because the amount you still owe has not changed. A rise in value may be due to increased home prices in your area and/or improvements you make to the home.

Market home prices may rise and fall from one year to the next but given enough time, most real estate tends to increase in value. For example, current economic forecasts from CoreLogic project a 4.8 percent increase in home prices year over year in 2017.

Gaining access to your equity
Now that you understand what equity is and how much equity you have, your next question may be “How do I use it?”

Your first step is to contact a knowledgeable mortgage professional. They will be able to answer your questions as well as show you loans that use your home as collateral. You will want to do your research to determine which type of loan is best for you. You should also take the time to compare interest rates, offers, and loan features.

And if you are age 62 or older, you are also eligible for additional home equity options such as a Home Equity Conversion Mortgage (HECM), which is an FHA-insured Reverse Mortgage loan. This loan may be taken as a lump sum, a line of credit, through fixed monthly payments or a combination and the loan can never be frozen or reduced.

The equity in your home empowers you with several financing options and the specifics of each loan may vary from lender to lender, so ask questions and do your own research. Once you understand all your options you will be able to determine which loan offering allows you to make the most of your most valuable asset.

To learn about HECM Reverse Mortgage loans and other special home-equity options available to homeowners 62 and older, visit www.reversemortgage.org/HomeEquity. v

Transform Your Home in a Weekend With These DIY Projects

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Now that fall is here, you will be spending more time at home. This is the ideal time for quick and inexpensive DIY projects that make a big statement around the home, but not a big difference in your pocket book.

Create wood accents: Use flooring to make headboards and accent walls. Retailers like Lumber Liquidators offer a variety of styles of flooring such as laminates, engineered, vinyl, click ceramic plank and more, and these flooring materials can easily be incorporated into many accent features. The flooring material can be affixed to walls and other surfaces with a special acrylic flooring tape. Flooring comes in a variety of styles, which can also be cut into striking patterns like chevron or herringbone.

Install butcher block countertops: Butcher block is a warm and rustic countertop style that is affordable and increasingly popular. Made from strips of wood bonded together, it can be sliced and chopped on directly – a great option for the minimalist homeowner. Installation is DIY-friendly, making butcher block an ideal weekend project with a good step-by-step tutorial in hand.

Build a trellis: Building a garden trellis is a great way to draw more attention to what your green thumb has created. Dedicate Friday to sizing the trellis and cutting and framing the pieces, Saturday to building the panels and assembling and Sunday for digging the holes and setting the trellis into place. Tailor the building materials to what is best for your backyard.

Repurposed planters: When gardening outside is not an option, bring the garden inside by making unique planter boxes. A DIY planter box is typically more affordable than store-bought, and the design possibilities are endless. Reuse vessels like shipping crates, Mason jars and tin boxes. Personalize them with colors and patterns to match your interior and inject personality and life into your space.

Add crown molding: Crown molding adds distinguished curves and angles to a ceiling, instantly elevating a room to a polished and sophisticated look. DIY crown molding does require attention to detail when measuring and marking the wall and cutting pieces, so measure twice to cut once.

These are just a few of the weekend-ready projects homeowners can knock out this fall to bring new life to spaces indoors and out. A weekend DIY project is a minimal time investment that not only creates a sense of accomplishment, but adds value to your home.

Fresh Herbs

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The end of summer does not have to mean the end of your gardening enjoyment, even if you do not have the time or climate for a full plot of vegetable plants. Herbs are perfect fall crops; they are prolific growers and can satisfy your desire for fresh, garden-grown greens.

Pick a place: Herbs need at least four to six hours of natural light per day to grow indoors, so choose a sunny spot near a window where they will be protected from drafts and cold.

Caring for container herbs: You will need to keep a close eye on your herb plants’ watering needs. Remember, dry topsoil is not an indication plants need water. Always water in the morning, at soil level and avoid watering the leaves, as bacteria can breed in cool, wet, damp, and dark conditions, like night time.

Make sure to fertilize your herbs. Read the label on your potting soil mix and follow the brand’s recommendations for fertilizing frequency. Timed-release granular fertilizer or a plant food you mix with water will help keep herbs nourished.

Whether you are an expert gardener or a first-time fall grower, autumn is the perfect time to fall in love with the freshness, flavor, and ease of herb gardening. You have still got time to get growing! v

Iced Pumpkin Spice Cookies

pumpkin cookies recipe

Ingredients
2 1/2 cups all-purpose flour
1 teaspoon baking powder
1 teaspoon baking soda
2 teaspoons ground cinnamon
1/2 teaspoon ground nutmeg
1/2 teaspoon ground cloves
1/2 teaspoon salt
1/2 cup butter, softened
1 1/2 cups white sugar
1 cup canned pumpkin puree
1 egg
1 teaspoon vanilla extract
2 cups confectioners’ sugar
3 tablespoons milk
1 tablespoon melted butter
1 teaspoon vanilla extract

Directions
Preheat oven to 350 degrees. Combine flour, baking powder, baking soda, cinnamon, nutmeg, ground cloves, and salt; set aside.
In a medium bowl, cream together the 1/2 cup of butter and white sugar. Add pumpkin, egg, and 1 teaspoon vanilla to butter mixture, and beat until creamy. Mix in dry ingredients. Drop on cookie sheet by tablespoonfuls; flatten slightly.
Bake for 15 to 20 minutes in the preheated oven. Cool cookies, then drizzle glaze with fork.

To Make Glaze: Combine confectioners’ sugar, milk, 1 tablespoon melted butter, and 1 teaspoon vanilla. Add milk as needed, to achieve drizzling consistency. v

Down Payment Strategy

Down payment Strategy

The minimum down payment on an FHA loan is 3.5 percent, which makes it a popular choice among those who do not have the funds for a large down payment (also those who do not meet the higher credit score requirements for other types of loans). And that is not even the lowest you can go. Some loans require only three percent down, and if you are a veteran or are buying a home in a rural area, you may be able to buy a home for nothing down. But should you go that low just because you can, or are you better off making a larger down payment? Here is break-down:

The case for a 20 percent down payment – There are several advantages to putting down 20 percent when buying a home, like:

Since the bank will generally consider you a lower risk because of your large down payment, you may be able to get a lower interest rate than you would with other types of loans—as long as you have the credit score to support it.

You will have built-in equity as soon as you move in.
You can avoid paying private mortgage insurance (PMI).
It is that last part that drives many people to strive for that 20 percent down payment since PMI can add several hundred dollars to a new homeowner’s monthly payment, and it can be hard to get rid of it.

But is that a smart move? – The less you put down, the higher the mortgage insurance will be. Yep, there is that pesky PMI again, which, for many first-time buyers, pushes their monthly payment to a level they are not comfortable with. Another issue with PMI: if you need to pay PMI, the loan amount you can get will be slightly smaller, to allow for the bigger payment which will determine the house you can afford.

You may also have trouble qualifying for a loan even if you have a high enough credit score because you would not have enough cash reserves after the down payment. If you are using all your savings for the down payment and the lender questions where the funds for your closing costs, taxes and insurance, and any needed repairs are coming from, you could have a problem.

Even when you add the PMI and a higher interest rate, the equation comes out in favor of the lower down payment. With three percent down and making adjustments for rate and PMI, the rate of return on a low-down-payment loan is still be as high as 106 percent – much higher than if you made a large down payment. The less you put down, then the larger your potential return on investment could be.
The case for somewhere in between – Finding that balance between down payment and savings is a challenge for many homebuyers and the sweet spot will be different for everyone depending on their unique circumstances and financial situation. Most financial experts will say that saving and scrounging to get together 20 percent at the risk of depleted savings and zero emergency funds is a shaky strategy.
If putting 20 percent down means that you would use all of your savings, then do not do it! Especially, when you consider all the added costs you may be facing once you buy: yard work, home repairs and maintenance, renovation costs, property taxes, insurance, association fees, etc. It is important to consider all of the costs and not just compare the monthly mortgage payment to your current rent amount or mortgage payment on your old house.

Another thing to consider when evaluating how much you should put down is what would happen if you had an emergency. It is easy to lose sight of real-life issues that can arise when you are so driven to buy a home and focused on saving the money to get there. v