What's a Good Use for a HELOC?

  • 22 Jun 2017
  • Posted by Amarasco

When you take out a second mortgage, a name for a home equity line of credit, you're offering your house as collateral to secure another loan. The upside: You can gain access to up to 85% of your home's value, minus your current mortgage balance and adjusted based on your creditworthiness.

The downside? If you can't make your payments, you could lose where you live. Because the stakes are high, you want to make sure you use a HELOC for the right reasons. Here are a


Making home improvements

Most people who take out a HELOC do so to make home improvements. Experts say you should only do this if the improvements you're considering will increase your home's value. This way, the money you're borrowing will be returned when you sell your house at a higher price.

The National Association of Realtors' 2015 Remodeling Impact Report lists these six changes as the ones with the best return on investment:

  • Installing a new front door.
  • Installing new siding.
  • Upgrading your kitchen.
  • Adding on to your deck and patio.
  • Making an attic into a bedroom.
  • Installing a new garage door.

These improvements can range from a few hundred to tens of thousands of dollars, but they don't change the footprint of your home and tend to be what future buyers look for.

Supplementing an emergency fund

Everyone should have an emergency fund to cover events such as unexpected car repairs and appliance breakdowns. Most people keep these in savings accounts, but you might consider a home equity line of credit as another source of cash. You only pay interest on the amount you borrow, and you could pay the loan off quickly to save money. Still, it makes more sense to have an emergency fund that's earning a little interest rather than one that charges you interest.

Paying off high-interest debt

Because the average interest rate on a HELOC is much lower than the average credit card interest rate, many people think about using a HELOC to pay off their credit cards. This is a great strategy if you're committed to never carrying a balance again. Otherwise, you're just adding another debt at a lower rate.

Regardless of how you use a HELOC, remember that the interest rate is variable and may change each time you tap it. And you'll have to repay the entire loan by the end of the payment period set by the lender. On the upside, the interest you pay on a HELOC is tax deductible, like your mortgage interest. If you use a HELOC for the right reason, that's just one more benefit.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

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Best Ways to Fund Spring Home Repairs

  • 17 May 2017
  • Posted by Amarasco

Now that spring has blossomed into full-on allergy mode, the time we spend outside is even more appreciated — especially with the help of a good antihistamine. The next time you venture out, take a moment to do a walk-around inspection of the old homestead. See some room for improvements? Maintaining, repairing and upgrading a home can range in cost from a minor trickle to a major cash drain.

Paying for minor repairs

If you see the need for only modest repairs, you might be able to tackle them within the bounds of your cash flow. But remember, your emergency fund is best left intact for unexpected cash needs, not for replacing a gutter or downspout.

If you have a bit of a cash cushion in your checking account or in a contingency savings account, small home projects can be covered with your close-at-hand liquidity, even if it means a temporary trim to discretionary spending, such as a couple of “family nights out” spent at home.

If the need exceeds the cash

If your home-repair needs are more costly, you might consider turning to your secondary tier of financial resources: a credit card. While average credit card interest rates are in the double digits, you can do a lot better, particularly with introductory rates that can last more than a year.

When it comes to minor improvements or repairs, having that extra spending power available will allow you to fix what’s needed now, while budgeting the repayment over a period of time. It’s best to keep that payback schedule from extending longer than three to six months.

If you need to spread the payments out beyond that, you might protect your credit score — and pay less interest — by considering our next funding alternative.

Raising the roof on expenses

Larger home upgrades or repairs are going to require bigger investments. A new roof, exterior painting, foundation repairs or other projects will protect your home’s value — and can end up costing more the longer you delay. Under these circumstances, a loan often can get you more than your credit card limit will allow, as well as save you money.

A secured loan will offer a better rate than an unsecured loan, while both likely will offer much better long-term interest rates than a credit card. Longer repayment terms will be favorable for these larger projects, too.

Covering the cost of major upgrades

Your strolling inspection — in, around and outside your home — might have revealed a need for a major upgrade. Perhaps the furnace has heaved its last gasp, or the air conditioning is already struggling with the warmer spring weather. Or it might be time to do a bit of renovation to a bath or kitchen that is well past its “best by” date.

In that case, it might be well worth tapping a home equity line of credit, or HELOC. Accessing the value of your home — up to 100% of your existing equity — will allow you even greater financial flexibility. Once approved for an open-ended revolving credit line, you can draw from it at any time, as needed. And you’ll pay interest only on the balance you’ve withdrawn.

Not only are the variable rates very favorable on HELOCs, but the interest paid may be tax-deductible. Your tax advisor can give you details on that. And repayment terms can stretch as long as 15 years, depending on the amount financed.

From a small repair to a major improvement, there are prudent ways to fund whatever spring home project you decide to undertake.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

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4 Reasons to Buy a Home Instead of Renting

  • 10 May 2017
  • Posted by Amarasco

The financial benefits of buying a home compared with renting have yoyoed over the years, especially of late. If you’re sitting on the fence, here are four circumstances in which it may be a better bet to buy.

If interest rates remain low

From a financing perspective, if this isn’t the best time to buy a house, it’s pretty darn close.

The average interest rate on a 30-year fixed mortgage, the most common variety, has hovered below or near 4% for several months now. For comparison’s sake, if you bought 10 years ago, the average interest rate was 6.41%. In 1996, it was 7.81%, and in 1981 it was a whopping 16.63%.

Although the Federal Reserve has begun to inch rates upward, it is likely that it will do so slowly and that it will be a while before the cost of borrowing to buy a home stops being historically low.

If home prices level off

Home prices rose steadily in the 1970s, ’80s, ’90s and 2000s before plunging around 2007, and in the past few years they have been climbing again. Different markets have seen different trends, of course, but generally what’s at play is supply and demand: More potential buyers than houses available means sellers can dictate terms and get top dollar.

But something interesting is happening: The oft-told story that millennials are renting for longer or living with their parents nowadays is not entirely accurate. No, people in this age group (born between 1981 and 1997) want very much to own a home, but they are putting it off because of real and imagined difficulties in affording it.

That could mean fewer potential buyers and a cooling of the upward surge in home prices. While others wait, you could pounce.

If rental costs continue rising

Real estate researcher Reis Inc. reports that apartment rents rose 4.6% in 2015. In hot housing markets such as California and the Pacific Northwest, rents are going up by about 14% per year.  According to Zillow, the median asking price nationwide for a rental was $1,575 per month in early 2016.

The monthly payment on a $200,000 mortgage — about the average in the U.S. — with a 4% interest rate would be just over $950. Even with taxes, insurance and maintenance, it’s tough to make a financial case in favor of renting.

If you want to save money

Home values over the past 70 years have generally tracked with inflation. Yes, you could make more money in the stock market. But we’re talking real life, not investment advice. Consider two things:

  • Your rent is locked in for a year or two, then will go up. Your mortgage payment can be the same for 30 years.
  • If you are raising a family, it seems all but impossible to save money. But when you sell the house after 30 years (or 20 or 10), someone will hand you hundreds of thousands of dollars, money that could put the kids through college or finance your retirement.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved



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Buying a Home Then Versus Now: What’s Changed?

  • 10 Jan 2017
  • Posted by Amarasco

Hint: It's all about the Internet.

By Marissa Stern
Baltimore Style Magazine

In the market for a new home? You should know that there’s been gradual changes over the years in lending and mortgaging, and if you haven’t kept up, the experience might well be unlike any home purchase you’ve made before. Among the biggest changes of late is the entry of more people in the home-buying market, making it more likely that if you don’t act fast, that quaint three-bedroom, two-bath cottage you have your eye on could be gone before you score your pre-approval letter.“Rental prices are really high,” said Matthew Krimm, regional business development manager at Mlend, which finances homes for residential buyers, “so you’re seeing people who maybe before would have been renting, are in the market to buy because they can buy a house less than they can rent one for.”

In many areas around Baltimore, there’s an imbalance between who’s buying and what’s available.“There are more buyers out there right now than there are properties,” Krimm said, “so the properties that are out there are going very quickly.” “Even though the economy in and of itself is still struggling,” he continued, “the outside of that is you have people who went through a bankruptcy or foreclosure three, four years ago and are back into the buyer pool. So boomerang buyers—people who had a financial hardship years ago—are back in a position to buy. Interest rates are lower, that makes it more affordable to buy.”

Another point to keep in mind: If you’re expecting the traditional process of filling out paperwork by hand, you’re likely in for a surprise. Much of the home-buying experience has shifted online; the paperwork isn’t even paper anymore.“When I first started, the loan package was a big pile of pages and you sat down at the kitchen table and signed everything,” he said. “Now, 95 percent of customers do that online. Back even 10 years ago if you thought about buying a house, you call the realtor your mom used and they tell you what lender to use. Now it’s social media.”

altieriRobert Altieri, executive vice president and president of the mortgage division at Howard Bank, has also noticed the change in online activity.“You have not necessarily new mortgage business popping up, but you have more internet applications,” he said. “I think you’re seeing 57 percent of mortgages done through an electronic means.”

While Howard Bank, which does roughly 250 mortgages monthly per Altieri’s estimation, does not use an online process for mortgages right now, Altieri said they hope to by the end of their third quarter. The changes he’s seen in mortgages have been more gradual, but they are certainly there.

“It seems like, since we’ve been through the Great Recession, the secondary market investors are loosening their guidelines a little bit to assist, obviously, homeowners,” he said. “That’s been a bit of a change, but a very gradual change. As the economy gets better so do the parameters and underwriting guidelines from investors.”

There have even been shifts for hard money lenders, like Craig Fuhr at

Dominion Lending, which does commercial loans for real estate investors. To put it in HGTV-speak, it’s like a Tarek and Christina situation: flipping houses.

After the mortgage meltdown starting back in 2007, hedge funds started dipping into the real estate world and backing lending companies, like Dominion Lending. This gives them a much larger amount of lendable money—and more competition.

“Business went from being very small local mom and pop where a lender typically had a couple million dollars to lend to now unlimited,” Fuhr said. “So the benefit here is there’s a lot of competition now. The market has created competition, which is great for real estate investors because now we’re competing with much more sophisticated and large companies for large business.”

But one thing that hasn’t changed: Who do you call first when you’re looking to buy a home?

“The first call someone should be making is to a lender,” Krimm said. When it comes to calling a lender and learning where you stand financially, no matter if you’re looking to move in two weeks, two months or two years, “the time to start is now.”

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Mortgage Tips for First-time Homebuyers

  • 01 Sep 2016
  • Posted by Admin

David Fitzell, MortgagePurchasing your first home is a big investment and commitment. When it comes to a mortgage for that home, it makes sense to seek the help of a professional who understands the intricacies of these loans.

Howard Bank’s mortgage team has the experience and the tools to assist buyers through this process. Senior Vice President of Howard Bank Mortgage, David Fitzell says, “For many families, this is their largest investment, and they want personal interaction. And all banks and lenders are not created equally. Navigating through some of the (financing) complexities takes a strong, educated mortgage banker to help you through that.”

Fitzell outlines some of the elements that a Howard Bank mortgage officer helps customers manage.

  • Get educated up front. Come talk to a lender.
  • Consider all the grant programs and government backed loans that may be available to you. Howard Bank participates in numerous grant programs and is an expert in that space.
  • Determine what you can reasonably /comfortably afford. This is not necessarily the amount you qualify for.
  • Do you have money for a down payment? Many consider 20% an industry norm, but there are other options available.

“Interest rates are at historic lows. This really makes this an opportune time to buy,” says Fitzell.

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How Does Student Debt Impact Your Mortgage?

  • 23 May 2016
  • Posted by Amarasco

Let’s say you’re a recent college grad. You’ve landed your first real job (or maybe you’ve been working it for a while already) and after years of dorms and apartments, you’re realizing you might as well start building equity in a place of your own.studentdebt

You wouldn’t be alone. Though you’ll see articles all over the place insisting that millennials just aren’t interested in buying homes, a closer look at the data says the opposite is true actually true.

However, there’s one small hiccup: student loan debt. In 2013, the average student borrower graduated $28,400 in debt, which will almost certainly lead to problems when they try to qualify for a mortgage. So what can you do if all this describes you?
First, let’s take a closer look at the why of this problem.

How does student debt interfere with getting a mortgage?

When lenders do all the math to figure out whether or not you’ll be able to make your monthly payment, they take special care with something

called a debt-to-income, or DTI, ratio.

This is almost exactly what it sounds like—it allows banks to get a feel for how much of a borrower’s income is already accounted for by other debts. Even if your loan is still deferred, which means you haven’t begun payments on it yet, lenders will still estimate monthly commitment from you, though it may be even higher than the standard minimum payment.

What can you do?

Well, there’s the obvious, solution: pay down your debt before applying for a mortgage. Of course, obvious doesn’t always mean easy. Paying off your student loans will take time and careful budgeting, especially if you’re trying to save up for a down payment at the same time. That may mean some serious cutting back on living expenses or avoiding big purchases.

Of course, the other way to improve your DTI ratio is to increase your income. Earning a raise, moving on to a better paying job, or even taking on a part time one are all ways to do just that. Make sure you do so several months before applying, though, or your lender may not count the income.
If neither of those options work for you, you can always try to consolidate your student debt, or convince a parent to co-sign with you.

Whatever you do, though, make sure to keep your credit in good standing, or you’ll have to add “bad credit” to your list of problems to fix.


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Millennials and Mortgages

  • 09 Apr 2016
  • Posted by Admin

millennialhomeownersSeemingly not a day goes by that a major media outlet doesn't report on the significance and growing purchasing power of the mighty demographic: Millennials. The age cohort includes at least 80 million people with roughly $200 billion to spend, and companies are understandably doing everything possible to reach these new consumers.

The other story that has dominated real estate and mortgage news has been the state of mortgage rates, which have remained low (historically!) for some time now. Even first-time homebuying has increased in recent months. It would seem like this is a match made in heaven, right? Although millennials will undoubtedly one day be the dominant force in housing, Forbes columnist Beth Braverman provides four reasons why that hasn't happened quite yet.

1) Strict mortgage standards and stubborn debt. Braverman notes,  potential buyers used to have more

wiggle room with their debt-to-income ratio. Some buyers are getting approved because lenders were able to take into account other factors that would help mitigate the high level of debt, like a large downpayment. In today's more highly regulated market, with lenders more cautious than ever, debt-to-income ratios are capped more strictly at 43%, meaning otherwise credit-worthy borrowers are facing a roadblock. Add to that the struggle recent college graduates are having finding high-income jobs, and it's easy to see why many millennials are not ready to jump in the housing market.

2) Competition and Cash. Real estate inventories are down in many parts of the country, meaning homes on the market are generating high levels of buyer competition. Unfortunately for many millennials and first-time buyers, they are finding out the meaning of the term "cash is king" as they are losing battles to all-cash buyers.

3) Delayed family formation. Even more than previous generations, millennials are waiting to purchase their first home until they are either married or otherwise attached. Not surprisingly, single, unmarried millennials are just not as interested in the commitment of a home purchase when rental options are available.

4) Rental options are available! Thanks to the housing crash, many former owner-occupied homes are now owned by investors who are renting them out instead. Additionally, the homebuilding industry has spent considerable energy and resources in the past few years building apartments and multi-family options that appeal to renters.

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5 Unusual Houses? Nope..Home Sweet Home For These Owners

  • 31 Mar 2016
  • Posted by Amarasco

Not everyone thinks “raised ranch” when they hear the word “home.” Here are 5 out-there houses that may or may not actually be fun to live in.

The Bioscleave House

BioCleaveIn the late 90’s, architects Arakawa and Madeline Gins were commissioned to renovate a home in East Hampton, New York. Years (and more than $2 million dollars) later, Arakawa and Gins claim to have built a house that will slow aging and death.The secret? Bright colors, unusual angles, and a bumpy, undulating floor, which they say will stimulate your immune system by forcing you to work to maintain your balance.The house has two bedrooms, one bathroom, and no doors.




The Mushroom House

MushroomBuilt between 1970 and 1972 by Robert and Marguerite Antell, this house was inspired by Queen Anne’s Lace. The result, however, looks a lot more like a cluster of mushrooms. In total, the structure consists of five connected pods, which house three bedrooms and three bathrooms. In 1989, it was designated a town landmark by Perinton, New York.





The Haines Shoe House

In 1948, Pennsylvanian shoe salesman Mahlon Haines decided to build house shaped

like a shoe. It comes complete with a living room in the toe, a kitchen in the heel, and two bedrooms in the ankle.
shoeFor the most part, Mahlon intended the five story house to be an advertisement for his business, but for a period of time, he did rent it out to couples. Now, the house is a tourist attraction.






The Headington Shark House

Shark HouseThis house actually isn’t that unusual—it’s what’s on its roof that makes it special. In 1986, on the 41st anniversary of the dropping of the atomic bomb on Nagasaki, Bill Heine installed the shark as an artistic protest. Since then, it’s graced his Oxford house, excepting a 2007 renovation.






The Winchester Mystery House

MysteryOdds are pretty good you’ve already heard of The Winchester Mystery House, but it’s hard to deny that it deserves a mention. When gun maker William Wirt Winchester died and left a fortune to his wife, Sarah Winchester, she traveled west to California on the advice of a psychic.
Of course, the psychic also told her that she must build a home—continuously—for herself and the ghosts of the victims killed by Winchester rifles. The construction went on for 38 years, up until Sarah’s death.
The result is a 160(ish) room house full of stairways that lead nowhere, unusable chimneys, and covered-up windows. It’s currently a tourist attraction.


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4 Fast Solutions for Last Minute Mortgage Problems

  • 09 Feb 2016
  • Posted by Amarasco

Getting a mortgage can be stressful, especially when last-minute issues crop up that can stop the process in its tracks. These surprises are unpleasant, but they don’t have to spell disaster for your mortgage if you act quickly.

Puzzle1Problem: Additional Documentation is Needed
Your lender calls you days before closing and requests additional documentation. This most often occurs when the lender needs to verify closing funds or requires proof that all conditions for approval are satisfied, such as settling a debt.
Solution: To rectify it quickly, take the required paperwork to the lender in person, if possible. If not, see if you can send it by email or other digital means. The final option is to send a fax directed to the attention of the loan officer who is working on your mortgage.

How To Avoid It: Contact your lender no less than one week before closing and make sure there’s no additional paperwork you need to turn in.

Problem: Paperwork Error
An error in your paperwork has brought the

loan process to a halt. This issue can range from the misspelling of a name to erroneous financial figures.

Solution:Include all necessary supporting documentation when you submit the corrections to increase your chances of a timely closing.

How To Avoid It: Review all of your application and loan paperwork well ahead of closing and keep an eye out for errors, no matter how trivial. Be especially diligent about the loan amount, down payment, interest rate and closing costs.
Lenders require you to pay the funds for your down payment and closing costs on closing day from certified funds, and this is often done by a direct bank transfer. However, bank errors and other delays can cause this option to fail, leaving you unable to close.
Solution: You can’t use personal checks for this purpose, so your only option to fix this situation fast is to request a certified or cashier’s check from your bank and bring it with you to closing.
How To Avoid It: Arrange for the transfer to happen a few days in advance of the closing date to leave room for possible hiccups.

Problem: Unexpected Problems During Final Walk-Through
Lenders require assessment of the property before signing off on a mortgage. This is often done near the end of the process, which can be trouble if the condition of the property has deteriorated since the first appraisal inspection.

Solution: After discussing the extent and costs of the repairs with the inspector, talk to your real estate agent about having the sellers pay for any necessary repairs. This is usually negotiated by requesting the seller’s escrow funds or by increasing their closing costs to cover the expenses.

How To Avoid It: Request the inspection a few weeks before closing to ensure that any problems are found and dealt with before you’re at the table.

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What’s the Fastest Way to Pay Off a Mortgage?

  • 02 Feb 2016
  • Posted by Amarasco

If you’re like most home buyers (almost 90% in 2013), then you took out a fixed rate 30-year mortgage. There are plenty of reasons to go this route, the most important of which is low monthly payments, but it’s hard to deny that 30 years is a long time.
BlogMany first-time homeowners assume they won’t stay in their home for that long, but for those that do—or who are already halfway there—owning your house outright is the ultimate end goal. There are several ways to pay down your mortgage, but as far as actual speed goes, which method will be fastest for you depends on your individual financial situation. Here are the two strategies that have worked for other homeowners in the past:
Refinance to a shorter term.
Most lenders offer 10- and 15-year mortgages, and not only can refinancing to one from a 30-year help you pay off your home faster, it can also cut down on the total amount of interest you’ll pay. If you haven’t refinanced

recently, this may also be an opportunity to grab a lower rate.
There are some downsides, though. Your monthly payment will increase, and closing costs mean it may be a year or two before you actually feel like you’re saving money. If you’re already very close to the end of your current mortgage, you may want to consider another route. Because refinancing resets your amortization, the majority of your early payments will go to interest, not principle.
Pay extra.
If refinancing isn’t right for you, then your next best option is to pay more or increase the frequency of your payments. Check your contract for prepayment penalties, though. If you pay off your loan early, the bank misses out on some of the interest they expected, meaning they may try to get the money another way.

There are all sorts of creative ways to pay extra without feeling the pinch. Try:
• Waiting for tax season. This year, the average tax return is $2,893. For most people, that’s at least one mortgage payment. So instead of spending it on other expenses or treating yourself, put your refund money back into your mortgage.
• Making extra principle-only payments. Interest is front-loaded into your payments, so for the beginning of your mortgage, the majority of your payment actually goes toward interest, not your principle. Check to see if your lender allows you to make addition payments on just your principle. By paying down your original loan amount, you’ll save interest as you shorten your term.
• Paying every two weeks. Most people pay their mortgage once a month, but by splitting your payment in two and paying twice a month, you actually end up make one extra full payment a year. That doesn’t sound like much, but it can still shave years off the end of your mortgage, and save you thousands. Plus, if you or a spouse get paid bi-weekly, it can actually make things simpler.

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