4 Steps to Take Before Borrowing From Your Home’s Equity

With the housing market in full recovery mode and home values on the rise you might be considering tapping some of the equity in your home. Those considering this option should do their homework first. The time you spend now could save you heartache (and plenty of money) in the future. Take these four steps before signing on the dotted line:

1. Consult your financial advisers. Financial advisers know which questions to ask to understand your complete financial picture, including events on the horizon. Starting here can save both time and money while making the borrowing process less threatening. Any major financial decision should be weighed with consideration to its tax impact. Speaking with a tax professional can guide you to your smartest borrowing decision.

2. Comparison shop. Shopping is an incredibly important but often overlooked step. At the very least, start with your primary lender. One easy way to find the best deal is to give us a call and allow us to refer you to one of our affiliates. Another is to use the Bankrate home equity loan rate tables to find rates specific to your area. One bankruptcy researcher draws a parallel between consumer willingness to “run around to Kmart or Target to save 50 cents,” while the stakes of taking out a home equity loan are much higher. With these numbers, rates even 0.1 percent to 0.6 percent higher than the prime rate add up to thousands of dollars worth of additional interest payments. Be sure to shop.

This audio clip explains what lenders look for.

3. Understand the terms. Home equity loan terms may be unfamiliar to you. What you don’t know could cost you your home. Most home equity lines of credit, known as HELOCs, are variable rate loans. Generally, a HELOC starts with a low teaser rate, then increases after a set introductory period. Find out the floor and ceiling rates. The initial rate is almost always at floor, or the lowest allowable rate, and the only way to go is up. Make sure you do the math and determine whether you will be able to afford the rate increases.

Use the glossary of the most commonly used home equity terms to help you understand all the details of the deals offered.

4. Know your rights. The Federal Reserve says you should receive information in writing about each mortgage or home equity loan program you are interested in before you pay any fees. Be sure to read all the loan details and ask the lender or broker to clarify index rates; margins; caps; other ARM features, such as negative amortization; or anything else you don’t understand. After applying for a loan, you will receive detailed loan information from the lender, including the APR, a payment schedule and whether the loan has a prepayment penalty. A provision of the Truth in Lending Act gives you the right to cancel certain real estate loans within three business days without penalty. It is called the right of rescission. In home equity loans, you can rescind only when using your principal residence — not a vacation or second home — as collateral.

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 Marysville 43040 43041 New Albany 43054 Pickerington 43147 Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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