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April 2014     






The Value of Equity

Buying a home is bound to be one of the biggest investments you make during your lifetime. Therefore, it is natural to spend time thinking about the pros and cons of purchasing a home. Some people seek advice and feedback from friends and family, while other research on the internet or in the library.

At some point in this discovery process the term "building equity" will inevitably pop up. Though this term is commonly used, it is not necessarily understood. According to Webster's dictionary equity is defined as "the money value of a property or of an interest in a property in excess of claims or liens against it".

This may seem simple at face value, however many people are ignorant of the ways in which they can use the equity they have accumulated. Therefore, let us look at the different ways in which you can use your home's equity.

Refinance: Basically by refinancing your home you are paying off your current mortgage and getting cash out based upon how much equity you have in your home. If mortgage rates are low, refinancing brings greater advantages because it allows you to lock in a low rate for the duration of the term. Refinancing also comes in handy when you need large sums of cash, whether it is for home improvement or your second son's college tuition.

The down side of refinancing is that there could be numerous additions to the cost of your loan. Mortgage lenders often charge closing costs, discount points, appraisal fees, loan processing fees, document prep and recording fees, underwriting fees, and more. You want to be careful that your need or savings through refinancing exceeds the additional costs that will be added to your mortgage premium.

Second Mortgage: A second mortgage would probably be more useful to a homeowner who does not need a large influx of cash and already has a competitive mortgage rate. The term is much less than a conventional 30-year mortgage - five to 15 years. These installment loans are paid out in one lump sum, so they're good for repaying credit card debt or remodeling projects, or even buying a new vehicle.

You must be sure you will be able to pay this loan back, because it's easier to foreclose on a second mortgage than on a federally insured first mortgage. Find out about closing costs and points in advance, as well as balloon payments, hidden fees, or credit or property insurance tacked on.

A home equity line of credit: A home equity line of credit allows you to borrow money against the value of your home. It works much like a credit card in the fact that you have a pre-set credit limit and are able to borrow against this limit as need dictates. Home equity lines of credit are good for expenses such as debt consolidation, tuitions, major home improvements, and any other expected or unexpected needs that arise. The benefit of a home equity line of credit is that rates are generally lower than other types of debt and you do not make payments unless you use the money; however it is always there if you need it in a pinch.

Some credit lines have variable interest rates, with no cap on how high they go. Make sure you read the fine print and find out exactly how much it could increase, and then do the math. And if you're an impulse buyer, this may not be a wise choice. A home equity line of credit shouldn't be used for frivolous luxury items, unless it's a one-time purchase and not a pattern of behavior.

Reverse Mortgage: A reverse mortgage is a loan against your home that requires no repayment for as long as you live there. This type of loan is generally only available to persons over the age of 62 who own their own home. Homeowners who opt for a reverse mortgage can generally get their money through an immediate cash advance, a line of credit, monthly cash advances, or a combination of the three. As a homeowner draws payments their equity decreases and their debt increases, which is why it is generally referred to as a "rising debt, falling equity" loan.

The debt does not need to be paid until the homeowner no longer occupies the home. The amount to be paid off, either in cash or through sale of the home, is all the sum of all payments received (including any fees) and the interest incurred on the debt.

Six Questions to Ask Before Making an Offer

When you are buying a home, there are many problems that the seller is obligated to disclose. But, these disclosures don’t always paint the entire picture of the home. Here are six questions you may want to ask that can offer additional insight about the prospective home before you make a final decision.

Why is the seller selling the house? This question may help you evaluate the “real value” of the property.

How much did the seller pay for the home? This question can, in some instances, help the buyer negotiate a better deal—maybe even get the seller to carry part of the loan.

What does the seller like most and least about the property? By asking the seller what he or she likes most and least about the property, you might get some interesting information. In a few cases, what a seller likes the most about a home might actually be something the buyer is looking to avoid.

Has the seller had any problems with the home in the past? Even if it is something that has already been fixed, it is important to know the history to ensure the issue was properly repaired.

Are there any nuisances or problem neighbors? Use this answer to find out about any noisy neighbors, barking dogs, heavy airplane traffic or even planned changes to the neighborhood, such as a planned street widening.

How are the public schools in the area? - Because the value of a neighborhood is usually greatly influenced by the public schools in the area, finding out the buyer’s perception can give you some insight about the quality of the area’s schools.

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Springtime Gardening Tips

As we enter the fourth month of the year we can already see the drab hues of winter begin to give way to the promise of a colorful spring. What better way could there be to celebrate this fertile and exciting time of year than to work on improving your garden? Gardening is a relaxing and fulfilling activity that the whole family can enjoy together. Plus, a rich and colorful garden can greatly add to the aesthetic beauty of your home. I've compiled some tips that you should keep in mind when attending to your yard this spring.

Don't over water!- Horticulturist, Mitch Hoyles of Western Garden Nursery says the biggest danger at this time of year is over watering. "Now is the time when we have to start watering, and most people water way too much," Hoyles said. Roots need air in order to grow. Clay soil must be allowed to dry between watering, so the water can be replaced by air to nourish the roots.

Watch your step - Make sure you don't walk on delicate flowerbeds when they are saturated. Wait until the soil dries. If you compact the soil by stepping on it when it is wet, you run the risk of damaging new growth.

Spring-cleaning, for your yard - Pick up old leaves, broken branches, and debris accumulated during winter. Cut back any perennials that you have. Trim shrubs, and any other excess growth.

Tune up your tools - Sharpen mowers and clippers so everything is ready when things start to grow. Make a note of what's missing and order tools for the new season of growth.

Check on your soil - Check soil pH with a Home Soil Test Kit, taking several samples from different planting areas for an accurate reading. Enrich soil as necessary. Add dolomitic lime to raise the pH, or elemental sulfur to lower the pH.

Don't forget to fertilize - Apply balanced fertilizer (6-6-6 or 8-8-8), fish emulsion, or other soil enhancements suggested by soil-test results around trees and shrubs when new growth appears. Spread high-acid fertilizer and pine-needle mulch around acid-loving shrubs like azaleas and camellias. Begin fertilizing perennials when active growth resumes.

With a bit of luck and hard work your garden will be the envy of the neighborhood. By the time summer rolls around, you'll be able to relax in your garden in comfort and style as you sip your favorite beverage and enjoy the beautiful environment you have created for you and your family.

Market

February Existing-Home Sales Remain Subdued

Home prices continued to show solid growth in most of the country due to limited inventory conditions, but rising prices and severe winter weather caused existing-home sales to slip in February, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.4 percent to a seasonally adjusted annual rate of 4.60 million in February from 4.62 million in January, and 7.1 percent below the 4.95 million-unit level in February 2013. February’s pace of sales was the lowest since July 2012, when it stood at 4.59 million.

Lawrence Yun, NAR chief economist, said conditions in February were largely unchanged from January. "We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago," he said. "Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage declined to 4.30 percent in February from 4.43 percent in January; the rate was 3.53 percent in February 2013.

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