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What is a Home Equity Line of Credit (HELOC)?
Much like a Reverse Mortgage or Second Mortgage, a HELOC gives homeowners the ability to convert their home equity into cash. A HELOC is a line of credit secured by the equity in your home. Homeowners can choose when to use the funds, and there are repayments due according to a schedule in the contract. It functions as a revolving line of credit, similar to a credit card with large limits. Some people find themselves interested in a HELOC if they have a large balloon payment due on a loan, perhaps even their home mortgage loan. They are also sometimes used as a debt consolidation tool to pay off credit cards and other outstanding debts (but, for this, fixed-rate home equity loans are more popular). Continue reading...
What is Mortgage Refinancing?
Refinancing a mortgage means to get a new mortgage agreement with a different interest rate. If the prevailing interest rate environment has changed, or if a person’s credit history has strengthened since signing the original mortgage agreement, a homeowner might benefit from refinancing their mortgage with a new arrangement. The bank or lending institution would effectively pay off the first mortgage with the new one, and give the client a different interest rate or mortgage term (length) or monthly payment amount. Continue reading...
What is a Home Equity Loan?
Home equity loans give a homeowner the ability to borrow a lump sum against their home equity. Homeowners have the ability to use their home equity as collateral on a lump-sum loan from a lending institution. This may be done on a paid-off home or on one with an outstanding first mortgage. People sometimes use these to pay for large expenses such as their children’ s college, or as a debt consolidation tool. When used for debt consolidation, a homeowner will take out a large loan against the equity they have in their home and use it to pay off debts to credit card companies and other creditors. Continue reading...
What is a Mortgage Equity Withdrawal?
Mortgage Equity Withdrawals (MEWs) may effectively be a withdrawal when viewed in a balance sheet, but they are actually loans that use the equity in a home as the collateral. These are also known as home equity loans. A full liquidation of equity through such a loan is a reverse mortgage. When a homeowner has paid off their home, they have a lot of equity and collateral to work with if they would like to get some liquidity (money) out of a hard asset. Continue reading...
What is Home Equity?
Home equity is a notional amount that a person owns at any given time, which is computed as the market value of a home minus any remaining principal repayments on a loan. Home equity is an asset on a person’s balance sheet, and can be used as as leverage for additional loans or lines of credit. A person’s home equity is the amount in their home which is “paid off.” It can be computed by taking the fair market value of a home and subtracting the amount of principal, if any, that still needs to be repaid on a mortgage loan. Continue reading...
What is a Home Mortgage?
A home mortgage is a long-term loan for the purchase of a home, secured by the value of the home itself. Banks as well as mortgage companies make mortgage loans to consumers and charge an interest rate for the duration of the loan that may be fixed or variable. Mortgage loans generally last for between 15 to 30 years, and they are constructed so that paying off a home can fit into a person’s budget while a bank or lending institution collects interest on each payment. Continue reading...
How Does HELOC (Home Equity Line of Credit) Compare to Your Other Options?
Ever considered tapping into your home's equity but unsure of the best route? Dive into our definitive guide on HELOCs, unravel its intricacies, and compare with other financing avenues. Equip yourself with the knowledge to leverage your home's value wisely and secure your financial future! Continue reading...
What is a Reverse Mortgage?
A reverse mortgage is basically an annuity paid for with home equity. In a reverse mortgage, instead of paying to for your home, you’re getting paid for your home. It is considered a loan, but it does not have to be repaid, except by the proceeds from selling the home. Older Americans who need the income and aren’t concerned about their heirs getting their house might apply for a reverse mortgage. It is also known as a Home Equity Conversion Mortgage (HECM). Continue reading...
What is Appraisal Fraud?
Appraisal Fraud is the intentional misrepresentation of the value of a home using an appraiser’s statement. Appraisals are necessary for large loans and real estate transactions, and appraisal fraud is common. Fraud can be committed in this manner by the appraiser or by a person falsifying an appraiser’s statement. A common example would be overstating the value of a home so that a borrower can get a larger home equity loan. Continue reading...
What is Working Capital?
Working capital is computed by subtracting a business’s current liabilities from its current assets. Current means that the assets and liabilities exist within the current year. The appropriate amount of working capital will vary from business to business. Some businesses have a need for a large amount of working capital, and some can maintain a healthy balance sheet with relatively little working capital. Whatever the situation is for a particular business, the approximate calculation for the amount of working capital that they have to use is arrived at by subtracting current liabilities from current assets. Continue reading...
What is Appraisal?
Appraisal is a valuation conducted by a certified professional to assess the value of property, especially real estate. Appraisals are an important service in the real estate industry in particular. Where mortgage loans are being taken out from banks, including original mortgages, refinancing, home equity loans and lines of credit, as well as in business and estate valuations, the property appraisal will play an important role. Continue reading...
What is a Home Debtor?
In contrast to the term “home owner,” home debtor is reserved for those who will seemingly never be able to pay off the mortgage(s) on their home, or who have already defaulted. Most Americans live in homes that they pay on, but are still primarily owned by the bank that loaned them money. Banks have insurance to protect them against mortgage defaults. Home mortgage loans are the primary way that Americans by homes today. Continue reading...
What is a Home Lien?
A lien is a legal filing through which a third party lays claim to certain assets, such as a person’s home, until an amount owed to them is paid. There are mechanic’s liens, judgment liens, and tax liens, any of which could be applied to a person’s home. A lien is a document serving as notice that a significant amount of money is owed to a third party and that certain assets of the debtor may be used to cover the obligation, becoming the property of the lien-holder if the debt is not paid in time. Continue reading...
What is Monetary Policy?
Monetary policy is the stance of the central bank at any given time regarding the tightening or loosening of rates, or the issuance of new currency denominations, that will affect the money supply in the country. Monetary policy is the prerogative of the central bank but may be influenced by congress as well as private banking institutions and the central banks of other countries. The goal of monetary policy is to keep the Federal Funds Rate or the LIBOR, or whatever it might be depending on the country, at just the right level to keep the economy going in the direction that will be most helpful. Continue reading...
How Can a Home Equity Loan Benefit You?
Ever considered tapping into your home's equity for a financial boost? Discover the essence of Home Equity Loans, how they stand apart from other lending options, and how they can be a pathway to fulfilling significant financial needs. Whether it's funding a major home renovation, consolidating debt, or even buying a second home, a Home Equity Loan could be your answer. Dive in to unravel the process, benefits, and considerations to ensure it's the right choice for you. Continue reading...
What is Hyperinflation?
Hyperinflation is when a rate of inflation grows exponentially, and a currency is rapidly devalued. Hyperinflation occurs in the midst of dire economic circumstances. This is usually partially due to the piling on of downward price pressure in which newly printed currency rapidly floods the market as the government attempts to cover debt obligations. Sometimes this stems from situations where the government is having trouble receiving adequate taxes from the population. Continue reading...
What is a Home Inspection?
A home inspection is performed by a certified home inspector to determine the condition of a property and to find out if there any safety of compliance issues that the home or property may have. Home inspectors are typically hired by real estate professionals and homebuyers when a home is on the market. It is not required except for FHA loan termite inspection requirements, but it is always advisable for a potential home buyer. A home inspection is not to be confused with a home appraisal. Continue reading...
HELOC vs. Home Equity Loan: Which Option Suits You Better?
What is a Home Office Expense?
IRS Link to Form — Found Here The home office expense deduction allows people who work from home to take a tax deduction reflecting the loss of square footage in their home for the purpose of doing business there. The space must be used exclusively for doing business on a regular basis and it must be the principal place of business, not just a place to work outside of the actual office. Many people fail to file for the home office expense deduction because they believe it will be more trouble than its worth or that it may even trigger an IRS audit of their reporting. Continue reading...
What is a Credit Crunch?
A credit crunch is when access to liquidity dries up dramatically in rapid fashion, or becomes less accessible due to a spike in borrowing rates. Central banks will often step-in to try and curb the lack of liquidity by offering the markets access to cash at lower than market rates, in the event of a crisis. Perhaps the most famous credit crunch in history occurred in late 2007 and early 2008, when bank balance sheets became highly leveraged overnight due to mark-to-market accounting rules that were applied to the mortgage backed security portfolios on their balance sheets. Continue reading...