Is Line of Credit the Right Way to Pay off Debt?

                                            

 Pay Down Debt

A very provocative question is posed below:

   

   Should you use a home equity line to pay off debt?

Yet the discussion that Al Clark's article in HomeAction Newsletter is very good.

Though taking a loan, personal, HELOC, 2nd Mortgage or other, is not a great idea in most instances.  Typically, as touched on in this article,

the discipline to not used the new loan or line of credit as a "piggy bank" is essential.

Yet, establishing a budget and leveraging the difference between the current loan/credit card interest rates and current interest rates can be a very very wise move.

For example, if you have a credit card payment on $10,000 at 18%, you payment would be approx. $2600 monthly if wishing to pay off in one year.  Yet an HELOC interest only loan with 3.75% rate would only cost $375 per month.  Thus, you pay $1200 per month and the loan is paid off in a year.

You save $1680!!!  

Yet, this savings would be lost if you never reduced the principal and simply paid interest for the 10 years of the HELOC loan.

Yet, saving $1680 in a single year and being out of debt(or having extra funds to pay off other debt...the average family has over $40,000 in credit card debt!!).

Thus, ensure you have a plan prior to taking any loan.  All loans come with a price, interest and a lost of property(if payment not made).   

No one wants to lose a house for the sake of a spending spree on some vacation!!

Have questions?  Wonder how to make this work so that you can pay down loans or set your financial house in order to move to that new place?

Call me at 757 580-6546 or email me at bcerny@roseandwomble.com

Got input or success story?  Please share!!!

SHOULD YOU USE A HOME EQUITY LINE TOPAY OFF DEBT?

Home Equity Loan Pros And Cons Should you use a home equity line or loan to pay off your outstanding credit card bills or other debt? Maybe. But before you borrow, consider the pros and cons. There are two kinds of home equity mortgages. With a home equity loan you get a set amount all at once. With a home equity line, you get access to line of credit that you can spend as you need it. Loans and lines are secured by the equity in your home (that's the difference between what you owe on your first mortgage and what your home is worth). If you fail to make your monthly payments, your lender can foreclose on your home. Many homeowners will take out a HELOC (home equity line of credit) to finance home improvements, to purchase a vehicle or to pay off debts. Because the interest you pay on a home equity loan may be tax deductible, a home equity line can be a relatively inexpensive way to borrow money. Suppose you have a $10,000 debt. You're offered a HELOC for $10,000 at 5 percent interest or you can pay the debt with a credit card that charges 12 percent interest. The advantage to using the HELOC instead of the credit card is clear. You pay less for the HELOC because the interest rate is 7 percent  lower. But, like any loan, it's important to remember that a home equity loan is just that - a loan, or debt guaranteed by your home. Your lender will likely let you stretch out repayment over 10 years or more and you'll be paying interest that whole time. If one of your major problems is that you spend beyond your means, a HELOC may help you overspend. As a result, a home equity loan may actually make your fundamental problem worse, rather than better. But, if you have made a commitment to control your debt and are seeking ways to reduce your overall expenses, a home equity loan can be a sensible solution. One essential exercise is to actually calculate how much money you would be spending per month - and over the life of the debt - in one scenario versus the other. There are debt calculators readily available online to help you do just that.

Lender's Scoop!!

visit my website    email me now Jeff Hurd Loan Officer780 Lynnhaven Parkway #420 Virginia Beach, VA 23452 Mobile: 757-329-1115 Fax: 866-396-6422

For the week of April 22, 2013 – Vol. 11, Issue 16 QUOTE OF THE WEEK... "We do not have to become heroes overnight. Just a step at a time, meeting each thing that comes up,...discovering we have the strength to stare it down." --Eleanor Roosevelt Our hearts go out to the Boston bombing victims and their families. Our pride goes out to the heroes who responded with sacrifice and courage. God Bless America. >> Market Update  INFO THAT HITS US WHERE WE LIVE... Last week Housing Starts were reported UP 7.0% for March to a 1.036 million unit annual rate, 46.7% higher than a year ago and the highest they've been since 2008. But wait. The boost was all due to multi-family units, up 31.1% for the month. Single-family starts were down 4.8%, although they actually are UP a very healthy 28.7% from a year ago. Analysts tell us the multi-family sector is super volatile from month to month, but they expect large gains for home building overall for at least two years. Building Permits in March were down a bit, to a 902,000 annual rate, but almost all the drop was due to multi-families. Single-family permits slipped just 0.5% for the month and are now UP 27.7% versus a year ago. The National Association of Home Builders (NAHB) confidence index went to 42 from 44 in March. But get this. The NAHB index for future single-family sales rose from 50 to 53, a very positive sign.Economists say it's OK in a recovery to see up and down indicators along the way, as long as the underlying trend is upward, which it is now in housing. BUSINESS TIP OF THE WEEK... Focus. Set goals, make decisions, get organized. Don't just watch life happen; take control of your destiny. As Yogi Berra said: "If you don't know where you are going, you'll wind up somewhere else." >> Review of Last Week DOWN... It was a volatile week on Wall Street, with corporate earnings , economic data, commodities, and global growth worries keeping investors on edge. When all was said and done, it was no surprise that the three major stock indexes closed markedly down for the week. Q1 corporate earnings were a mixed bag, with IBM missing forecasts and Microsoft beating them. General Electric's profits were in line with projections, but McDonald's missed. Google happily reported a double-digit increase in net revenue from its core Internet business. Economic data was also mixed. The New York Empire and Philadelphia Fed manufacturing indexes both missed estimates, indicating slowing activity in those regions. The NAHB Housing Market index and March Building Permits also came in lower than expected. But Industrial Production and Housing Starts both pushed past forecasts, clearly positive signs for factories and home builders. Yet crude oil and gold futures were hammered and global growth concerns returned, as China's Q1 GDP rose at a 7.7% annual rate when 8.0% was expected. The week ended with the Dow down 2.1%, to 14548; the S&P 500 also down 2.1%, to 1555; and the Nasdaq down 2.7%, to 3206.  Atypically, the heavy selling in stocks did not spur a flight to safety to bonds, which ended the week little changed. The FNMA 3.5% bond we watch ended the week up .01, at $106.09. After the prior week's soft retail and consumer sentiment numbers, national average mortgage rates edged lower for the third week in a row. The Mortgage Bankers Association put purchase loan applications at their highest level since May 2010, up 4% for the week and up 20% versus a year ago.  DID YOU KNOW?... GDP, Gross Domestic Product, is the total value of all goods and services produced in a country in a year. It equals total consumer, investment, and government spending, plus the value of exports, minus the value of imports. >> This Week’s Forecast HOME SALES SOLID, DURABLE GOODS SINK, GDP SOARS... The week should begin with solid home sales numbers for March, the annual rate of Existing Home Salessurpassing the 5M threshold and New Home Sales moving ahead nicely. But as usual, any excitement will be tempered. In this case, Durable Goods Orders for March are expected to slide 3.1%. In spite of this, the first Advanced Q1 GDP reading is forecast to show economic growth proceeding at an encouraging 2.8% annual rate. This is good news following the negative to anemic GDP growth numbers we saw for Q4. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.  Economic Calendar for the Week of Apr 22 – Apr 26  Date Time (ET) Release For Consensus Prior Impact M Apr 22 10:00 Existing Home Sales Mar 5.01M 4.98M Moderate Tu Apr 23 10:00 New Home Sales Mar 415K 411K Moderate W Apr 24 08:30 Durable Goods Orders Mar –3.1% 5.6% Moderate W Apr 24 10:30 Crude Inventories 4/20 NA –1.233M Moderate Th Apr 25 08:30 Initial Unemployment Claims 4/20 351K 352K Moderate Th Apr 25 08:30 Continuing Unemployment Claims 4/13 3.060M 3.068M Moderate F Apr 26 08:30 GDP–Advanced Q1 2.8% 0.4% Moderate F Apr 26 08:30 GDP Chain Deflator–Adv. Q1 1.6% 1.0% Moderate F Apr 26 09:55 Univ. of Michigan Consumer Sentiment–Final Apr 72.4 72.3 Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... Last Thursday Minneapolis Fed president Narayana Kocherlakota said financial market conditions requiring the Fed to keep rates super low may persist for 5 to 10 years. More cause for economists to expect no change in the Funds Rate. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus May 1 0%–0.25% Jun 19 0%–0.25% Jul 31 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus May 1      <1 span=""> Jun 19      <1 span=""> Jul 31      <1 span="">

Fed ACTS

Update:   Feds just  authorized  QE 3rd repurchase of mortgage backed securities!!!

All reports indicate action taken to further pump up home sales.  As I have stated and Jim Belote in notes such as that below has stated, housing is a major contributor to our economy....not only house purchases but the complimentary appliance, furniture, lawn and garden purchases(along with hundreds of other impacts upon economy.

So the positive news keeps coming!!  Stock Market soared  200 points(DOW) with financial stocks leading the way.

Keeping you updated on the market! For the week of  September 10, 2012 MARKET RECAP This lead in could be filed under “dog bites man,” because it's something most of us already know. We are referring to recent data from the National Association of Realtors that show the time to sell a home is shrinking. According to the NAR, the time to sell for traditional sellers is back within historic norms: the median time a home was listed fell to 69 days in July, down from 98 days a year earlier. Of course, national numbers often hold little meaning to any particular local market. In fact, the NAR's data range from one-third of the homes were listed for less than a month, while one in five homes was listed for at least six months. The positive takeaway is that more homes in more markets are selling at a quicker pace. What's more, that pace appears to be accelerating. The price of many homes listed for sale is also accelerating. Clear Capital reports that home prices are up 2.9% year over year in August. Clear Capital cites fewer REO properties coming to market due to new borrower-friendly legislation and the $25 billion lenders' settlement with the federal government. That's really only part of the story, though, and gives short sales the short shrift, because many lenders are simply finding it more remunerative to engage in short sales than foreclosure and REO sales. While we are on the subject of sales and prices, Trulia reports that national asking prices on for-sale homes, which precede actual sales prices by two or more months, increased 2.3% year over year in August. Gains were widespread, with 68 of the 100 largest metropolitan areas Trulia follows reporting price increases. Trulia's data are particularly encouraging, because they are a leading indicator of future home sales (where we are going is much more important than where we've been). Therefore, we would be surprised if home-price gains and the housing recovery were not to persist into fall. That said, lending could be the monkey wrench that grinds the recovery gears to a halt. Participation is the issue, and it is akin to the observation “water, water everywhere, but not a drop to drink.” Rates are low, but not enough borrowers are able to take advantage of them. We've mentioned many times over the past year that the issue isn't low lending rates at this point: it's a dearth of borrower-buyers. If only the same people can access credit at these low rates, these low rates become meaningless. A less restrictive lending environment would do much more to accelerate the recovery than historic low rates. Economic Indicator Release Date and Time Consensus Estimate Analysis International Trade (July) Tues., Sept. 11, 8:30 am, et $43.5 Billion (Deficit) Important. A weaker dollar is raising import prices. The trend could stimulate consumer-price inflation. Mortgage Applications Wed., Sept. 12, 7:00 am, et None Important. Purchase applications have again slowed, pointing to lower home-sale volumes. Producer Price Index (August) Thurs., Sept. 13, 8:30 am, et All Goods: 1.6% (Increase) Core: 0.3% (Increase) Important. Food and energy price increases are elevating producer inflation rates. Retail Sales (August) Fri., Sept. 14, 8:30 am, et 0.7% (Increase) Important. More retail sales points to increased economic growth. Is This the Next Bubble? An aspiring home owner who can't buy a home becomes a renter. Today's credit markets have forced many aspiring home owners to become renters. In turn, the rental market has caught fire. By some estimates, there are 2.1 million more single-family homes rented now than in 2006. It's a strong trend. Rents rose nationally 4.7% year over year in August, which builds upon the 5.8% year-over-year rise recorded back in May. In a few markets, Houston and Seattle most notably, rents are up 10% year over year. Buyers of rental homes (many paying with cash) have soaked up much of the inventory, and to be sure, that's a positive. But many of the people renting these properties would have preferred to buy them themselves, but they were precluded from buying because they were unable to secure financing. The market at this point is becoming too skewed toward rentals, which is driving up rents at an abnormally fast rate. This isn't a good thing, because abnormally fast-growing rates aren't sustainable rates. Should rents turn south, many of those investment properties will no longer be sound investments, particularly those bought late into the rising-rent trend. What's more, a neighborhood of rentals isn't as well maintained or holds its value like a neighborhood of owners. A neighborhood of rental homes tends to loose value over time; a neighborhood of owner-occupied homes tends to gain value over time. The point we want to emphasis is that we need a lending environment that encourages more of the latter; that is, more owner-occupied buying. To get that, we need a lending environment that encourages profitable, heterogeneous lending. We simply don't have that today. If you wish to unsubscribe, click on the link below and send the email. If this

Mortgage Matters: Builders Positive...Rates Going Lower????

Intriguing Mortgage Matter Update by Jim Belote with Union Mortgage!!!


Final sentence of 1st Paragragh reads: 


 " Looking ahead, the expectation is that sales will continue
     to improve over the next six months."


Discussing the news on new homes and resale homes, improving prices, the logical counter balance that occurs is well stated.  Though it could seem, there is some "negative news", read carefully.  It is all positive.


Jim closes with discussion of interest rates in the macro environment of a "sluggish" economy.  Note the summary: 
Interest Rates could hold until 2013 and perhaps go lower!!!
Now isn't that exciting!!!


Comments?? Questions???   Let me know!

Keeping you updated on the market! For the week of  July 23, 2012 MARKET RECAP Are the home builders foreshadowing the future of the housing market? We sure hope so, because builder sentiment suggests better days ahead. We say that because the home builder sentiment index surged a whopping six points to 35 in July. The monthly improvement is the largest in nearly 10 years, and it lifts the index up to where it was in March 2007. What's more, the posting wasn't skewed by a few bullish outliers. All regions reported gains. Looking ahead, the expectation is that sales will continue to improve over the next six months. When you parse the trend in housing starts over 2012, it's easy to why home builders are more optimistic. The uptrend in new home sales is finally working its way into new construction. Housing starts in June improved 6.9 percent over May. Gains were prevalent in both the single-family and multifamily components. The more-important single-family component saw starts increase 4.7 percent, while the volatile multifamily component rebounded 12.8 percent, following a 19.3-percent drop in May. The news on existing homes was less rosy, proving again the housing market is a heterogeneous market. Sales for June dropped a surprising 5.4 percent to a 4.37-million annualized rate. The lower sales pace was reflected in inventory, which rise to a 6.6-month supply from 6.4 months in May. There were still some positive takeaways. The national median sales price for an existing home rose to $189,400, a 5-percent increase over May and a 7.9-percent increase over June 2011. Higher prices might be discouraging sales on the low end of the market, but the price rise, which has been confirmed in other data sources, is good news for homeowners struggling with negative equity. We've been reporting for months now that the housing market is on the mend. More important, it's on the mend in more local markets. After all, local markets are what matter most; few of us conduct business nationally. It's reassuring to have our anecdotal evidence reaffirmed by official data. The Federal Reserve, in its latest Beige Book release, reports that the trend remains largely positive. The Fed notes that most districts reported declines in home inventories, while stabilizing and home price were becoming more of the norm. That said, many pundits and market watchers continue to worry aloud about shadow inventory. To us, though, the state of the U.S. economy is the much bigger concern. Job growth has been anemic in recent months. The latest quarterly data show that hiring by companies is the weakest it has been in two years. Unfortunately, the contraction has been equal opportunity: growth in both consumer spending and business investment have slowed. An economy that is marred by reduced spending and investing will also be marred by less hiring. Slow economic growth could spur the Fed to pump even more money into the economy. The rationale is that more money will induce more spending and investing, because there is less incentive to hold cash due to the reduced value of each note. Concurrently, more money will keep lending rates low because there is more money to lend. This sounds good in theory, but there a few issues with the Fed's easy money policy, which we'll explicate below. Economic Indicator Release Date and Time Consensus Estimate Analysis Mortgage Applications Wed., July 25, 7:00 am, et None Important. Low rates and HARP have reignited refinances, but the purchase trend remains positive. New Home Sales (June) Wed., July 25, 10:00 am, et 375,000 (Annualized) Important. Rising new home construction and sales could spur economic growth in coming months. Pending Home Sales Index (June) Thurs., July 26, 10:00 am, et 99 Index Important. The drop in existing homes sales will be reflected in a lower index reading. Gross Domestic Product (2nd Quarter) Fri., July 27, 8:30 am, et 1.3% (Annualized Growth) Very Important. Low GDP growth will incentive the Federal Reserve to continue to drive interest rates lower. Two Sides of the Same Coin Each week, mortgage rates establish a new all-time low. Is this a good thing? Many lenders and economists think so. After all, fewer dollar tied up in housing expenses means more dollars to spend and invest elsewhere. The Federal Reserve's policy of purchasing long-term bonds means mortgage lending rates will likely stay low through 2013. If the Fed injects more money into the economy by purchasing these long-term bonds with new money, rates could go even lower. The push for more money and lower interest rates is seductive, but there is another side to the coin: private capital. If investors and savers are getting paid little for tying up their money, they won't tie up their money. That means the market becomes even more dependent on government sources of financing. This, in turn, means a less diverse market. The problem with a less diverse market is that we see a lot more recycling, meaning the same people refinancing repeatedly. Granted, the latest HARP has brought new refinances into the market, but we'd like to see the market promote more borrowing driven by new buyers. We think more private capital would do that. But private capital, unlike public capital, demands a positive rate of return. Today's low rates don't provide that.

1st Timers...Buy Before FHA rates are up!!

Yes!!!  Another message on BUYING NOW!!!

Personally, I am surprised so many buyers are on the sidelines...and I do mean BUYERS that need to BUY!!

Did you know you may be among 300,000 people that graduated, got divorced, add a family member that are projected to be the "pent up market".   

Economists have been stymied by the lack of recovery in the housing market with the pressures present from those noted above that have had a life change event and the general population growth that has occured since 2007(both immigration and births) coupled with the overall increased aging of the American population.

So if great rates under 5% and bargain priced homes has kept you on the sidelines, perhaps new FHA regulations will inspire you.  In June, FHA mortgages will have a higher monthly MI(mortgage insurance premium) which will result in higher mortgage payments for home owners.

For instance, if you purchase a home resulting in a $200,000, your PMI will go from a present  $92/mth to $142/mth:  $50 increase.  

This $50/month equates to $600/year and $6000 over 10 years

Thus if you purchase a home with an FHA Loan and had the appraisal ordered prior to June 1st, you could either save the money or purchase a home up to $210,000 for a similar payment.

Any questions????

                           Ready to Move???

         Call me today...(757) 580-6546

Mortgages, Mortgages, Mortgages.

A top question of buyers is on interest rates. Though the news and reports shared in this blog have noted the pressure on mortgage rates, mortgage rate question keeps arising.


To know the answer, you just need to look the Bank straight in the eye!!!



                                         1 yr CD

                  



                                                    
Institution      APYRate                                                                                 Min Deposit 
  Ally            1.29%        Fri Jan 21            1.28 %     Compounded daily                $0

Always competitive rates. No monthly fees. Member FDIC.

Aurora          1.27%    Fri Jan 21                1.26 %   Compounded daily                  $1,000
Apply now! Bankrate.com TOP TIER Award winner. FDIC Insured.

Bank of Internet USA   1.36%      Fri Jan 21   1.35 %   Compounded daily               $1,000

Ascencia, a div. of PBI Bank  1.35% Fri Jan 21  1.34 % Compounded monthly           $500

Colorado Federal Savings Bank 1.35% Fri Jan 21  1.34 %  Compounded daily           $5,000

Discover Bank    1.30%  Fri Jan 21   1.29 %             Compounded daily                   $2,500

Incredible Bank   1.30%  Fri Jan 21   1.30 %           Compounded quarterly              $10,000

Goldwater Bank  1.26%   Fri Jan 21  1.26 %               Simple interest                      $5,000

VirtualBank        1.26%   Fri Jan 21  1.25 %            Compounded daily                   $10,000

These rates are 3/4% to 1% higher that you could have seen from any bank 3 months ago!!!


How do banks make money??? On the spread between what they pay you and me and what they can charge for interest on car loans, furniture loans, ect. THUS, IF THE BANKS ARE WILLING TO GIVE 1% MORE TO YOU ON A 1 YEAR CD, THE BANK WILL CHARGE A MINIMUM 1% MORE ON THE CAR LOAN THAN PREVIOUSLY.

Does this track perfectly to mortgage rates? Never has historically BUT they do march together up or down...never see CD rates high when mortgage rates are low!!!

The Fed continues to do QE2 purchases of Treasury Bonds to "artificially" reduce interest pressure on these bonds that compete directly with mortgage securities...$600 Billion dollars worth.

But Mortgage Rates continue to march up as the financial markets are demanding more interest return due to the competition from the Stock Market.

So can you guess what will happen when the "artificial" Fed relief on interest rate pressures gives way to "natural" market pressures???

Questions???   Pass it on or push back!!!