Advantage | California Current

I recently wrote about the Mortgage Reform legislation for California that was vetoed by Governor Schwarzenegger and I wanted to give you some positive responses. One of the main issues this reform addressed was the increased restrictions over California mortgage brokers; it would take preventive steps to cure some of the mortgage lending problems we encountered in the recent years.

Many people were disappointed by the veto for various reasons. I won’t go into detail or justify any of these political standings. But I will offer this piece of universal generalization; no one wants home owners to get taken advantage of. Yes, the legislation would have addressed many issues. Fortunately, there are still many things you have control of to make you are not take advantage of. Here are three simple tips any home owner can follow:

1. Do your research

Negative amortization loans, interest only loans, adjustable rate loans. “Creative lending” has caused California quite the headache as many homeowners are now realizing what these loans actually mean. These loans exist for a reason, so make sure you understand the reason behind them. By doing so, you’ll be less likely to sign for these loans simply because of a sales technique or marketing tactics.

2. Ask and Ye Shall Receive - Not Quite

Don’t get anxious or overbearing, just be cautious. Question your broker. Question the Lender. Question the Docs. Don’t be afraid to ask a question if you don’t understand. This is one of the biggest financial decisions you’ll make in one of the most chaotic markets in history. By asking questions along the way, you’ll stand a much better chance of receiving the loan terms you originally asked for.

3. Stop and Think. Relax then Focus.

Take a moment and seriously consider the decisions you are about to make. I’m not saying to take your sweet time - in fact, time isn’t on your side given the volatility of the mortgage market. But don’t just sign anything that comes your way. There’s a lot of pressure going both ways during a mortgage transaction and things can get pretty crazy pretty fast. Time is of the essence, but rushing won’t get you anywhere.

While we didn’t get the actual legislation to curb some of these predatory practices, there are many ways you can protect yourself. Follow these simple steps in your next mortgage transaction and you’ll avoid a lot of the headaches without any fancy bills or legislation.

(6 votes, average: 4.67 out of 5)

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Lenders are seem to be putting HELOCs on the back burner as home prices continue to slide, but HELOCs are still great options for those looking to borrow. If you can qualify, here are five common benefits borrowers find in their HELOCs

Low Interest Rates Compared to Credit Cards and Personal Loans
Although HELOC rates are nothing outstanding in the mortgage arena, they are almost spectacular compared to credit cards and personal loans. Consider it a reward for owning a home, but a HELOC can truly save you some cash if you have considerable debt on high interest rate accounts. Just remember though that a HELOC is secured debt whereas credit cards are unsecured debt; so if you default on a HELOC, you do risk losing your home.

Higher Credit Limits
Most people do not have the luxury of having six-figure credit lines but with a HELOC you will enjoy a decent sized credit limit. Granted you have the equity, HELOCs can easily be issued lines nearing $200,000. Now, don’t go crazy just because you have that celebrity style credit line. But, if you have medical bills or home improvements waiting, a HELOC can support you where most credit lines might not be able to.

Tax Deductions
While a HELOC resembles a credit card in the way it is issued and advertised, don’t forget that it is still a regular home loan with mortgage interest. Your individual tax benefits will be unique to your own situation, but mention it to your CPA when taxes are due and claim those deductions. Your deductions will be based on the amount of the HELOC and also how it was used. (i.e. purchase, home improvement, general cash out) Let’s see you try to claim some of that interest from your last credit card statement.

Low Fees
It is common for lenders to offer HELOCs with no application fees or appraisal costs - be sure to also shop around as lenders will offer HELOCs with varying options. By taking out a HELOC, you can save yourself thousands in closing costs and fees by not having to refinance your entire loan.

It’s There When You Need It
When you get a HELOC, you are issued a line of credit and can use this line however you please in the future. So while you might have a $150,000 HELOC, you might have only initially borrowed $15,000; that means you have a remaining $135,000 at the tip of your fingers. This could be great if you were thinking of making home improvements, but weren’t planning on doing so immediately.

So, if you are in the market and can take advantage of some of these key benefits - obtaining a HELOC may just be the right move for you. Read more about shopping for your HELOC.

(6 votes, average: 4.83 out of 5)

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