The biggest perk of being a homeowner is you can build home equity over the period of repayment. As you pay the mortgage your equity in a home increases simultaneously. Additionally, a Home Equity Line Of Credit (HELOC) is a financial product enabling homeowners to borrow a chunk of that equity against their homes. If you are someone who is thinking of using HELOC apart from securing a second mortgage loan; read our blog about why avoid using your home equity line of credit. And make a decision later.
What Is Home Equity?
Home equity or also known as real property value is the unencumbered interest of a property. It is the difference between your home’s worth and the outstanding balance of all credits on the property.
Example – Your home’s worth is $300,000 and you’ve paid $25,000 of the mortgage. Additionally, you’ve put down 20% ($60,000) which signifies you have $85000 equity in the home.
What Is A Home Equity Line Of Credit?
A HELOC (Home Equity Line Of Credit) is similar to a credit card. Although the limit is purely based on the equity you have in your home, most banks offer about 80% of your equity. HELOCs often have a lower interest rate in comparison to other loans and the interest may be tax-deductible.
As HELOCs have a lot to offer, using them for leisure and entertainment can be an indicator that you are misusing the allowance. Even if the HELOC is cheaper than a credit card, it is still a debt that must be avoided for funding a luxurious lifestyle. Given are some of the activities you must avoid while using your home equity line of credit.
Paying For A Vacation
Adding to other activities, spending your home equity line of credit on a vacation can be a bad decision. HELOCs are a source of cheaper debt in comparison to other kinds of credits, people use them for sponsoring trips. Also, the HELOC offers interest rates below 6% whereas credit cards may be on the steeper end offering 14%-25% interest rates. When you borrow from the home equity you are only aggravating the issue, as you may be risking your home while using HELOCs.
Buying A Car
There was a time where HELOC rates were reasonably cheaper than auto loans. Eventually, the cheaper rates enticed people, enabling them to use HELOCs although it’s not the case anymore. Furthermore, buying a vehicle or car, in this case, is a bad idea for many reasons. When you take an auto loan with a HELOC your loan is secured by the car you purchased. If your financial condition worsens you may end up losing the car. Additionally, if you’re unable to make repayments you may also lose your house. Adding to the rest, an automobile is a depreciating asset.
Paying Off Credit Card Debt
When calculating your repayments paying off expensive debt with cheaper debt may make a lot of sense. However, in some cases, this debt transfer can skip the underlying issue, which is a lack/shortage of income or inadequacy to control spending. It is vital to understand what led you to create credit card debt in the first place. You can only pay a credit card debt if you have the discipline to pay the principal of the loan initially.
Paying For College Education
The primary reason for people using HELOCs as mentioned above is because it’s cheaper than other credits. This makes it a big reason for using it for your child’s college education, however, using HELOCs may put your house at risk. You may have to think twice before using the home equity line of credit as it may risk losing your house. Additionally, if the amount is significant and you’re unable to pay the principal within 10 years. You may carry the added burden of mortgage debt into retirement.
Investing In Real Estate
Should I invest in real estate with HELOCs? The ultimate answer to this question is that it’s a risky proposition. There are many uncertain circumstances that may affect this decision. Reasons like sudden renovation, or a downturn in the real estate market, etc. can be a pitfall. Due to the same reason, many people have been trapped in debt, which makes repaying a tough task.
Bottom Line
There are many other ways to fund your requisites apart from HELOCs may it be for education, getting a car, or planning a trip. It is best to avoid using the home equity line of credit and use your savings or other available credit options. Furthermore, if you want to sell your house fast you can get in touch with Elite Properties. We are a cash buying company offering fast closings and no-obligation offers. Call us today at 718-977-5462 to know more.
You might be doing all things right to sell your house starting from decluttering extra stuff to carrying out improvements. Although, all your pain and time may go to waste and won’t make a difference to a potential buyer, reason, or bad neighbors. Buyers these days do not miss a single point whether it’s asking about the history of the house or negotiating terms with home sellers. One of the points that a smart buyer won’t miss is checking the neighborhood and the neighbors. Sometimes living in a good area is not enough if you have loud, disrespectful, and rude neighbors that bring down the impression of the neighborhood. If you are facing the same issue and can’t sell the house due to bad neighbors? Here’s what to do.
Talking To Your Neighbors
Communicating can solve any bitter relationship and it may also solve the problem from the root cause. Talking politely about any issue to your neighbor can avoid retaliation situations. You can bring up the topic of selling your house and explain to them your situation. This might diffuse the old problems and smoothen the tiring home sale process. Make sure to be reasonable with your request and assure yourself that reaching out to them in the first place is probably for the best.
Offer To Help If Required
Very often your neighbors may have an unsightly lawn that probably is not mowed for more than 6 months. This is just one scenario, they might have junk outside their house or garbage lying all over. In such circumstances, you can offer them help in moving the junk, helping to mow the lawn, or cleaning the garbage. Offering help may take up a lot of your time and money, whether it’s calling for lawn maintenance or a junk removal service. By doing this you are not only helping your neighbors but, also making way for a profitable home sale.
Seeking Outside Help
Let us agree that we all can be a little noisy sometimes but, if you have a loud neighbor who is consistently noisy, it can be a problem. If this is the case, and your neighbor resides in a rental property you can find out the owner of the property and inform them about their tenant/s. On the other hand, you can contact the homeowners association and find out the noise ordinances. You can check if the neighbor is violating any ordinances by yourself before contacting any agency outside. There are certain guidelines set by the homeowner association regarding the maintenance of homes in certain neighborhoods.
Raising Concern To City Or County
At times, people face bad circumstances where the neighbor can trespass on their property directly or indirectly. In such a case, you’d want to raise the concerns and take it up with the authorities. However, you may want to check your municipality’s code enforcement and noise statutes. Post which you can report to the police or concerned officials if there are any violations.
Sell Your House To Cash-Buying Companies
We understand that selling your house comes with a lot of responsibilities. Your hands may already be full of staging and decluttering stuff. Although, you may want to check the area where you reside too. Identify the problem areas and start working towards them for a better sale. It’s not just neighbors that can be a potential problem but also the neighborhoods.
If you are still unable to sell your house fast due to the constraint of strict deadlines you can consider selling your house to Elite Properties. We are a cash-buying company, which means we buy houses as-is without the concerns of bad neighbors in any location and condition. Sell your house to us and rest assured we offer the best cash offers based on a fair market price. Call us today at 718-977-5462 and sell properties with us.