Time to tap your home’s equity? Banks are making it easier.

The New York Times’ Vickie Elmer writes about good news for potential home equity borrowers.
mortgage refinance title insurance closing heloc
Seems that the Office of the Comptroller of the Currency “noted that one in five lenders nationwide loosened up underwriting standards on home equity loans, while another 68 percent kept them unchanged from a year ago.” That’s a big improvement over 2009.

“Lenders also have been lowering the credit scores and equity levels needed to qualify, industry experts say. “You may not need to have as much equity as lenders may have demanded two years ago, when housing prices were going to fall,” said Keith Leggett, a senior economist at the American Bankers Association. This is especially true, he said, in areas where home prices are appreciating.”

Advice for tapping your home’s equity-

“Borrowers must decide whether they want a traditional home equity loan, sometimes called a second mortgage, which has a fixed interest rate and fixed payments, or a home equity line of credit, known by its acronym, Heloc. A line of credit usually has a variable rate and can be drawn down incrementally. The variable-rate Heloc is one and a half percentage points lower than the fixed-rate home equity loan, which in turn is around three percentage points above the average 30-year fixed-rate conventional mortgage.”

Once you are approved for a home equity loan, you will have to select a title agency to close your loan. For my two cents, avoid the one recommended by the lender because experience shows that borrower’s need the personal touch when it comes to closing the loan, not some production line outfit. Personal service, that’s something we’re proud to be able to provide.

Read the full article here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Using your home to get rid of $80,000 in credit card debt

Bankrate.com’s Steve Bucci is its Debt Adviser. He answers a question from someone with an $80,000 credit card bill.

Dear Debt Adviser, I am considering refinancing my mortgage. My plan is to take cash out in order to pay off my credit card debt. I owe $80,000 on credit cards, which is actually more than the $63,000 I owe on the house. Would this be a well-advised move, in your opinion? I can very easily handle the new monthly payment. With the savings from not making credit card payments I can make additional payments on the mortgage principal. My current mortgage has 11 years remaining, and the new mortgage would be for 15 years. So in other words, I'd be paying my house off in about the same time frame, anyway. I appreciate your advice. -- Robert

Before he answers, Mr. Bucci has to pick himself up from the floor. Here are the highlights from his response.

Dear Robert, Before I answer your question, I must make a comment: $80,000 on your credit cards?! Because I am the Debt Adviser, I can't help but address your $80,000 in credit card debt first. That is a huge amount of debt. Before you do anything, I want you to seriously analyze how you acquired so much debt. Before doing anything, you must be very sure that you can live day to day without racking up another $80,000 in new debt after any refinancing.

First, remember that the refinancing will not really pay off anything. It will just move your debt around. Furthermore, it could end up hurting you ultimately. That's because your $80,000 in credit card bills will be converted from an unsecured debt to a mortgage secured by your home.

The real message here is that Robert could lose his home over a debt that could be cleared in bankruptcy if everything hit the fan. But there are refinancing options.

Let's say you decide to do a traditional 15-year fixed-rate refinance of your existing mortgage with a cash-out option to pay off the $80,000 credit card debt. If so, I would encourage you to organize your budget so you can repay the loan in five to seven years. As an alternative, depending on the current rate of interest on your existing mortgage loan, you might consider using a home equity line of credit, or HELOC, instead of obtaining a new, larger first mortgage. The HELOC interest rate would likely be lower. You should be able to pay off the debt in a shorter period of time. That would save you on interest payments. It will also reduce the time period where you'll be most at risk to financial surprises like illness or a layoff. My experience is that as soon as you make yourself vulnerable to a problem, it shows up.

A traditional refinance may be the best option if your goals are to: first, get a lower rate on your primary mortgage, and second, pay off the credit cards. However, if you already have a fairly low interest rate on your mortgage, a HELOC might be the better option. I want you to lose your debt, not your home. So here's an added note of caution: You are taking on added risk with either a HELOC or a mortgage. You are moving a rather large debt from unsecured terms -- credit card accounts -- to a secured loan using your home as collateral. If for any reason you default on your new loan, your home is at jeopardy. I've seen enough unexpected things happen to otherwise smart people because they took on a risk they didn't understand.

There is also a tax risk. If the unthinkable should happen and you go into foreclosure, the $80,000 used to pay off your credit cards would not qualify for debt forgiveness under the Mortgage Forgiveness Debt Relief Act. The result: You would owe income taxes on the $80,000 when you can least afford it.

 Read the full article.  To ask a question of the debt adviser, go to Bankrate.com.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com