Category: Personal Finance

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

If you’re a homeowner, your mailbox is probably piled high with offers to “get the cash you need fast” with a home equity line or loan. It’s easy to understand why; with attractive rates, borrowing flexibility, and tax benefits, home equity borrowing can truly be a smart way to get the affordable money you need to finance life’s expenses.

Yet, even with all those benefits, home equity borrowing may not be the right decision for everyone. The housing recession several years ago was proof of that, as homeowners took out home equity loans only to see the values of their home decline, leaving them underwater and drowning in debt.

If, however, you have equity in your home and you use it wisely, you might be able to use a home equity line or loan to strengthen your financial situation. Here are four smart ways to do this:

Home renovations. The wisest use of home equity credit for home improvements involves renovations that add to the value of your home, such as a kitchen remodel or the addition of a bathroom. It’s important to note, however, that there’s a limit to the value they add, so you want to be conservative in your remodeling efforts. Home improvements that are cosmetic only, such as landscaping or adding a swimming pool, may not increase your home’s value.

Debt consolidation. Are you carrying extra debt, such as high-interest credit card debt?  Consider consolidating your balances with a home equity line or loan, which might allow you to lower your monthly payments and the interest you’ll pay over the life of your debt. If you do this, be careful not to run up new debt with your credit cards.  Otherwise, you could worsen your financial situation and end up putting your home at risk.

Emergency expenses. Life is unpredictable and there may be times when you get hit with unexpected expenses, such as medical bills or costly car repairs. In these situations, having a home equity line of credit can be a smart and more affordable way to handle these expenses.

College financing. With the lower interest rates and potential tax savings, home equity borrowing may also be a more affordable alternative to parent and student loans for financing your child’s education. Keep in mind, however, that you shouldn’t tap the equity in your home for your child’s education if it will put you at greater financial risk later on in life.

Depending on the situation, there may be other smart uses of home equity, such as starting a business or investing in a second home or property. The important thing to remember about home equity is that you should always use it wisely, and not for frivolous purchases of things you don’t really need or can’t afford. Otherwise, your debt could pile up faster than those offers in your mailbox!

by Vince Liuzzi
Executive Vice President and Chief Banking Officer, DNB First

Spring isn’t just the start of baseball season; it’s also the beginning of another big season – the spring home buying season. And just like baseball, the home buying season can be highly competitive, as multiple buyers often compete for the same home.

What can you do to put yourself in better position to get the home you want – and get a leg up on your competition? Here are seven smart moves you can make:

1. Tend to your credit. Good credit is key to obtaining a mortgage and the best possible rate, yet many borrowers don’t deal with their credit until they apply for a mortgage. Before you begin shopping for a home, get a copy of your credit report to ensure it’s accurate and to rectify any problems.
2. Get pre-approved. One of the most important steps you can take to improve your negotiating power with a seller is to get a pre-approval from a lender. A pre-approval is a conditional approval from a lender that demonstrates that you’re a qualified buyer, giving you an advantage with sellers over your non-pre-approved competition.
3. Set a budget. Determine how much you can afford before you start shopping for a home. You may be pre-approved for a higher mortgage amount, but you may not feel comfortable making higher payments. Review your debt payments and the amount you will put up for a down payment.
4. Treat your home as an investment. Your home may very well be the largest investment you make in your lifetime. As such, you’ll want to make sure that you’re investing your money wisely. You wouldn’t want to overpay for a home that’s in need of significant repairs. That’s why it’s important to do your homework to determine how much the home is really worth.
5. Connect with the seller. Many sellers are passionate about their homes and want to know that the new buyers will take good care of the home. One way to forge a personal connection with the sellers is to include a letter with your offer to tell them about yourself and why you love the home.
6. Get a buyer’s agent. An agent can help you with the paperwork and give you valuable advice on how to make the best offer for your situation.
7. Prioritize home features. Most of us would love to find a home that meets all of our qualifications, but those who have gone through the process know that you sometimes have to make concessions. Determine the features you absolutely require in a home and prioritize them.

By taking these simple steps, you just might gain a negotiating advantage and score that perfect house.