RE/MAX 440
John F. O'Hara

John F. O'Hara
731 W Skippack Pike  Blue Bell  PA 19422
Phone:  610-277-4060
Office:  215-643-3200
Cell:  267-481-1786
Fax:  267-354-6973

My Blog

6 Ways to Finance a Renovation

May 9, 2016 1:03 am

(BPT)—If you're planning to take on a home improvement project, you're in good company. A recent report by the Joint Center of Housing Studies at Harvard University predicts that the home improvement industry is expected to post record-level spending this year. As you prepare for your renovation, it’s important to review your financing options based on the size of the project, your intended repayment plan and whether you plan to use a contractor or do it yourself. Some financing options to consider:

Home Equity Line of Credit (HELOC) - A HELOC can provide ongoing access to funds using the equity in your home, which typically results in lower interest rates than unsecured credit. This type of credit may also provide you potential tax benefits. Consult your tax advisor regarding the deductibility of interest.

Mortgages with Built-In Renovation Financing - These loans help homeowners complete renovations with a loan amount that is based on an appraiser's estimate of what the property value will be with completed improvements. This is also an option for aspiring homeowners who purchase properties that need repair. Whether a home purchase or a refinance, this option finances the renovations and mortgage in one loan.

Cash-Out Refinance Mortgages - A cash-out refinance replaces your current mortgage with a new and larger mortgage that pays off your current balance and allows you to use the equity in your home to provide additional funds for other purposes.

Credit Card - Credit cards can be used for large or small purchases and may earn rewards, which can add up to significant benefits when you're making big home improvement purchases. However, credit cards often have higher interest rates than other loan or credit options, which should be taken into consideration.

Personal Loans and Lines of Credit - These personal credit options typically offer quick credit decisions and access to funds in a day. Lines of credit provide ongoing access to funds.

Savings - If you have a do-it-yourself project or a small renovation, accessing your savings might be an option. By paying cash, there is faster access to funds and nothing to repay.

Your bank may not be the best source for what color to paint your room or which walls to move, but it can help you identify your financial options. Each option has its associated benefits and considerations, and your bank can provide valuable information to help you make informed decisions about which options are right for you.

Published with permission from RISMedia.


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Retiring Homeowners FAQ: What the Heck Is a HECM?

May 6, 2016 12:54 am

The number of retiring homeowners is projected to expand exponentially in the coming years. Maximizing your real estate investment can help underwrite retirement expenses. For your consideration: the Home Equity Conversion Mortgage (HECM).

HECM is the Federal Housing Administration's (FHA) reverse mortgage program, which enables homeowners to withdraw some equity in their home in a fixed monthly amount, a line of credit, or a combination of both. 

To be eligible for a FHA HECM, you must:

• Be a homeowner 62 or older;
• You must live in the home;
• Own your home outright, or;
• Owe a low mortgage balance that can be paid off with proceeds from the HECM, and;
• Have financial resources to pay ongoing property charges like taxes and insurance.

You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.

A longevity annuity can also be a useful tool. Retirees aged 65 could draw $3,000 a month to age 100 with assets of $600,000, at which point their assets would be fully depleted. Retirees could use $200,000 of their nest egg to purchase a longevity annuity that begins payments of $3,000 after 10 years. These same retirees could draw on a reverse mortgage credit line to bolster their retirement income, as long as they had sufficient equity in their home.

Retirees with equity in their home who depend on pensions (rather than a nest egg of financial assets) can supplement their pension income using a HECM reverse mortgage in either of two ways. One way is to exercise the “tenure” option under the HECM program, and receive a fixed annuity payment for as long as the retiree remains in the house. The second way is to exercise the credit line option, using some or all of it to purchase an immediate annuity from a life insurance company.

You can find a HECM counselor online at HUD.gov, or by phoning 800-569-4287.

Published with permission from RISMedia.


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