Do You Own, or Are You Selling?[cite::98::cite]

This isn't your first rodeo, so here's some information to help you consider other things that will help you maintain, refinance, sell, or add value to your home.

Maintain and Add Value to Your Home

Adding Value to Your Home

Thinking through your future goals is helpful when considering home improvements. Many times we add things to our home, not just for our own enjoyment but expecting to enhance the value of our property. Unfortunately, the value doesn’t always increase enough to match costs of your upgrades.

Inexpensive Ways to Improve Your Home

Some inexpensive ways to improve your home include:

  • Painting
  • Care and maintenance of your landscaping
  • Replacing knobs and door pulls on kitchen and bathroom cabinets
  • Refinishing your front door
  • Replacing door knobs throughout the house

More Options to Improve Your Home

More extensive (and expensive) options include:

  • Remodeling the kitchen or bathrooms
  • Converting an unused den into an office
  • Adding a deck or patio

Available Grants and Assistance Programs

There are many options open to you if you are looking for a grant or loan program. Go HERE to get more information.

Quick Tip: DIY

Be sure you know exactly what a project involves before tackling it on you own.

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Second Mortgages and Reverse Mortgages. Borrowing Your Home’s Equity

There are a few ways you can borrow against the equity you've built in your house.

A Home Equity Loan

A home equity loan is a loan secured by a subordinate mortgage on your principal residence. Home equity loans are most commonly referred to as second mortgages, because they’re usually in second lien position, but can be held in first or third.

A traditional home equity loan provides lump-sum proceeds at the time the loan is closed. There is a difference between a home equity loan and a home equity line of credit (HELOC) A home equity loan typically has a fixed rate, a fixed term and amortized payments, while a HELOC has a variable rate and is open ended.

A Home Equity Line of Credit

A home equity line of credit (HELOC) is an open line of credit that uses your home as collateral. This is different from a home equity loan in that once a maximum loan limit has been established, the available funds can be withdrawn at the homeowner’s discretion. A HELOC is generally in second lien position, but can also be in first or occasionally third position. A HELOC typically has a variable interest rate and often requires only a minimum monthly payment.

Reverse Mortgages

Home Equity Conversion Mortgages (HECM), more commonly called reverse mortgages, are available to individuals age 62 and older. The homeowner doesn’t have to repay the loan until the property is sold, vacated, or the owner passes on. An HECM is a popular choice for retirees.

An HECM releases your home’s equity and convert it to available funds. The amount of the loan is based on the value of the home, the age of the borrowers and the current mortgage owed, if any. There is a purchase HECM as well as refinance HECMs; thoroughly investigate which option is best for you.

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Using Your Current Residence As An Investment

Converting Your Primary Residence to a Rental Property

When purchasing a new or second home, many borrowers keep their current residence as a rental or investment property.

If you’re considering doing so, it’s important to consider the laws regulating property management. It may be beneficial to consider hiring a property management company. Ask yourself if you have the time and knowledge to treat your home as a business.

Typically, to use the rental income for qualifying purposes, you must have at least 75% loan-to-value (LTV) for FHA or 70% LTV for conventional loans in the new rental property as evidenced by an appraisal no older than 6 months. Many times you must have 6 months of house payments in savings.

Quick Tip: Income Qualification

You can only use 75% of the gross rental income for income qualification.

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Refinancing Your Home Loan

Cash Out Refinance

Cash out refinance refers to a loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. Cash out refinances are a common way for homeowners to access the equity in their property. Keep in mind, the lender may charge a higher interest rate with this type of transaction.

Refinancing a first mortgage and second mortgage into one first mortgage can be considered a cash out transaction.

No Cash Out Refinance

A no cash out, or rate and term, refinance is a loan that pays off the existing mortgage principal, interest due and usually the settlement costs associated with the transaction. It doesn’t provide the borrower with any cash at closing. This refinance is done primarily to lower the interest rate, convert a variable interest rate to a fixed interest rate or change the term.

Quick Tip: Income Qualification

You can only use 75% of the gross rental income for income qualification.

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Selling Your Home

Hiring a Listing Agent

It’s important to set realistic expectations when selling your home. An experienced real estate agent may be knowledgeable about market prices in your area and can offer solutions to help your home sell. A good agent is able to discern marketable features about your home and can focus on these key items. An agent may also be able to expose your home in more locations, such as in real estate magazines, online and on the multiple listing service (MLS).

Before you hire an agent, personally interview at least 3 agents. First get recommendations from friends, family and neighbors. Look on the web, in home magazines and the local newspaper. The interview is simply an opportunity for you to meet the candidate and explain your needs, it need not be formal. Agents should come prepared.

For Sale By Owner

Sometimes homeowners will opt to sell their home on their own rather than hire a real estate agent. This can represent a significant savings as a real estate agent’s sales commission can cost up to 6% of the transaction. Some sellers use this benefit as a selling incentive. Before listing your home, you may want look at your home from a stranger’s viewpoint. It might be a good idea to spend some of the money you will be saving on repairs and staging your home.

Home Staging

Home staging is the process of making your home more appealing to hopefully shorten the time it takes to sell. Staging focuses on improvements that give the property more appeal to buyers. Cleaning, uncluttering and fresh paint can be a good start to staging your home. Small gestures such as opening blinds to allow light in and baking fresh cookies can help a buyer to envision living in your home.

Quick Tip: Sell It

Curb appeal is an important part of home staging, make sure your yard is free of clutter and maintained.

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Downsizing means moving into a smaller home. Homeowners downsize for a variety of reasons. It’s more common for retirees to move into smaller properties, but younger people also downsize for a variety of reasons.

There are advantages and disadvantages to moving into smaller living spaces. Financially, a smaller home may reduce utility costs, property taxes, homeowners insurance and your mortgage payment. Downsizing may free up time that was spent on yard work and house cleaning.

If you meet IRS requirements, you may be able to take advantage of a tax-free gain of up to $250,000 when you downsize. Consult a tax advisor for information and to advise you on all IRS requirements. Weigh all financial and non-financial effects before making a decision.

Quick Tip: Know Before You Downsize

Disadvantages to downsizing may be that a smaller space may require you to reduce your number of personal belongings and change your lifestyle.