IS NOW A GOOD TIME TO OPEN A HELOC?

Is a HELOC a good idea

If you’re looking to fund a home improvement project, or if the economic devastation of COVID-19 has left you in need of cash, consider tapping into your home’s equity with a home equity line of credit, or ‘HELOC’.

What is a HELOC?

A HELOC is a revolving credit line allowing homeowners to borrow money against the equity of their home. Borrowers can withdraw money as needed during a set amount of time known as the “draw period,” which generally lasts 10 years. Some lenders place restrictions on HELOCs and require borrowers to withdraw a minimum amount of money each time they make a withdrawal, regardless of need. Other restrictions include the requirements to keep a fixed amount of money outstanding or to withdraw a specific sum when the HELOC is first established; however, borrowers are typically free to spend the money however they please.

Most homeowners are eligible for a HELOC with a debt-to-income ratio that is 40% or less, a credit score of 620 or higher and a home assessment that stands at a minimum of 15% more than what is owed.

How do I repay my HELOC?

Repayment of HELOCs varies but is generally flexible.

Many lenders collect interest-only payments during the draw period, with principal payments being strictly optional. Others require ongoing monthly payment toward both principal and interest.

When the draw period ends, some lenders require borrowers to pay back the entire loan “balloon” amount. Others allow borrowers to pay back the loan in monthly installments over a new time period, known as the “repayment period.” Repayment periods are generous, lasting as long as 20 years.

What are the disadvantages of a HELOC?

A HELOC places your home at risk of foreclosure if not repaid. Before opening a HELOC, it’s a good idea to run the numbers to ensure you can easily meet the payments.

Also, many lenders require the full payment of the HELOC after the draw period is over. This can prove to be challenging for many borrowers.

Finally, if you don’t plan to stay in your home for long, a HELOC may not be the right choice for you. When you sell your home, you’ll need to pay the full balance of the HELOC.

A HELOC can be a great option now

HELOCs have variable interest rates, which means the interest on the loan fluctuates along with the general interest rate, sometimes dramatically.

The economic fallout of COVID-19 has generated historically low interest rates. The average APR for fixed 30-year mortgages has hovered at the low 3% for months now, and experts predict it will continue falling. The low rates make it an excellent time to take out a HELOC with manageable payback terms.

The economic uncertainty the pandemic has generated also makes it a prime time to have extra cash available for any need that may arise.

Now may be the perfect time for you to refinance your current mortgage, from another loan provider, into a lower rate from Freedom Federal Credit Union! We offer a wide range of programs with low rates and great terms. Contact us about a refinance option that meet your needs today.

About Freedom Federal Credit Union

Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals. Learn more at freedomfcu.org or call us 800-440-4120 to see how we can help.

Your Turn: Are you looking to sell your home? Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU

Selling Your Home During COVID-19

Home Selling During COVID-19

Selling a home is a move people generally plan years in advance, and 2020 was no different. For many homeowners, the hot real estate market of spring and summer of 2020 was going to be the season they put their homes up for sale. And then came the coronavirus — and the world turned upside down. With people struggling just to get by financially, and health and safety paramount, selling a home seemed like a dream from another lifetime. Records of home sales in the U.S. from the beginning of the outbreak reflect these feelings, with a sharp decline of 21% in total homes sold in March, and another decrease of 17.8% in April, according to data from the National Association of Realtors (NAR) .

 

Now, though, the U.S. real estate market is looking very different. As the economy limps toward a recovery, many buyers are searching for a new place to call home and the housing market is thriving. In fact, national home sales climbed a record 20.7 percent in June compared with home sales from a year ago, global pandemic notwithstanding.

Despite the flourishing housing market, many homeowners who have planned to sell their homes this year are still reluctant to take that leap. And it is no wonder, with restrictions still in place and so much uncertainty still surrounding the economy.

If you have been thinking of selling your home, you still can. Here’s all you need to know about selling your house during the COVID-19 crisis.

 

Are you really ready to sell?

Before putting your home on the market, it’s important to consider all the variables involved in this step and be sure it’s a financially responsible move. With the pandemic causing a slowdown of the economy and a likely recession, life circumstances you may have relied on, such as a steady job and salary, may not be dependable anymore. Before calling a real estate agent, it’s a good idea to review all the relevant numbers to be sure that selling your home now is in your best interest.

Stage your home to sell

Anyone selling their home knows they need to showcase it in the best possible light, and never has this been truer than now. With restrictions still in place in many states and lots of people stuck home in quarantine, many buyers will be doing their touring virtually. For sellers, this means that staging and photographing a home well is more important than ever.

Here are some general tips to follow when staging and photographing your home, as shared by Buddy Mountcastle,  a real estate photographer based in Fort Lauderdale, Fla.:

  • Clean up the outside. Curb appeal is the first selling point for any home. Make sure there are no weeds, overgrown grass or kids’ toys ruining the first impression of your home.
  • Let the sunshine in. Aim to shoot mid-day. Scrub your windows clean, open the curtains and let the natural sunshine brighten up every room.
  • Undo the lived-in look. Remove all personal effects from your home before going camera-crazy. This includes stray shoes, family photos, piles of magazines, small kitchen appliances and more.
  • Shoot from the right spot. When capturing a room on camera, try to get as much of the space in the frame. Aim to include three walls, which can mean shooting from the corner or doorway. It’s also important to shoot straight and from chest height so as not to distort the room.

To make it easier for buyers to view your home, you can post a virtual tour on your online listing, and offer the option of scheduling a live tour with an agent through FaceTime or Zoom.

Play it safe

If you will be allowing potential buyers into your home, don’t forget to play it safe. Set up a box of disposable masks, shoe covers and sanitizing wipes at the door for all visitors who will be tramping through your home. If you will be hosting an open house, it’s best to allow a limited number of people inside at a time to make social distancing possible.

Price it right

Fewer homeowners are putting their houses up for sale this year, but the pool of buyers is also smaller than usual. This means you won’t be able to jack up the price of your home for way more than it’s worth. Work with an agent to look at comparable home sales in the area and to determine a fair asking price. Also, as always, list a selling price a bit higher than your actual desired price to allow for negotiations.

Closing during COVID-19

The coronavirus pandemic will likely affect every aspect of selling your home, up until the closing. With many workers in the home-selling industry, from professional home inspectors, to mortgage lenders, to movers working with a smaller team now, be prepared for various steps of the home-selling process to be delayed. It’s best to be patient and to anticipate that things may take longer than usual. This is especially true with lenders, as low mortgage rates are triggering a spike in refinance applications across the country and lenders are busier than ever.

COVID-19 has wrecked all sorts of plans, but selling your home does not have to be one of them. With some adjustments and altered expectations, you can successfully sell your home during the coronavirus pandemic.

 

Your Turn: Are you looking to sell your home? Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU

Should I Buy a House During a Pandemic?

Buying a House During a PandemicQ: I’ve been planning to buy my first home this spring, and I’ve spent years preparing for this purchase. Now that the coronavirus has had a negative impact on the economy, I’m wondering if I should go through with my plans. Is it a good idea to buy a house during a pandemic?

A: The coronavirus outbreak that has swept through the world while wreaking havoc on the national and global economy has given rise to dozens of financial questions. The uncertainty that characterizes this time is confusing the average American and financial experts alike. No one can say when this pandemic will come to an end, or what kind of lasting impact it will have on the economy. Experts can only look at past economic crises and downturns to try to predict what the short-term and long-term financial future will look like in the United States.

Let’s take a look at the mid-pandemic housing market and explore the wisdom of purchasing a home during a time of economic instability.

 

What does the current housing market look like? 
In a twist of irony, the home sales of February 2020 were the strongest they’ve been in the country since 2007, topping 5 million sales. Factors like falling interest rates and a booming economy contributed to the thriving housing market, but two months later, experts already are seeing a decline in the buying trend.

Lawrence Yun, the chief economist of the National Association of Realtors, says the market has turned sharply, adding, “The coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales.”

This downturn has likely been triggered by the economic devastation caused by the outbreak, including widespread job insecurity, thousands of shuttered businesses and millions of employees on leave from work for an indefinite period of time due to statewide and self-imposed quarantines.

The decrease in home sales is also likely due to practical reasons. When people are worried about their health and they’re trying to create a semblance of normal life while essentially being confined to their homes, it’s difficult for them to think about purchasing a new one. Meeting with potential sellers and real estate agents and looking at properties is also complicated when trying to maintain social distancing.

No one knows when the spread of the coronavirus will ease, but when it does, and normal life resumes, the market may see an increase in sales.

Does it make financial sense to buy a house now?

A dwindling housing market does not automatically mean this isn’t a good time to buy a house. In fact, times of financial uncertainty generally lead to falling mortgage rates and the ease of credit qualifications. Mortgage rates have already reached a record low of 3.13 percent in the beginning of March, prompting some buyers to rush into new home purchases. The rate, however, has since jumped back up to 3.65 percent, though it is still relatively low and may fall again.
It takes more than just a favorable mortgage rate to make a home purchase a sensible decision.

Some market experts believe the coronavirus pandemic will cause an eventual spike in home sales as buyers, fearing a recession, will want the stability and control that homeownership brings. A fixed-rate mortgage will not be subject to the peaks and valleys of a volatile national interest rate. It can also help the owner feel secure if job loss and unemployment become the norm.

Before you jump into a home purchase at this time, you may want to take a step back and look at your entire financial picture. Consider the following factors:

  • How stable is your income? If you have any reason to believe you might be facing a layoff, you may want to hold off on your purchase. Your mortgage will need to be paid each month, regardless of your employment status.
  • How long do you plan on living in this home? If you anticipate living in your new home until you’ve paid off your mortgage, it can be a great time to buy a house at a low interest rate; however, if you plan on selling within the next few years, you may come out at a loss due to a falling housing market and an unstable economy.
  • Will you have savings left after going through with the purchase? As the economy heads toward a probable recession, this is not the best time to be without a savings cushion.

The coronavirus outbreak has destroyed all kinds of plans, from vacations to weddings, parties and more. That doesn’t mean you need to put your plans of buying a house on hold. If you can comfortably afford the purchase and your income isn’t threatened by the economic instability, the favorable interest rates and looser qualifications can make this a good time to buy a new home.

Your Turn: Are you on the market for a new home? Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU