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Dallas, Richardson, Garland, Plano and Sachse luxury homes for sale in Texas, real estate listings, new construction & relocation information.
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Greg Foster
Real Estate Services
469.358.8569
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The Michael Group
9669 N. Central Expressway, Ste 290
Dallas, Texas 75231
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Information on
Dallas, Richardson,
Garland, Plano and Sachse
Texas real estate.
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Financial Health
This can be an especially problematic situation for homeowners now. The equity you acquire in the life of your
home ownership is hugely important to your financial future and stability. Refinancing to pull out equity on a
home used to be restricted to very narrow guidelines, but in 1998 the laws changed in Texas allowing home
equity loans for a variety of reasons. Consequently there have been an abundance of mortgage brokers coming
after your equity. It’s often tempting to use an equity loan due to the current tax benefits available but one
should be careful to balance the actual market value to the appraised value a lender is willing to issue in order to
loan you more money.
For example;
A home is appropriately valued at $150,000. The homeowner has a loan balance of $100,000. The finance
company can give up to 80% of appraised value. At a value of $150,00 that would be $120,000 minus the
$100,00 balance, equals $20,000 the company can loan you. Now, if you’ve been a pretty good credit risk up
to that point, the lender is confident you’ll make your payments on the refinance so they’ll have no problem if
the appraiser that they hire comes back with an appraisal about 10% higher than actual market value. Appraisers
have latitude to make appraisals based on comparative sales over the last 6 months, actual replacement costs,
much like an insurance appraisal and using subjective criteria as well. Thus the available amount to lend you is
now $32,000. (150,000 + 15,000 = 165,000 x .80 = $132,00-$100,000)
Because of the refinance fees on many packages, when it’s time to move, particularly if you have to sell in the
next couple of years, you can be hurt significantly. Particularly if you have less real equity. You home will still
sell only for the $150,000, even though your appraisal for refinance is larger. There are many good, sound reasons
to refinance, but before you do make sure you have the right information to base your decisions on. Know
your actual resale vale, not just the appraisal for refinance value. Develop your refinance plan based on actual
sale data. Or if necessary, seek alternatives. Short-term options can sometimes be the wiser choice and often at
good interest rates. While personal unsecured loans may cost you more in the short run, you may pay heavily if
you want to sell your home sooner than 5-7 yrs. after refinancing.
Related Topic
Energy Efficiency
Download complete Home Value Report
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