The Return of Equity Lending
By
Jayson Stebbins Mortgage Professional
Jayson Stebbins is a 21-year veteran of the Mortgage Banking industry and an Accredited Mortgage Professional through the Mortgage Bankers Association . He grew up in Morgan Hill and currently lives in Gilroy . He is the local Branch Manager of Guild Mortgage , a 54-year-old Mortgage Banking firm . His office is in Morgan Hill and serves all of Santa Clara , San Benito , and Monterey counties . You can reach Jayson and his Team at 408-782-8800 or jstebbins @ guildmortgage . net .
As lending would have been
recently as two years ago , a conversation about equity
unrealistic . Now after a steady and quick recovery , we are looking at the opportunity to once again borrow using equity in our homes .
Here is the voice of warning : just because we can , doesn ’ t mean we should . One of the traps commonly sprung during the early 2000 ’ s was using the equity in our home like an income stream ; pulling it out as needed to finance lifestyle choices or improvements , assuming value would always continue to grow . We have all learned our lesson , and caution is the best option .
There are still plenty of good reasons to celebrate the equity recovery , and plenty of ways that it can benefit a homeowner .
Reasons for equity use :
• CONSOLIDATE DEBT – this is especially true if you are carrying high interest rate debt on Credit Cards or signature loans . The cost of money via an equity line or cash out refinance usually makes the math work , assuming you have the discipline to stop using your cards after you pay them off .
• HOME IMPROVEMENTS – using your equity to help do improvements around your home , correct some deferred maintenance , or even upgrade some features to improve the value of your home ; all of these can be wise uses of equity .
• EMERGENCY FUND – some people will pull an equity line but not draw on it , just to have it there as a backup for emergencies such as illness , job loss , car repair , etc .
• MISCELLANEOUS – finance an education , purchase a car , cover medical bills , buy more property , etc .
Reminder : Equity use is about budgeting and money management . Make good decisions that will benefit you both in the short and long term .
How to access your equity :
• CASH OUT REFINANCES – you can refinance your first mortgage and at the same time pull out cash from your home . This is a good option if you are paying off debt , or have a very specific amount you need . It also helps if you can lower your interest rate , eliminate Mortgage Insurance , or shorten your loan term at the same time .
• HOME EQUITY LINE OF CREDIT ( HELOC ) – this is a standalone line of credit against the house that is usually designed to be used and paid down much like a credit card . The rate will be higher than market and usually the payment is interest only . This is a good option if you are using it for home repair , but unsure of the amount you will use . Also if you are good at budgeting and paying off the debt quickly .
Most lenders cap the amount of financing at 80 % of the home value when it comes to equity lending , so check with your local Mortgage Professional . Running the numbers to see if it makes sense for you is always free . Be prudent and your equity can really work for you .
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