Seller – The Korwels Team

Unlock Your Home’s Hidden Potential

A Comprehensive Guide to Leveraging Your Equity

Your home is more than just a place to live; it’s a valuable asset that can provide significant financial flexibility. Over time, as you pay down your mortgage and your home’s value appreciates, you build equity – a powerful resource you can tap into for various financial needs. This blog post will explore how you can leverage your home equity through Home Equity Lines of Credit (HELOCs) and refinancing, providing you with the knowledge to make informed decisions about your financial future.

Understanding Home Equity

Home equity is essentially the difference between your home’s current market value and the outstanding balance on your mortgage. For example, if your home is worth $500,000 and you owe $200,000 on your mortgage, you have $300,000 in equity. This equity represents a significant portion of your net worth and can be a powerful tool for achieving your financial goals.

Why Leverage Your Home Equity?

Leveraging your home equity can provide access to funds for various purposes, including:

Home Improvements: Renovating your home can increase its value and improve your quality of life.
Debt Consolidation: Consolidating high-interest debt, such as credit card debt, into a lower-interest loan can save you money.
Major Expenses: Covering unexpected expenses, such as medical bills or education costs.
Investment Opportunities: Investing in real estate or other ventures.

Two Primary Methods: HELOCs and Refinancing

There are two primary methods for accessing your home equity: Home Equity Lines of Credit (HELOCs) and refinancing.

1. Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit secured by your home equity. It functions similarly to a credit card, allowing you to borrow funds as needed up to a pre-approved limit.

How it Works:
- You apply for a HELOC with a lender, who will assess your creditworthiness and home equity.
- If approved, you’ll receive a line of credit with a specific limit.
- During the draw period (typically 5-10 years), you can borrow funds as needed.
- After the draw period, you enter the repayment period, where you repay the outstanding balance plus interest over a set term.
Advantages:
- Flexibility: You can borrow funds as needed, making it ideal for ongoing projects or unexpected expenses.
- Lower Interest Rates: HELOCs typically have lower interest rates than credit cards or personal loans.
- Interest-Only Payments: During the draw period, you may only need to make interest-only payments, reducing your monthly expenses.
Disadvantages:
- Variable Interest Rates: HELOCs often have variable interest rates, which can fluctuate with market conditions.
- Risk of Foreclosure: Your home serves as collateral, so failure to repay the loan can result in foreclosure.
- Discipline needed: It is very easy to overspend.

2. Refinancing

Refinancing involves replacing your existing mortgage with a new loan, often with better terms or to access your home equity.

Types of Refinancing:
- Rate-and-Term Refinance:
  - This is the most common type of refinance.
  - It allows you to change your interest rate, loan term, or both.
  - Benefits: Lower monthly payments, reduced interest costs, or a shorter loan term.
- Cash-Out Refinance:
  - This type of refinance allows you to access your home equity by taking out a larger loan than your existing mortgage.
  - You receive the difference in cash, which you can use for various purposes.
  - Benefits: Access to funds for major expenses, debt consolidation, or home improvements.
- Cash-In Refinance:
  - This is when a borrower makes a lump-sum payment to reduce their loan balance.
  - Ideally lowering their loan-to-value ratio and securing better loan terms.
- No-Closing-Cost Refinance:
  - This option allows you to avoid upfront closing costs by rolling them into your new loan balance or accepting a slightly higher interest rate.
  - Benefits: Lower upfront costs.
- Streamline Refinance:
  - This refinance option applies to FHA, VA, and USDA loans.
  - It offers a faster process with less paperwork and no appraisal required.
  - Benefits: Streamlined process, reduced paperwork.
- Consolidation Refinance:
  - Borrowers can combine multiple debts into a single loan, securing an interest rate that’s often lower.
- Reverse Mortgage:
  - This option is only available to homeowners over the age of 62.
  - They can borrow against their home equity and receive regular cash payments.

Benefits of Refinancing

Refinancing can offer several benefits, including:

Lower Interest Rate: A lower interest rate can significantly reduce your monthly payments and save you money over the life of the loan.
Reduced Monthly Mortgage Payment: Refinancing to a longer loan term or a lower interest rate can lower your monthly payments.
Shortened Loan Term: Refinancing to a shorter loan term can help you pay off your mortgage faster and save on interest.
Switching from an ARM to a Fixed-Rate Loan: Switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan can provide stability and protect you from rising interest rates.
Tapping into Home Equity: A cash-out refinance allows you to access your home equity for various purposes.
Eliminating Private Mortgage Insurance (PMI): If you have built enough equity, you may be able to eliminate PMI, saving you money on your monthly payments.
Saving Money Over the Life of the Loan: By reducing your interest rate or shortening your loan term, you can save thousands of dollars over the life of the loan.

Choosing the Right Option: HELOC vs. Refinance

The best option for you depends on your individual financial situation and goals.

Consider a HELOC if:
- You need flexible access to funds for ongoing projects or unexpected expenses.
- You prefer a revolving line of credit.
- You are comfortable with variable interest rates.
Consider refinancing if:
- You want to lower your interest rate or monthly payments.
- You want to access a large sum of cash for a specific purpose.
- You prefer a fixed-rate loan.
- You want to consolidate debt.

No-Closing-Cost Refinance vs. Standard Refinance

A no-closing-cost refinance can be appealing because it eliminates upfront costs. However, it’s important to understand that these costs are typically rolled into your new loan balance or reflected in a slightly higher interest rate.

No-Closing-Cost Refinance:
- Lower upfront costs.
- Potentially higher interest rate or larger loan balance.
Standard Refinance:
- Upfront closing costs.
- Potentially lower interest rate and smaller loan balance.

Determining Your Home’s Worth

Before making any decisions about leveraging your home equity, it’s essential to understand your home’s current market value. This will help you determine how much equity you have available. Contact us today to get a free, no-obligation comparative market analysis (CMA) of your home.

Click here to start home valuation

Seller

4 Reasons you need your CMA (not one is…

CMA or Comparative Market Analysis shows you what is the current value of your home, or how much money would a potential buyer pay to buy it in the current real estate market.

The value of your home changes with time, and is dependent on many factors. It is influenced by all the maintenance you do to inside or outside – or you do not do. Any upgrades, like kitchen remodel or new floors/carpets will influence house value. The value also depends on popularity of your neighborhood and how good are the schools in this area.

This is why it is so important to check your Comparative Market Analysis or your home value at least once a year, just like you would your Credit Score.

You might not be thinking about selling your house just now. There are several other reasons to stay current on ever changing value of your home. Here are just a few:

To refinance to take advantage of low rates or just decrease your monthly payment
To take advantage of your Home Equity Loan and do this maintenance project you have been postponing
Update your home insurance policy to make sure it covers whole value of your house
Dispute your property taxes in rare instances your home value decreased below the assessment

Would you like to receive your own, complimentary CMA? Contact us today.

Seller

Getting ready for garage sale

You do not have to be selling your home and moving across the country to want to declutter- and earn few dollars in the process. Now, when the temperature is climbing and days are getting longer, it’s perfect time for Garage Sale season!

When you start your spring cleaning, look around the house and in all of your storage areas. Do inventory of each of the storage spaces: garage, attic, spare bedroom closet, and yes, yours (and your kids) summer and winter wardrobe. Anything you have not used in last 12 month is a good candidate to go. It is a good rule of thumb for clothes, decor, and even books in your must read pile.

Don’t censor and dismiss any item. One person’s trash is another person treasure. Besides, if any item doesn’t sell in your garage sale (best strategies below), simply donate leftovers next day to your favorite charity (Goodwill, Habitat for Humanity, Salvation Army etc.). You already made the decision to part with those items, didn’t you? Drop the. Off same day. And save the receipt for your charitable tax deduction.

Ahead of time

Do your homework. Check your Communities: HOA association and city regulations regarding garage sales. Is it allowed on your property? Do you need any permits? This is also a good time to check if no city or block wide events are not being planned in the area that will advertise and bring crowds of people.
Plan date and time. If you are not joining a larger event, the best time is to schedule on a first Saturday of the month (people have paycheck to spend), before noon. If weather is nice people are most likely to be out and about. Check and re-check the forecast.
Talk to your neighbors. You can either talk them into joining you, or offer to sell some of their overflow items. They can also assist in putting the word out to their friends.
Advertise. Put the info out on your social media accounts. Place a note on local groups boards, like Facebook groups or on NextDoor. Use garage sale website to spread the word out: some examples are Garage Sale Finder or Yard Sale Search. Be specific what types of items you will have for sale and provide some photos to build interest.
Sort and prepare. Wash and iron clothes, dust off books and furniture, clean sporting equipment.
Price your items. Place small labels with prices on every item you plan to sell. Good rule of thumb is to price items at 20% of their original value. However, items in the range $1 to $5 dollars will sell the quickest. Perhaps you can organize items in the same categories and sell for same price? For example- all books $3, all dresses $10. After all, main idea is to declutter, not to make money.

Evening before the sale

Put signs out. Unless your garage sale is part of city or block wide event, put plenty of signs, balloons and arrows around area. Make it easy to notice and find you.
Visit your Bank. Garage sale is a cash business and you’ll need to have a way to give change back. Ask tellers for $1 bills. If you plan on asking less than full dollar amounts – get some coins too.
Organize your items. Sort everything in clear categories, similar to the ones you see in department stores: clothes, toys, decor, books etc.
Get ready. Prepare and organize all items and accessories evening before the event, for example in the garage, for speedy set up in the morning.

On the day

Keep your house safe. Keep the doors to your house locked, and set out note “no public restrooms”. You can add directions to closest public facilities, for example corner gas station.
Provide packing materials. If you have many small things, having a supply of cardboard boxes and or plastic shopping bags can come in handy. It also helps to declutter your place of those items.
Separate free items. Put aside a clearly marked box with items you are willing to give away for free. Side note: Mark “not for sale” any items in visitors view that are not for sale to avoid confusion!
Provide barrier. Do not put any items directly on the ground. Place them on the table, tarp, etc. It just makes them more desirable – and easier to reach.
Hang clothing. Present clothes, particularly adult clothes that are typically hard to sale, on hangers and on a rack. It will make them more appealing. Pro tip: set up a mirror by the rack to try items on!
Allow testing electric items. Set an extension cord to allow to plug in and test working condition of any appliances etc.
Create experience. Play some music, sell bottled water to drink, if weather is hot.
Sit down and enjoy. Set up a chair in shady spot with good view of your display and observe.

Seller

Staging a house

Did you know?

In 2019, the National Association of Realtors (NAR) conducted a Profile of Home Staging and found that 28% agents stage homes they list for sale, while 13% of agents admitted to staging only difficult to sale homes. Of those agents, 22% reported that their homes sold for 1% to 5% more thanks to staging, 17% said their homes sold for 6% to 10% more. About a third thought that staging decreased the time the house was on the market.

9 basic tips for house staging

Staging the home you continue living in is a bit different than staging an empty place. Your focus should be on showing how much space there is already in your home, how much natural light there is and how much storage your house offers. Keep also in mind that having your house presentable is equally important in the Seller Market like we experience right now, not only in Byers Market! You do want to secure more offers and ultimately get a better price – and have house sold in less time.

Here are some quick ideas how to approach staging your own place, with items you already own. It is as much about addition as it is about subtraction!

Start from improving your house curb appeal by tidying the yard and exterior. Mow the lawn, clean last year leaves and weeds, trim the plants, organize toys and sporting equipment. Consider power washing the siding.
Focus on main areas. Buyers pays the most attention to: living room and master bedroom. If there is a master suite, master bathroom is a must.
Make the place look inviting – and sparking Buyers imagination of their family occupying the space. It has to look lived in, at the same time not too personal. Remove your family photos, put away your clothes and toiletries. Add some tasteful art or nature and landscape photos. Put up pillows and plants to add color and life.
Declutter. If you choose to follow only one tip on the list, this would be the one. Spend time putting away things you do not use very often. You can even already pack them away in moving boxes. Keep shelves, tables and countertops minimal – but leave out some neutral decorations (again, flowers, natural objects like shells etc.).
Reduce the amount of furniture in rooms. Make the space visually larger, and give Buyers space to walk and their children to run.
Remove about two thirds of items from all storage spaces. That including closets, kitchen cabinets, pantry. This will help to highlight how spacious they are.
Deep clean all nooks and crannies. Now it’s the time for that deep cleaning you were postponing. Potential Buyers will really look everywhere!
Consider repainting rooms in modern neutral colors to refresh the walls. This is particularly crucial if your taste is in bold colors that might not suit everyone and scare more traditional Buyers.
For showings, open all curtains and blinds, and turn on all the lights. The more light, the more welcoming your place will look.

Seller

Selling during COVID pandemic

The real estate market in South Central Wisconsin continues to be hot, with record low inventory of houses for sale. Per WRA data for January 2021, the number of houses for sale on the market was 43% lower than in January last year.

There are several reasons for the market situation. Low interest rate entice buyers to look for new and better place, while COVID makes sellers hesitant to open house to a lot of strangers. Those reasons and others, bring the ultimate sale price up among multiple offers competition.

If you are ready or seriously thinking about selling your current house and move or upgrade, now is the perfect time to do that. We prepared a guide for you to address some of your concerns how your COVID concerns can be accommodated.