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Advantage Home Equity

Using Home Equity to Your Advantage

What rate of return is the bank paying you for the equity in your home? Zip Zero Zilch! Use the equity to pay off high interest credit cards ...

OP-ED: How Home Equity Improves Retirement Security

Two major retirement challenges could be addressed through a simple innovation. First, long-term investors are struggling to meet their (lowered) target rates of return. Attempts to raise returns by investing in riskier assets only raises the risk of future underperformance. Second, individuals have insufficient retirement savings, and are facing the prospect of a meager retirement pay check. A new real estate sub-asset class, iHomes (Income from Homes), created by innovative funds and real estate managers, could address these twin challenges with attractive results for all parties. The solution rests in allowing retirees to tap into home equity to generate income, and for innovative investors to get rewarded for supplying capital for these transactions.

A global retirement crisis looms because traditional pillars of retirement (e.g., Social Security and employer-provided defined benefit plans) are under pressure. Under-funded pension funds are facing enormous pressure to raise realized returns while controlling pension fund risk. Simultaneously, financially unsophisticated individuals are being asked to bear the risk of retirement, and the National Conference on Public Employee Retirement Systems study notes an average American retirement savings deficit of approximately $50,000 per person, with an aggregate national retirement savings shortfall of almost $5 trillion. However, globally, more individuals are likely to own a home than own stocks and bonds, or even a bank account. In the US, the National Association for Home Builders study notes that, “[A]t $20.7 trillion, the primary residence accounted for almost one-third, 30%, of all assets held by households in 2010…The primary residence represented 62% of the median homeowner’s total assets and 42% of the median homeowner’s wealth…The primary residence is also a widely held asset. A greater share of households (67%) owned a primary residence than held a retirement account (50%) or stocks and bonds (16%).

As mortgage rates plunge, should you refinance?

Before you spend the time applying for a mortgage refinance, be sure you check your balance sheet and credit first. Applying for a refinance is similar to getting a mortgage in that lenders will consider your FICO score, debt-to-income ratio and employment history when evaluating your application. Your interest rate is a reflection of your financial situation and banks tend to reward low-risk customers with better rates.

Borrowers want to aim for a credit score of over 740 and a loan-to-value ratio of 75 percent or under to nail down the best rates, says Melissa Cohn, executive vice president at Family First Funding LLC in Toms River, New Jersey. The income needed for a loan is dependent on the bank's qualifications; for self-employed borrowers, additional proof of income may be required to meet loan prerequisites.

Homeowners who have improved their credit score since getting their original mortgage should see if refinancing makes sense for them. For every 20-point increase in credit scores, the interest drops about 0.125 percent. So, if someone had a 680 credit score and now has above a 760, this alone will improve their rate by about 0.5 percent, says Daniel M. Shlufman, Esq., mortgage banker at Classic Mortgage LLC in Maywood, New Jersey.

Any advantage between joint and single home equity lines?

Me and my wife are thinking about it, but not sure if to go with joint or single? What are pros and cons?

TAGS: Mortgages, Home Loan, Bank, Banking, Finance.

It's an equity line. It HAS to be titled at least in the same manner as the house. If the house is a joint ownership then so WILL the loan. They will demand all owners pledge to the loan.

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