Your Top HELOC Questions Answered

HELOC-Blog2

You may be able to use the equity in your home to your advantage with a Home Equity Line of Credit (HELOC). While the idea sounds simple, HELOCs can be confusing. Get the basics here.

What is a difference between a Second Mortgage and a HELOC?
There are two types of loans that use the equity in your home as collateral. They are either a Second Mortgage (also known as a Home Equity Loan) or a Home Equity Line of Credit.

A Second Mortgage, or Home Equity Loan, is simply borrowing money, using the equity in your home to secure the loan, much as a personal loan may use the equity in a car to secure the loan.

Home Equity Line of Credit is a revolving loan that works very much like a credit card. The equity you have in your home secures a credit line with a variable interest rate that is available to you for a certain amount of time. The monthly payments are determined by how much money you owe the bank, not by how big the line of credit is. As you pay down the amount you owe on your line of credit, the rest is available for other uses. The line of credit works well for do-it-yourself projects or a series of projects because you only make payments on the money you’ve already used.

Each loan works differently and which one may be best for you is often determined by your purpose for taking out the loan. The interest rate the bank charges on these loans typically takes several factors into account, such as your credit score, the loan to value or the loan type.

What is Loan-to-Value?
As mentioned above, loan-to-value is one of the factors taken into consideration when determining the loan interest rate. To calculate your loan-to-value, add the amount you want to borrow to the unpaid balance of your mortgage then divide that number by the appraised value of your home. The result will be a percentage that is referred to as the Loan-to-Value of your home. The lower the percentage, the lower your interest rate may be. 

Can I borrow more than the value of my home?
While some mortgage lenders offer loans that often will go over 100% of your home’s value, we don’t think it’s a good idea. Borrowing in that manner will make it difficult, if not impossible, to sell your home should you want, or need to move.

Can I use a HELOC for something other than home improvements?
Yes. A Home Equity Line of Credit can be a great way to get that new roof or finally finish the lower level, but it can also be used to buy a new car or to pay for a college education.

The flexibility of a HELOC means you can make your home equity work for current financial needs. In addition, the interest you pay may be deductible on your federal tax return. The interest you pay on car loans, credit cards and almost all other loans definitely is not. We suggest you consult your tax advisor regarding interest deductibility.

What’s the next step?
If you’re interested in learning more, check out these HELOC resources:

Katie Lund Joins Merchants Bank in Rochester as a Mortgage Lender

LundKatie

Katie Lund, Mortgage Lender

Katie Lund has joined Merchants Bank in Rochester as a Mortgage Lender, according to John Doyle, President of Merchants Bank in Rochester.

Lund has been part of the Merchants Bank team since 2008, when she joined Merchants Bank Equipment Finance (then known as Merchants Capital Resources). Since 2013, she has worked at Merchants Bank in Rosemount as a Mortgage Loan Coordinator.

“Katie brings a great deal of knowledge and experience with the mortgage origination process, which will be an immediate benefit to our customers,”Doyle said. “She puts the needs of our customers first, and she is dedicated to making sure those needs are met. I know people will enjoy working with her.”

Lund’s office will be at Merchants Bank’s Northwest Plaza location. She is a native of St. Charles, MN, and has recently moved to Rochester with her family.

“I’m familiar with the needs of the individuals and families who are part of the Rochester market,”Lund said. “I’m excited to help people realize their dreams of home ownership with the programs and support we can offer at Merchants. Given the very active Rochester housing market, I’m especially looking forward to helping people get pre-qualified for their loans, so they can be first in line when they make an offer on their next home.”

Is Your Home Ready for Winter?

PrepareHomeForWinter-Blog

Minnesota and Wisconsin are known for cold winters. Just how cold? On January 9 and 10 of 1982, the wind chill was purported to be -71 degrees in Minnesota. That type of weather can be fatal to people and animals, and it really does a number on our homes, too.

Most days aren’t nearly that cold, but many can get downright numbing. What can you do to prepare your home for this weather? We’ve compiled some of the best tips.

As you go through these tips, remember that everyone has a different level of comfort in tackling home projects. Please consider hiring professionals whenever you believe it is necessary.

Inside

  • Insulate walls and attic.
  • Install a smoke detector and a battery-operated carbon monoxide detector near a fireplace, wood stove or portable heater. Vent all fuel-burning equipment outside.
  • Examine wooden window frames for signs of rot or decay.
  • Examine exposed ducts in the attic, basement, and crawl spaces. Use a sealant to plug up any leaks.
  • Test your sump pump.

Outside

  • Caulk and weather-strip doors and windows.
    Service snow-removal equipment. Sharpen ice chopper and inspect snow shovels.
  • Trim overgrown branches back from the house and electrical wires to prevent them from causing a problem with ice or wind.
  • Ensure rain or snow drains away from the house to avoid foundation problems. The dirt grade around the exterior of your home should slope away from the house.
  • Remove and drain any attached hoses and store them for the winter.
  • Shut off exterior faucets. Drain water from outdoor pipes, valves, and sprinkler heads to protect against pipe bursts.
  • Make sure you have an ample supply of ice melt or sand on hand.
  • Check the gutters and downspouts for proper fastening. Re-secure if loose or sagging. The weight of snow and ice can pull gutters off the house.
  • Clean gutters of any debris. Make sure downspouts extend away from the house by at least 5 feet.
    Ensure all vents and openings are covered to prevent insects, birds, and rodents from getting inside to nest in a warm place.

Projects Where You’ll Definitely Want Professional Help

  • Have chimney and flue inspected.
  • Check for missing, damaged or warped shingles. Have a professional replace them as necessary to prevent roof leaks.
  • Check for deteriorated flashing at the chimney, walls, and skylights and around vent pipes. Seal joints where water could penetrate.
  • Have a professional Inspect your furnace or heat pump to be sure the system is in good repair.

Again, please consider hiring local professionals when needed, including clearing your driveway and sidewalks, if necessary.

Don’t Forget Your Pets

When the weather gets cold, take care of your pets. Bring them inside, or make sure they have adequate shelter and unfrozen water, if they are outdoors.

If you need help financing any home repairs or projects, a Home Equity Line of Credit may be the answer. Contact your local Merchants Bank location today.

Tips compiled from emergency.cdc.gov, bobvila.com and kiplinger.com.

Loans are subject to credit approval.

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Helping Realtors Help Their Customers

TRID4Days-BlogTaking the Right Steps May Keep You from Delays
It’s difficult for everyone concerned when a closing is delayed. A new consideration has been added to the mix with the TILA-RESPA Integrated Disclosure (TRID) rules for mortgage applications submitted on or after October 3, 2015.

The new Closing Disclosure has been put in place to add protection for customers by moving the Closing Disclosure timeframe from 24 hours to 3 business days, if hand-delivered, and 6 business days, if sent by mail. TRID rules will require the lender to give customers 3 to 6 more business days under certain change in circumstances to review the closing disclosure.

Three Things Will Require a New 3-day Review for Your Buyers:

  1. The APR (Annual Percentage Rate) increases by more than 1/8 of a percent for fixed-rate loans and ¼ of a percent for adjustable rate loans. A decrease in APR will not require a new 3-day review.
  2. A prepayment penalty is added, making it more expensive to sell or refinance.
  3. The basic loan product changes, such as a switch from a fixed rate to an adjustable interest rate or to a loan with interest-only payments, or a switch in terms, for example, going from a 30-year mortgage to a 15-year mortgage.

 

This should help:
We hope this information will provide help to ensure new October 3, 2015, TRID requirements don’t delay your client closings:

  • The Closing Disclosure must be delivered to the buyer/consumer at least 3 business days prior to the scheduled closing date. If by mail, the disclosure should be delivered/mailed 6 business days prior to the scheduled closing date.
  • To meet the Closing Disclosure delivery requirements of 3 and 6 business days, mentioned above, the closing agent should get information to the lender 10 to 14 days prior to the closing date for completion of the Closing Disclosure. We suggest you communicate to the closing agent all your buyer paid charges, so the closing agent can comfortably get information to the lender. Plus, remember an additional 3 to 6 more business days may be needed, if a re-disclosure is triggered.
  • The closing agent will need your real estate company’s state license number and your individual real estate number for the Closing Disclosure. Every file should contain the listing and selling agents name and phone number, contact information for the buyer and seller and the lender’s contact information.
  • Keep in mind that depending on the agreement, the lender, not the closing agent, may be preparing and delivering the Closing Disclosure.
  • Consider booking the actual closing date earlier in the process. This will help everyone in the process, encouraging everything to be completed in a timely manner. You can use the booked date to help prorate taxes, determining HOA (Homeowner’s Association) dues, calculating odd days’ interest and so on.
  • Make sure any repairs that need to be completed and proof of the completion/re-inspection should be done prior to the closing.
  • If applicable, well certificates need to be recorded. We suggest you solve this at the time the property is listed. Be clear on who is paying to record any well certificates.
  • Study the new Closing Disclosure form/format so you are able to answer questions from buyers and sellers. The new rules could affect the dates you put in place. Make sure they are realistic.

Please note, changes/adjustments that affect the value of the property may trigger additional disclosure and review periods.

The laws are continually changing to protect your customers, and the information can be hard to digest. If you have questions, give me a call or send me an email. I’m here to help make the process as smooth as possible for you and your customers.

Loans are subject to credit approval.

Sources include: Old Republic Title company’s “Top 10 Things Real Estate Agents Should Know About the New TILA-RESPA Integrated Disclosures (TRID)” and the Consumer Financial Protection Bureau’s “Will the new mortgage disclosures delay my closing.”

Myths About Home Equity Lines of Credit

Merchants Bank, Home Equity Loans, Home Equity Lines of Credit

You may be able to use the equity in your home to your advantage with a Home Equity Line of Credit, or HELOC. While the idea sounds simple, the details of a HELOC can be confusing. Here are a few common HELOC myths explained.

Myth: A Second Mortgage and a Home Equity Line of Credit are the same thing.
There are two types of loans that use the equity in your home as collateral. They are either a Second Mortgage (also known as a Home Equity Loan) or a Home Equity Line of Credit. Each works differently and which loan type works best for you is often determined by the purpose you have chosen to take out the loan. The interest rate the bank charges on either of these can take several factors into account, such as your credit score, the loan to value or the loan type.

A Second Mortgage, or Home Equity Loan, is simply borrowing money, using the equity in your home to secure the loan, much as a personal loan may use the equity in a car to secure the loan.

A Home Equity Line of Credit is a revolving loan that works very much like a credit card. The equity you have in your home secures a credit line with a variable interest rate that is available to you for a certain amount of time (usually ten years). The monthly payments are determined by how much money you owe the Bank, not by how big the line of credit is. As you pay down the amount you owe on your line of credit, the rest is available for other uses. The line of credit works well for do-it-yourself projects or a series of projects because you only make payments on the money you’ve already used.

Myth: I can only use my HELOC on purchases for my home.
A Home Equity Line of Credit can be a great way to get that new roof or finally finish the lower level, but it can also be used to buy a new car or to pay for a college education. The flexibility of a HELOC means you can make your home equity work for current financial needs. In addition, the interest you pay on a Home Equity Loan or Home Equity Line of Credit may be deductible on your federal tax return. The interest you pay on car loans, credit cards and almost all other loans definitely is not. We suggest you consult your tax advisor regarding interest deductibility.

To learn more about Home Equity Lines of Credit, visit our website or contact your local Merchants Bank today.

Loans are subject to credit approval.

First-Time Homebuyer? Mortgage Pre-Approval is the First Step

MidwestHouse

Where is your dream home? What does it look like? It would be a shame if when you found it, someone else’s offer was accepted before yours because you didn’t have mortgage pre-approval. With mortgage pre-approval you can:

  • Be confident when making an offer on your first home
  • Know how much money you can borrow
  • Show home sellers and realtors that you are serious about making and offer and ready to move forward today
  • Potentially be selected over other home seekers who make an offer who haven’t been pre-approved

Apply for Pre-Approval Now Schedule an appointment with one of our experienced mortgage lenders, or choose a lender and start the process by applying online. Get started.

Start Saving for Your Down Payment According to RealtorMag, it can take an average of 12 and half years for first-time homebuyers to save a 20% down payment for a house.* You can start saving more each day with a Home Buyer’s Certificate of Deposit.** This CD is a smart way to put away money for the future:

  • Interest compounds quarterly, and the CD is renewable every 12 months.
  • Higher rate than a normal 12-month CD.
  • Early withdrawal penalties are waived if the money is used to purchase a residential property financed by Merchants Bank.
  • Start with a $100 minimum deposit and then continue with a minimum deposit of $100 per month.

Click here to start the process for opening your Home Buyer’s CD today.

Loans are subject to credit approval.
*http://realtormag.realtor.org/daily-news/2014/11/07/20-down-payment-takes-12-years-saving
**12 Month Home Buyer’s CD requires a $100 minimum opening deposit and a $100 minimum monthly deposit. Additional deposits may be made at any time. Withdrawals prior to maturity will not be subject to penalty if the funds are used to purchase a primary residence that is financed through Merchants Bank, unless funds are withdrawn within 6 days after initial deposit. In this case there is a minimum penalty of 7 days interest. If funds are withdrawn prior to maturity for any other reason a penalty of 180 days interest will be assessed. When funds are withdrawn, either prior to or at maturity, the entire balance must be withdrawn. Partial withdrawals will not be allowed. Mortgage loan is subject to credit approval.

Home Construction Loans: The Basics

Construction loans at Merchants Bank

Have you always dreamed of building your own home, but you aren’t sure where to start? Follow this easy guide to learn the basics of construction loans.

What is a construction loan?
A construction loan is a loan used to pay for the cost of building a new home. When construction on your house is complete, you’ll need to obtain a new loan to pay off the construction costs. At Merchants, we offer construction to permanent financing, which allows customers to borrow for the construction phase and modify that loan to allow them to pay off the construction costs in one simple process.

How does it work?
For qualified applicants, Merchants requires a minimum down payment of 5% if the purchase price is under $417,000. If the purchase price exceeds $417,000, a down payment of 10% is required. With a 5% down payment, you will have a single loan with mortgage insurance at 95%.*

Once you have obtained financing for your construction loan, the builder will typically take draws (payments) throughout the construction phase. During the construction process, you will only be charged monthly interest payments on the amount of the loan advanced.

How do I apply?
Apply online at www.merchantsbank.com or visit your local Merchants Bank to speak to a mortgage lender. After reviewing your application and other information, you will be notified if you’ve been preapproved for both a construction and permanent loan.*

Read our complete guide for successful construction or remodel through the construction loan process, which covers:

  • What information is needed upon application
  • Bids, draws and cost overruns
  • Appraisal value
  • And much more

*Subject to credit approval.
Maximum financing is the highest loan-to-value which varies based on the loan product