Consumer Tips - Home Buying/Improvement

• FAQs About Your Home Equity
• Using Home Equity To Tap Low-Cost Borrowing Options
• Getting Your Home Ready for Resale
• Ten Handy Tips for First-Time Homebuyers

Frequently Asked Questions About Your Home's Equity

More homeowners than ever before are taking advantage of the borrowing potential built into their homes. Is a home equity loan right for you, too? The following answers to some commonly asked questions can help you determine if your home could fulfill your loan needs.

Q. How does a home equity loan differ from other types of loans?
A. A home equity loan is secured by the available equity in your home. Unlike other loans, such as boat loans, personal loans, most student loans and credit cards, the interest paid on a home equity loan is generally tax-deductible. The amount that is deductible is limited to the smaller of: a) $100,000 or b) your home's fair market value less the outstanding mortgage or other liens owed on your home.*

Q. Are there restrictions on how the loan can be used?
A. No, home equity loans can be used for practically any reason, from purchasing new appliances or paying for orthodontia to financing a child's tuition or consolidating higher interest debt. Because your home is being used as collateral, however, you should carefully consider how you will use your loan and steer clear of frivolous spending.

Q. How do I know whether a home equity loan or a line of credit is appropriate for my needs?
A. There are features unique to each type of loan:

• Loan is available to you as a lump sum.
• Fixed annual percentage rate.
• Fixed monthly payment.
• Set term for repayment.

This loan is best for a single payment, such as debt consolidation.

Home Equity Line of Credit

• Line of credit is available over the term of the loan, and is available by special checks, telephone transfer or other means.
• Variable annual percentage rate.
• Minimum monthly payment based on interest charged.
• Set term for repayment.

This loan is best for expenses requiring ongoing payments, such as college tuition.

Q. How do I figure my tax savings?
A. You will receive a Form 1098 indicating the amount of interest you paid in the previous year. Enter this amount on line 10, Schedule A of your tax form (1040). In most cases, you can fully deduct this amount from your taxable income. Deducting your interest payments can create substantial tax savings over the life of your loan. For example, if you take out a home equity loan of $30,000 at 10%APR** for seven years, you'll pay $11,835 in total interest. For those in a 28% tax bracket, that can represent savings of up to $3,314 over the term of your loan.

For more information about home equity loans and lines of credit, call us at 1-800-748-4302.

* There is a possibility of obtaining tax deductions for the amount over $100,000 if the loan is used to buy, build or substantially improve your home. See your tax advisor for details in your situation.
** APR = annual percentage rate.

Use Home Equity To Tap Low-Cost Borrowing Options

Does the grass always seem greener over the fence--in your neighbor's yard? You might be surprised to learn that you may have thousands of dollars in "green," right in your own yard. But before you start digging up your lawn, the hidden treasure we're talking about is the value of your home.

Tapping The Gold Mine

If you've lived in your home awhile or have seen property values rise, you may have equity built up in your home. Equity is calculated by taking the difference between the amount you owe on your first mortgage and the appraised value of your property. According to a recent report, home values across the country have increased an astounding 16.3%, on average, since 1996!* That means you may be sitting on a wealth of financial resources that can be tapped with a home equity loan or line of credit.

Home equity loans or lines of credit offer a low-cost method for borrowing money--up to 100% of the equity--to finance home improvement projects, college tuition, or a new vehicle. Funds can actually be used for any purpose, including debt consolidation or a dream vacation. Because your home is used as collateral, you can usually secure a better rate than with a personal loan or by financing through credit cards. In addition, the interest you pay on home equity financing may be tax deductible. Check with your tax advisor for more information on how this type of financing may help trim your taxes.

When Opportunity Knocks, Look Twice

Unfortunately when opportunities come knocking for consumers, con artists usually follow--and the home equity market is no different. Companies called sub-prime lenders often use unscrupulous practices to lure homeowners into borrowing more than they can afford, sometimes up to 125% of the home's value, regardless of income or past credit problems. Reported tactics include failing to warn borrowers about penalties on balloon payments, disguising prepayment penalties, and not disclosing increases in interest rates.**

Call Us First

We can help evaluate your debt-to-income ratio and credit history, and consider your loan based on facts, not fraud. For more information on unlocking your home's hidden wealth, please contact a trusted loan officer. Soon, you could be consolidating debts for easier money management, financing a college education for your child or yourself, or having a sprinkler system installed for the greenest grass in the neighborhood.

*Source: National Association of Realtors.
**Source: American Banker, August 4, 1999.

Getting Your Home Ready for Resale

It's a seller's market out there, but a good market does not ensure a quick sale. When prospective buyers look at your house they'll want to see a clean, well-cared for home. So, before your house goes on the market, take some time to revamp it inside and out.

The Interior

• Organize and de-clutter. Throw, pack or give away anything you haven't used in the past three years. Store extra pieces of furniture and remove all objects from kitchen and bathroom counters (it will make the rooms look more spacious.)
• Make it shine. Shampoo carpets, wax floors, wash windows, doors, drapes, blinds and light fixtures. Clean the stove, microwave, refrigerator and showers. Paint walls if necessary.
• Repair. Fix dripping faucets and doors and cabinets that stick or creak. Replace light bulbs and electrical switches that don't work.

The Exterior

Winter may prevent you from making some improvements on the exterior of your home. However, if you can make the necessary improvements, or, if you're planning on selling in the spring or summer, keep the following tips in mind.

• Clean. Wash windows. Clear patio/deck of planters, flower pots, the barbecue and any other small items. Remove rusty outdoor furniture. Sweep all walkways. Shovel snow from all walkways.
• Put on a fresh coat of paint or touch up spots as needed.
• Maintain the yard. Trim bushes and weed gardens. Remove objects from the yard, like water hoses and toys.

When It's Time to Show and Tell

On the days your house is to be shown, take these last minute steps to make it more buyer-friendly.

• Brighten your home. Open shades, turn on the lights in dark rooms and hallways.
• Straighten up. Make sure beds are made and clothes are picked up. Wipe down counters, sinks and toilets. Vacuum. Remove pets. Eliminate odors.
• Make your house a home. Add some finishing touches, like fresh flowers.

Let Us Help You Buy a Home

It's not too soon to start thinking about a mortgage for your next home. We can help you find the mortgage that fits your needs. Visit your nearby branch office or call 800-748-4302 to apply.

Ten Handy Tips For First-Time Homebuyers

The prospect of buying a house for the first time can be intimidating, especially since it may be the single largest purchase you ever make. Before you begin the search, there are some things you should know.

• Look for information. Research the process by attending classes at your financial institution or checking out books such as Home Buying For Dummies by Eric Tyson and Ray Brown, (1996, IDG Books Worldwide, Inc.).
• Save for the down payment and closing costs. Strive to save as much as you can of the purchase price of the house as well as closing costs. The greater your down payment, the more favorable your terms.
• Discover how much you can afford. Make sure you are saving enough toward retirement and other goals when deciding how much to spend each month on mortgage payments. Ask your financial institution about pre-qualifying.
• Don't forget the other costs of home ownership. Remember to plan for homeowners insurance, property taxes, private mortgage insurance, utilities, repairs and maintenance.
• Choose a mortgage. Most financial institutions offer traditional 15- and 30-year fixed rate mortgages as well as adjustable rate mortgages (ARMs). If you are having trouble saving for a large down payment, investigate low-money-down programs for first-time homebuyers. There are a variety of mortgage programs available, so choose an experienced mortgage loan officer at a financial institution that you trust.
• Research neighborhoods. Prioritize what you are looking for in a neighborhood. Then talk to the people who live in the neighborhoods you're considering.
• Hire a real estate agent. Get referrals from friends, relatives and co-workers, and then interview several agents. Choose an agent who's familiar with the neighborhoods you're interested in.
• Listen to your agent. An agent's job is to know how much properties are worth. A well-chosen agent will do his or her best to keep you from bidding too much on the house of your dreams.
• Have the house inspected. Hire a full-time, professional house inspector. Again, referrals from friends, relatives and co-workers are a good place to start.
• Prepare for closing. Have the escrow officer prepare an estimated list of closing costs. Closing costs can run in the thousands of dollars and you'll want to have enough money to pay for them.

Buying a house, especially for the first time, can be stressful. Stop by today and speak with a Mortgage Loan Officer. He or she should be able to answer any questions you may have. Loan Officers can also help you calculate monthly payments including the extra expenses, explain your mortgage options, and help you pre-qualify or get pre-approved for a mortgage loan.