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Shopping For A Loan - Which home equity loan type is right for me?

The key advantages to home equity loans over home equity lines of credit are that home equity loans are simpler and more stable than lines of credit, the interest paid is at a fixed rate, and generally there are fewer fees and charges.

A home equity loan is a more conservative home equity borrowing option than a line of credit and can give you greater peace of mind. Because home equity loans generally have a fixed interest rate, the monthly payment is also fixed over the life of the loan. A home equity line of credit has a variable interest rate and your monthly payments will therefore vary over the life of the loan. A home equity line of credit also gives you the option of making minimum payments on the outstanding amount – the option to make minimum payments can increase the interest you will pay over the life of the loan.

Making minimum monthly payments or even partial payments that do not fully pay off the home equity line of credit during the life span of the loan creates a ‘balloon’ payment – a large sum owed at the end. This situation is entirely avoided in a home equity loan where you must make fixed monthly payments that pay off the loan in full.

A situation you want to avoid is taking out a home equity line of credit for purposes of debt consolidation. Use a home equity loan instead. A home equity line of credit works very much like a credit card so the minimum payment option in a home equity line of credit is not conducive to debt management and can leave you with a dangerous balloon payment at the end of your loan.

What situations call for a home equity line of credit? A line of credit is the right choice when you need to access money at intervals or you do not know exactly how much money you will need. College tuition payments over the next four years are an example where money is needed at intervals. An open-ended repair or home improvement job on your home that spans a long period of time is an example where you may not know exactly how much money you will need and when you will need it. In both of these situations, you benefit by using the money only when you need it through a line of credit.

Home equity lines of credit generally have a lower interest rate than home equity loans. They can be a good choice if you are borrowing a small amount and you know you will be paying it back quickly.

Remember, both home equity loans and lines of credit serve a purpose. At United Poles FCU we can help you decide which one is best for you.

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Should I Buy or Rent?

Buying a home can be an emotional decision. You may find the perfect neighborhood, the home you have dreamed about, and see yourself sitting on the front porch before you consider how you’ll make the monthly payment! Keep your feet on the ground, take a step back and think how much house you can afford, the stability of your income, and your lifestyle.

For example, if you’re purchasing a home as an investment opportunity, be careful. Historically, while primary housing appreciates in value, it’s only in the single digits, while mutual funds or the stock market have appreciated 8-10%. You need to balance this information with the taxpayer benefits you will typically enjoy, such as deducting mortgage interest and real estate taxes on your income tax return.

There are some great benefits to homeownership. You build equity as you pay down your mortgage and typically the value of your home increases over time. You also don’t have to worry about housing costs escalating significantly with a fixed rate mortgage. But remember, when you own a home, you’re responsible for its upkeep. If something breaks in an apartment, the landlord takes care of it. If you own the place, this is your problem. So make sure you don’t put every penny of your savings into your down payment and closing costs. You might need money for an unexpected repair like a leaky faucet or new sump pump.

In today’s economy, there have been some great incentives for buying a home. However, if your job is not secure or you may need to relocate soon, you should probably wait. The costs add up, including closing expenses and commissions to real estate agents. You need time in your home to recoup that investment. If, on the other hand, your income is secure and you have found a place you can afford, talk to the Credit Union about your mortgage options. We would love to help!

Source: http://www.bankrate.com/finance/mortgages/should-you-buy-or-rent.aspx

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Five Financial Mistakes to Avoid

We all slip now and then with our money, especially in a tough economy, but be aware of these financial faux pas so you don’t end up paying in the long run.

  • Don’t Forget to Roll Over Your 401(k). When you leave a job, don’t forget about your 401(k). If you don’t roll over your funds into a qualified investment vehicle within 60 business days of leaving your job, you could be subject to a 20% income tax and/or a 10% early withdrawal fee. Also, if your previous employer gets into financial trouble, you could lose your 401(k). Keep what’s yours by rolling over your money into an Individual Retirement Account with the Credit Union!
  • Credit Card Concerns. Many families struggle to make ends meet and often resort to making purchases and payments with credit cards. Even worse, they’re only making minimum payments to these high-interest credit cards. When you pay only the minimum balance due, you’ll end up paying more in interest, assuming no additional debt is accumulated. Sound familiar? Apply for a Debt Consolidation Loan through the Credit Union. We’ll consolidate your high-interest credit cards and give you one low monthly payment.
  • Insurance Shortfalls. Make sure to double-check your insurance coverage – health, life, car, etc. According to the US Census Bureau, 47 million Americans are without health insurance, and the number of under-insured Americans increased by 60% between 2003 and 2007. While you may be saving money now, if something were to happen, you could be paying much more! The Credit Union offers low-cost life insurance and GAP insurance. Ask us for more information.
  • Make Punctual Payments. Save yourself some money by making prompt payments on loans and credit cards. When you miss or make a late payment, this information gets sent to credit bureaus, making it harder to obtain future financing. With the Credit Union’s Online Bill Payment, avoid those late fees by setting up one-time or recurring payments on credit cards, loans, and other bills. You can also log in to Online Banking and make payments to credit union accounts with online transfers. Sign up today!
  • Use Your Head, Not Your Heart. Many financial mistakes occur when you purchase or invest from emotion. Whether you financed a big-screen TV you can’t afford, made an investment into a friend’s “start-up” company, or kept the house in a divorce for “sentimental” reasons, decisions made on emotion may leave you hurting financially in the long run. Give us a call and we’ll help you set up a plan so you don’t fall into the emotional buying trap.
Source: www.finance.yahoo.com

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Shopping For A Loan
Should I Buy or Should I Rent
Five Financial Mistakes to Avoid
       
 
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