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2007 (3)
Friday, December 21, 2007

Holiday Real Estate Opportunities

 

As December approaches its Christmas and Kwanzaa celebrations, you’re probably scrambling to buy the remaining gifts for the last remaining people on your list or going to supermarkets looking for the ingredients to use in preparing your holiday feasts.  There’s also a possibility that one of your resolutions for next year is selling the home you’re currently living in.  December can actually be an opportune time for selling real estate.

 

Behind all the festivities and rapturous celebration lies some great perks you can use to your advantage in getting your home sold quicker.  Among them is making the extra effort to decorate your home to look its best and using this time that is quickly coming to a close to ensure it dazzles when the lights come on.  Particularly during such a time, an elegantly luminous home can sway a buyer who would otherwise not be interested in your home’s visual appeal.

 

So you’re all revved up and ready to astound real estate buyers with a carefully thought out blueprint of how you want to go about decorating your home for the holidays but alas, the price tags on those lights that do twenty different synchronized movements and the giant automated snow globe are simply out of the question.  If the window for selling is short, you may have to scale back your efforts to something closer to your budget.  Otherwise, the answer may be waiting the day after Christmas.

 

Head to any store selling holiday decorum and you’ll notice pretty much anything that has to do with the holidays has had its price chopped almost in half.  Something that carried a price of seventy dollars now costs an inexpensive $28.  You can either save these items for use next year or use them to complement the end of 2007 festivities.  Things are also shaping up to be favorable for the real estate market next year which should also justify these purchases.

 

As long as you’re not putting yourself into any kind of irrecoverable debt or setting back your saving efforts, don’t feel guilty about splurging a little more than you intended in getting your home sold.  December is when people can be convinced to overindulge more on items they’d normally scoff at so the odds of catching the eye of a young man looking to buy a home for him and his fiancĂ©e to live in is much greater.

 
Posted at 10:50:27 AM

Monday, December 3, 2007

News Article
News Article
 
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Posted at 11:22:36 AM

Monday, June 11, 2007

High-rises, high hopes

High-rises, high hopes

BY ANDRES VIGLUCCI AND MATTHEW HAGGMAN

aviglucci@herald.com

 

COURTESY OF THE TERRA GROUP

BIG PLANS: In 2005, this rendering of the condo tower was envisioned for the area behind the historic Freedom Tower.

In downtown, from Brickell Avenue north to the Edgewater neighborhood, up the Miami River and down historic Coral Way, great chunks of Old Miami are fast disappearing in a cloud of dust. In its place, the New Miami -- a dense, steel-and-glass forest of condo towers -- is rising from the rubble.

 

The scope, scale and speed of the transformation are breathtaking. More than 114 major projects, most of them high-rise condos, are under construction or in the planning stages in the urban core along Biscayne Bay.

 

Citywide, developers are proposing more than 61,000 new condominium units -- eight times the number built during the past decade.

 

The projects encompass the tallest skyscraper in Florida, a 74-story spire higher than any residential building south of Manhattan, almost four million square feet of new retail space (nearly as much as two Aventura Malls) and parking for more than 100,000 cars.

 

''You have a wave of development underway here in Miami that is unprecedented, bigger than anything, bigger than Hong Kong in the boom years of development,'' said former Portland, Ore., councilman Charles Hales, a transportation consultant working on a plan for a Miami streetcar line.

 

Not since the post-World War II housing boom that multiplied Miami-Dade County's population fivefold, to more than one million people, has the region experienced anything comparable. But that took almost 20 years.

 

''We are building an instant city; what should take 15 years will take three,'' said Michael Cannon, a Miami real-estate analyst. The boom struck suddenly, unexpectedly, first a trickle of projects, then a torrent. Cash has poured in from Latin America, New York and, increasingly, Europe, the result of converging market forces -- slashed interest rates, a cheap dollar -- and a worldwide infatuation with Miami among the chic and moneyed.

 

It all amounts to a multibillion-dollar gamble, outdoing in risk and bravado the 1920s boom that made Miami a modern city: That given waterfront location, a sunny climate and a hip, international culture, intensive downtown residential development can catapult Miami into the first rank of world cities.

 

Elected officials, in particular Miami Mayor Manny Diaz and Miami Commissioner Johnny Winton, are counting on the boom to reverse downtown's long decline, to turn its seedy blocks and outlying neighborhoods into a scintillating, working urban hub with a vibrant street life.

 

''Just five years ago we were broke; we had zero development,'' Winton said. ``I'm going to bet you that when we're done -- I don't know when that will be -- historians will identify this as the most significant and rapid transformation of an American city.''

 

What precisely will the boom deliver? It's too soon to tell, experts say.

 

But this convulsion of development is already remaking not just Miami's skyline, but its streets and neighborhoods and likely its population, too.

 

If it stays on track, the boom promises a fundamentally different Miami -- more urban and congested, but also more cosmopolitan and, given the high prices the condos command, probably wealthier.

 

It also raises serious concerns. In the absence of a ready plan, how will the city cope with thousands of expected new residents and the traffic they will generate, given antiquated infrastructure, limited public transit and a shortage of parks and open space? Will Miami residents, among the nation's poorest urban dwellers, be displaced or priced out of new housing?

 

That is, if the planned condos actually get built, sold and occupied.

 

As the boom takes on the feel of a gold rush, real estate analysts, bankers and even some developers fear it's a mirage, a bubble fueled by speculators looking to resell condo units for a quick profit, and not by true buyer demand.

 

If developers build too much, and speculators can't find buyers for resale, the boom could bust, leaving Miami littered with vacant and bankrupted buildings or, worse, unfinished towers and bare lots.

 

SIGNS OF FUROR

 

For now, though, signs of the furor are everywhere.

 

Sales centers for multimillion-dollar condos that tout the merits of high-rise living sprout up across the city. Brokers push Miami condos in farflung locales, from Caracas and Bogotá to New York and France's Cte d'Azur. Lavish condo parties are thrown by developers several times a week, and advertisements for the high-rises fill the pages of local magazines and newspapers, including The Herald.

 

Downtown Miami is a thicket of construction cranes. Much of the landward side of Biscayne Boulevard has been razed, and the footings and columns of what will soon be a wall of six colossal condos, each more than 50 stories, are becoming visible.

 

''Where else are you near the water, 10 minutes from Miami Beach, 15 minutes from the airport and have access to public transportation?'' said Daniel Kodsi, chief executive of Boca Raton-based Royal Palm Communities, which plans a high-rise condo called Paramount Park across from AmericanAirlines Arena.

 

There is so much building that developers are struggling to find qualified contractors and subcontractors.

 

Sales and resales in the mid-six figures, and well beyond, have become commonplace. Towers of 300 units sell out in a day, with buyers coming in the main not from Miami, but from other parts of the country and the world.

 

''Miami, New York and Los Angeles have become the three cities in the U.S. where people want to be,'' said Joe Cayre, chairman of Midtown Group, which is building eight condo towers on the site of the old Florida East Coast Railroad yards in Wynwood.

 

They are people like Sal Loduca, who plans to leave Manhattan and his family's Long Island food business to open a brick-oven pizzeria at Cayre's Midtown Miami.

 

''Everyone's making the move to Miami. How could you not? It's a great opportunity. Miami's full of life,'' Loduca said.

 

`CRITICAL COMBUSTION'

 

Real estate broker Philip Spiegelman calls the confluence of factors propelling this boom a ``critical combustion.''

 

Among them:

 

• Across the country, young people and so-called ''empty-nesters'' have been returning to urban centers, in part because of long, wearing commutes from outlying suburbs. At the same time, a dwindling supply of easily developable land in western Miami-Dade and Broward counties has prompted developers to look eastward.

 

• A shortage of waterfront property elsewhere led developers to Miami's acres and acres of vacant bayfront land.

 

• Low interest rates have fueled record home-buying, while aging baby boomers are increasingly seeking second homes in sunny or exotic places.

 

• A cleaner local government has made Miami attractive to lenders and investors who once thought the city too risky, unsafe or corrupt.

 

• The weak dollar has made Miami an alluring bargain for Europeans and Latin Americans. And compared to other urban centers like New York City, Miami remains cheap.

 

Then there is the other factor, anecdotal and unquantifiable: the speculator.

 

''As much as 85 percent of all condominium sales in [downtown Miami] are accounted for by investors and speculators,'' housing analysts at investment firm Raymond James warned in a March report.

 

Banks have started to back off lending on condo projects, or have instituted new rules to avoid giving mortgages to investors.

 

Spiegelman sold the condo units in the Marina Blue condo going up on Biscayne Boulevard.

 

''One hundred percent of the buyers were investors and speculators,'' he said. ``Anyone who tells you their projects are different are deluding themselves.''

 

ZONING-CODE OVERHAUL

 

The pace of development is so furious that it has overtaken the city's planning efforts.

 

Only now is the city getting around to a long-promised overhaul of its outdated zoning code, a complete rewrite meant to ensure that new development produces lively, pedestrian-friendly streetscapes and respects open spaces and established neighborhoods, while weaving it all together into a cogent urban fabric. The rewrite, dubbed Miami 21, will be phased in over two years.

 

Yet more than 100 large-scale projects, most of them in and around downtown, have already been approved or are under construction.

 

Public-transit improvements like Metrorail extensions, a light-rail line to Miami Beach and the contemplated city streetcar are years away, raising fears of gridlock.

 

Quipped Cannon, the real estate analyst: ``Maybe we need to give every buyer of a condo in the urban core a Segway.''

 

There are other worries.

 

Some skeptics, noting the high condo prices and the out-of-town provenance of buyers, fear that instead of the diverse, working 24-hour downtown that city leaders envision, the boom will instead create a seasonal playground for the rich, a Monte Carlo on Biscayne Bay.

 

''I bet those buildings are going to be empty a lot of the time,'' said Joel Kotkin, an urban historian and consultant who has written about the rise of what he calls ''ephemeral cities'' -- places like San Francisco, Berlin and parts of New York that increasingly cater to the rich, the childless young and tourists.

 

''Maybe this is Miami's karma, to be this kind of place, a temporary, hip, cool, nomadic population serviced by a poor population,'' said Kotkin, author of The City: A Global History. But, he added: ``History shows a city has to maintain some sense of a middle-class character if it wants to thrive.''

 

`MISSING LINK'

 

Yet there's relatively little in the new downtown priced for working families. ''The missing link here is in creating housing that the middle class can afford,'' said Rafael Kapustin, a longtime downtown property owner who pioneered the conversion of old downtown offices and hotels into modestly priced condos and apartments.

 

In partnership with a big developer, the Related Group, Kapustin developed two affordable loft condos, with units averaging around $150,000, now under construction in the inner core of downtown. But their Loft II project may be the last of its kind because of the surging cost of land and construction, he said.

 

City leaders are sanguine. They say it will take years for all the planned condos to be built and occupied, allowing time to absorb new residents, build public amenities and improve transit.

 

While few city residents can afford waterfront condos, thousands of moderately priced condos and rental apartments are being built by private developers in adjacent Overtown and neighborhoods like Little Havana and Allapattah, many with direct city subsidies, according to a recent report from Miami Mayor Diaz.

 

`SELF-REINFORCING CYCLE'

 

And gradually, as new residents move into downtown, businesses, shops, restaurants, neighborhood retailers and services will follow, said Neisen Kasdin, a land-use lawyer and former Miami Beach mayor.

 

''It becomes a self-reinforcing cycle,'' Kasdin said. ``Yes, there will be a large segment of temporary residents, but as the city continues to grow as an international business city, it leads to the continued growth of a permanent community.''

 

Meanwhile, the city has instituted measures that strengthen the planners' hand in shaping an attractive, livable downtown: hiding parking garages inside buildings; lining sidewalks with shops, offices, dwellings and restaurants; and keeping garage and service entrances off Biscayne Boulevard and other main arteries.

 

'We used to sit here and say, `Someday,' '' said Miami Planning Director Ana Gelabert-Sánchez, alluding to the city's long-frustrated hopes for a downtown revival. ``Well, someday is here.''

 

Herald staff writer Larry Lebowitz contributed to this report. 

 
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Posted at 12:04:07 PM

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Real Estate News
Updated: Friday, February 22, 2019


Staged Property: Buyers Beware

Would you like to unload your house faster and for more than you expect? That, in rough terms, is what home stagers promise.

All the Homes a Stage

My farmhouse house, I will disclose, is as backstage as it gets. Books fill the bookcases. This is a big no-no in the staging profession. A vice grip is as likely to be on the dining room table as a floral centerpiece. A vice-grip is not a character flaw. My idea of decluttering is to straighten the pile of reading newspapers by the couch.

Now I find nothing wrong with a seller doing clean up, paint up and fix up before offering a property for sale. I would not be the first to do any of those activities, but I endorse putting onersquo;s best foot forward, given the alternative, with which I have had more experience.

Staging property is like set design in the theater. It leads the audience to look at focal points in ways that lead to certain feelings about the play. Good sets invite the audience to them by invoking emotional responses.

House stagers do the same. They use props like plants, smells, visual accents, space, angles, lights, colors, textures, airiness, and furniture to lead a buyer to imagine living in this set.

They deploy tactical rental furniture and art in empty houses to create the imaginative magic of theater. Staged properties are clean, clutter-free, spruced up and depersonalized. Staging is intended to draw the buyer into its pretend world.

The object of this mind-tweak is to get buyers to become emotionally invested in a staged house, then make a spontaneous offer, then pay more than they should.

A Growing Industry

Staging is now an industry that describes itself as ldquo;self-regulating.rdquo; Stagers can become trained, accredited and join a professional group, such as the Real Estate Staging Assn. At the Real Estate Staging Association, hundreds of thousands of real-estate agents and others have been trained.

Staging is sophisticated, customized marketing. It works. Itrsquo;s not dishonest in the sense of pulling a rug over termite damage in hardwood floors.

But it is intentionally manipulative. Stagers orchestrate the presentation of space to twiddle with a buyerrsquo;s mind so that he does something that he might not otherwise do. Admittedly, our way of doing business with each other often tries to convince buyers that the sellerrsquo;s deal is better than it is.

So how can buyers defend against a Martha Stewartly correct Ficus Benjamina in the entrance, a potted tree so disgustingly symmetrical and repulsively tasteful that sunbeams dance in marching-band formation on its just-spritzed leaves?

Educate yourself about staging, its purpose and how itrsquo;s done. An Internet search will lead buyers to informative articles. Stagers have written books. An agent working for the buyer should be asked to ring a staging alarm when entering a magic kingdom.

Identify stage props as a way to strip them of their persuasive power. Note fluffy bath towels, linens, greenery, wildflowers in dark rooms they suggest sunlight, yellow roses on a dining-room table, compulsive decluttering, clean-plate closets, new furniture, non-casually tossed toss pillows, items arranged in threes, cleared-off counter tops, furniture angles that draw you into a room, a bowl of limes and lemons and other focal points that thrum ldquo;Look at merdquo; using a low C in a harprsquo;s bass clef.

Outside note fresh paint, recently whacked shrubs, new shutters, fancy grill, ceramic yard frogs, rope hammock, an antique-looking weathervane and a new picnic table. The last five vanish at closing, if not before.

The Power of the Prop

The power in these props is that, together, they represent the life>

The stager scrubs away dirt and traces of the current occupants. The stager wants the buyer to think of the sellerrsquo;s house with all props in place, not empty and not full of the buyerrsquo;s stuff.

Once a buyer recognizes staging, it becomes transparent and funny. ldquo;My, my, what a fetching woven rug with bulging knots Is it pre-Columbian? The limes, the limes. [Kiss your fingertips.] Quel limesrdquo;

Consider not looking at staged properties. Stagers boast that their properties get three to ten percent more than unstaged properties. I believe them. On property that is worth 500,000, staging puts an extra 15,000 to 50,000 of buyer money in a sellerrsquo;s pocket. Some of that extra might go for paint and shrubs, things that convey to the buyerrsquo;s benefit.

But the buyer pays most of this staging premium for looking at props like candlesticks and couch pillows that will disappear like a traveling peep show. Staging succeeds in getting buyers to pay for something that often amounts to nothing.

Since all of us are equally vulnerable to the stagerrsquo;s skills, perhaps a buyer should tell agents to eliminate staged properties from his
look list.

Consider the Bare Bones

Agents working for buyers might discuss ways to evaluate staged properties with their clients. Donrsquo;t look at the props. If a buyer visits a staged property, imagine the house buck naked and empty. Thatrsquo;s what yoursquo;re buying.

Working farms usually are well organized with a few rough edges. If you find no edges in a farmyard, piles of weathered materials, pieces of equipment, scrap from the last century, Irsquo;d be suspicious. Farmers always need such backup.

Some farms are perfectly maintained in every nip and tuck. These farmers take great pride in neatness and upkeep. If you see every fence as tight as a prison door, every road newly graveled, every gate painted thatrsquo;s great. Be prepared to pay for perfection. This isnrsquo;t staging; itrsquo;s compulsive-maintenance disorder.

The reasons to cross off staged properties is that you will pay too much for what yoursquo;re getting, and yoursquo;re likely to be competing against stage-struck buyers who have fallen under stagerrsquo;s Spell.

The seller has paid for the stage show, usually a minimum of several thousand dollars but often much more. Statistics from Home Gain indicate that for every dollar invested in staging, a seller gets 4 to 5 back in additional sales price. Where, a buyer must ask, do those extra dollars come from?

Staging raises seller expectations. Itrsquo;s hard to negotiate with a seller whorsquo;s both out hard cash and hopeful to boot.

Since staging works, it is ever more common. My advice to buyers is to factor out staging and stick with a price that makes sense to them.

For buyers: All of what you see is not all of what you get.


Curtis Seltzer, land consultant, is the author of How To Be a DIRT-SMART Buyer of Country Property at his website.


> Full Story

HOA Landlord Rules

Rules Enforcement.

The HOA has the right to expect all residents, whether owner or renter, to play by the rules. But with renters, its up to the landlord to enforce them, not the HOA. So, the board should adopt a policy that requires all landlords to provide a set of the governing documents and all rules that have been adopted that affect the renter. The Board can also require that all rental agreements specifically make reference to and be subject to those documents. If a tenant violates a rule, the landlord should be informed of it immediately along with the expectation of enforcement. If there is a fine or penalty, the landlord should be levied for it as if he did the dirty deed himself. Its up to the landlord to get reimbursement from the tenant.

There are several exceptions to the landlord middle man enforcement process. If a tenant parks illegally in a fire lane, the HOA has the authority to have the car towed and the tenant will, naturally, pay to retrieve the car. There are some things the HOA should not interfere or get involved with. When a renter crosses the line between HOA rule and civil law infraction, the HOA has the right to call in proper authorities. Those authorities include the police, fire safety, FBI and drug enforcement.

Short vs. Long Term Rentals.

Most HOAs deal with renters who have entered into long term rental agreements 30 days or more. Most governing documents, in fact, require that the rental agreement be long term to avoid what would be a hotel operation. In resort areas, mountains, beach, etc. the HOA may have been expressly built and sold allowing owners to rent their homes short term. These homes or units are owned outright and are not timeshares with professional site management. However, unless virtually every owner has that in mind, there will be an ongoing clash between permanent residents and short term renters. Short termers have no allegiance to the community, dont know the neighbors and frequently are in party mode.

These factors point to ongoing problems with the locals. If this is a reality, its important for the board to press for consensus among the owners. If the majority want the flexibility to short term rent, it makes sense to have an onsite manager to control these issues and others like key exchange and housekeeping. The manager could be funded partly by the HOA to handle regular maintenance and partly by landlords to care for rentals. Its a win/win.

Controlling Tenants.

Renters generally are no better or worse than owner residents. Ongoing problems result from lack of landlord standards or enforcement of those standards by the HOA. Here are Landlord Standards, which all HOAs should adopt:

bull; Landlords must provide a set of governing documents CCamp;Rs and rules to renters before move in.
bull; HOA rules amp; regulations must be a condition of all rental agreements.
bull; Landlords are held accountable for renter infractions.
bull; Renters must communicate requests to the HOA through the landlord.
bull; Board may demand termination of a tenant with multiple rule violations.
bull; Landlord must provide a copy of each rental agreement to ensure compliance with the HOAs standards and for emergency contact purposes.

Renter Surcharges amp; Fees.

Some HOAs impose a Move In/Move Out or Renter Fee on landlords. Unless this fee is imposed on all residents, owner or renter, it is discriminatory. If a particular renter causes damage to the common area moving in or out, the landlord should be charged for it. Never surcharge >

Communicating with Landlords.

All tenant violations should be directed to the landlord in writing along with specifics, including date and time. The communication should be clear on what the landlords course of action should be. It should also reinforce that its up to the landlord, not the HOA, to deal with a renter.

Limiting Rentals.

At one time or another, someone may press to limit rentals. There are right reasons for doing so, but avoid the wrong one: The belief that renters are undesirable. While some tenants may be problems, so are some owners. Each must be dealt with as individuals, not a >muster with most lenders. Falling below that level causes closer scrutiny by some lenders. When lenders scrutinize, it usually means the interest rate or fees go up. Restricted financing options cause market values to fall.

Limiting rentals to protect financing is a worthy rationale for doing so. However, placing a system in place that allows some owners to rent but not others has many problems. The board must oversee the rental restriction policy and establish guidelines for who gets to rent and when. Also, there will be hardship cases disability, job loss, down real estate market, etc. that will press the board to bend the policy.

And consider if a landlord simply ignores the restriction and rents his unit. The HOA has control over the owner but not tenants who are protected by Landlord-Tenant laws. For a variety of reasons, if limiting rentals is desirable, it should apply to all owners. A total ban on rentals doesnt completely eliminate the boards oversight, but it at least makes it fair to all owners. For a sample Rental Restriction Policy, see www.Regenesis.net.

Renters Have Rights.

After considering the various issues, its important to remember that renters have rights that must be respected. Besides the state Landlord-Tenant laws, the Fair Housing Act speaks to unreasonable rental restrictions. Never impose restrictions based on sex, faith, culture or race. When it comes to HOA renters, do the right thing.

For more innovative homeowner association management strategies, subscribe to www.Regenesis.net


> Full Story

HELOC or Home Equity Loan: Which One Is Right for You?

While there are definite advantages to accessing your equity over taking out a personal loan or using credit cards, especially if yoursquo;re intending to use the funds for home improvement, the No. 1 thing to consider before you take any money out of your home is whether you can really afford it. Take out a home equity loan or use the funds from a HELOC and your monthly obligation will increase. But thatrsquo;s not all. Should you have a change in circumstances like a job loss or simply extend yourself beyond your financial comfort zone, causing you to miss payments, you could be putting your home at risk of foreclosure.

ldquo;Because the loans are secured against the value of your home, home equity loans offer extremely competitive interest ratesmdash;usually close to those of first mortgages. Compared to unsecured borrowing sources, like credit cards, yoursquo;ll be paying far less in financing fees for the same loan amount,rdquo; said Investopedia. ldquo;But therersquo;s a downside to using your home as collateral. Home equity lenders place a second lien on your home, giving them the right to eventually take over your home if you fail to make payments. The more you borrow against your house or condo, the more yoursquo;re putting yourself at risk.rdquo;

Should you want to move forward, itrsquo;s important to know the difference between a home equity loan and a HELOC so you can make the decision that best suits your need.

ldquo;HELOCs and home equity loans extract value from your home but add to your debt,rdquo; said NerdWallet. ldquo;The loan is a lump sum, the HELOC draws money as you need it.rdquo; Both loans typically offer a shorter term than borrowers have on their mortgage. ldquo;Home equity loans and HELOCs are paid off within five to 20 years, while 30 years is typical of a first mortgage,rdquo; said Bankrate.

Letrsquo;s break that down a little further.

About home equity loans

Borrowers who choose home equity loans often do so because of the fixed interest rate. The stable payment schedule means they donrsquo;t have to worry if rates go up. But, the fact that this type of loan is given in one lump sum doesnt necessarily track with everyonersquo;s needs. If you are the type that wants more flexibility in your loan, a HELOC may be the better choice. If you get a loan for 25,000 and only use 5,000, yoursquo;re still required to pay on the total amount loaned.

A home equity loan can also be problematic if your homersquo;s value drops after you have tapped all your equity. In this situation, you could find yourself underwater, or owing more than the home is worth. Homes in some hard-hit areas remained underwater many years after the market crash, with ldquo;more than 820,000 underwater homeownersrdquo; who owed more than double what their home was valued for, according to CBS News.

About home equity lines of credit

With a HELOC, you are still borrowing against the available equity in your home, however the funds are provided differently. Instead of having a lump sum, you use a HELOC like you would a credit card, accessing money as you need it and only paying interest on what you use.

ldquo;As a line of credit, a HELOC allows for flexibility around both borrowing and paying back the money you borrow,rdquo; said Credit Karma. ldquo;But it can also require borrowers to stay especially disciplined when it comes to taking out the funds and repaying their lenders.rdquo; Thatrsquo;s because HELOCs typically offer adjustable rates; if the interest rate rises, so does your payment.

ldquo;A HELOCrsquo;s interest rate is usually variable and can change. The interest rate is often tied to the prime rate and can be affected by market forces that could change quite a bit over the life of the HELOC,rdquo; said Credit Karma. ldquo;There may be limits to those changes though, like a periodic cap a limit on rate changes at one time or a lifetime cap a limit on rate changes during the loan term.rdquo;

Most HELOCs also have ldquo;two phases,rdquo; said Investopedia. ldquo;During the draw period ndash; typically 10 years ndash; you can access your available credit as you see fit. Many HELOC contracts require small, interest-only payments during this period, though you may have the option to pay extra and have it go against the principal.rdquo;

At the end of the period, borrowers have to start repaying the principal in addition to the interest, and, ldquo;From here on out, you can no longer access additional funds and you make regular principal-plus-interest payments until the balance disappears. During the 20-year repayment period, you must repay all the money yoursquo;ve borrowed, plus interest at a variable rate.rdquo;

Payment shock often hits at this point because, ldquo;The monthly payment can almost double. According to a study conducted by TransUnion, the payment on an 80,000 HELOC at 7 annual percentage rate will cost 467 a month during the first 10 years when only interest payments are required. That jumps to 719 a month when the repayment period kicks in.rdquo;


> Full Story



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