To recap last week’s blog in a nutshell: home equity loans provide one-time lump sums that are satisfied with a fixed interest rate over a set amount of time. Got that?
Welcome to part two of our lesson on equity finance: Home Equity Lines of Credit (HELOC). Home equity is to mortgages as HELOCS are to credit cards. Rather than paying back the loan in equal payments each month, you withdraw money on an as-needed basis. Though different in function, both types of equity loans carry serious pros and cons, which Iowa State Bank would love to lay out for you.
Consider a HELOC if…
- “Flexibility” is the name of your game: If you’re interested in periodic cash withdrawals over time for an on-going need rather than covering a one-time expense, a HELOC can do just that. Projects like a house remodel with a payment to contractors as it progresses would call for adjustable payments you could access when needed, which is exactly what this loan could do.
- A big one-time expense is on the horizon: Because it’s backed by collateral, these rates would be lower than you’d otherwise expect as you look to finance a major event, such as college tuition or an unexpected medical bill.
- Set monthly payments aren’t your thing: Because this type of loan lets you access funds on an as-needed basis, you only pay interest when a withdrawal is made. This cuts down on reoccurring dues during periods where you’re not touching your funds.
Avoid a HELOC it if…
- Upfront costs are out of your reach: Just like the first fees you paid for your mortgage, a HELOC requires similar expenses, making it costly to get on its feet. Hundreds of dollars will be needed for application fee, appraisal, and title search, amongst other associated costs.
- You’re not borrowing that much: If your bathroom remodel requires just a couple thousand dollars, it may not be the most cost-efficient to take on a front-heavy HELOC. Opt instead for a low interest credit card for 18 months of interest-free use.
- Your income isn’t predictable: Missing a monthly payment on your HELOC could result in home foreclosure. Additionally, a drastic loss of home value or a reasonable belief that you won’t be able to repay the loan will freeze your HELOC, only to be opened when home value is restored or income is steady once more.
- A spike in interest rate would topple you: Unlike an Equity Loan, HELOCs operate on variable- rather than fixed-rate interest. Inflation and unforeseen factors could send your interest rate creeping upwards for the duration of your loan. If your budget can’t accommodate wiggle room, reconsider if this is the right option.
Just like a home equity loan, a HELOC shouldn’t be taken lightly. For help deciding if either are in your best interest, please get in touch with one of our experts today.
The recession of ’08 knocked the housing market flat on its face. Thankfully, the past few years have showed a steady comeback with home prices rebounding every day. With housing secured, the option for accessing home equity loans for extra cash seems more and more viable.
But just because you can, does this mean you should? If you’re looking to nip credit card debt with high interest in the bud by paying it off in full, or if you’ve got your eye on a home improvement project that increases equity in your house, a loan of this kind may make financial sense. Consider the benefits and drawbacks of undertaking a home equity loan, courtesy of Iowa State Bank:
- Tax-deductible benefits abound: No matter how, when, or if it’s used, interest is tax-deductible for the first $100,000, and business expenses and other approved purposes might qualify for tax-deductibility. Make sure to double check with your tax advisor to see if you qualify.
- Interest rates are slashed: Because your home as collateral creates lower risk for lenders, interest rates on Home Equity loans are often lower than you’d receive on unsecured loans for the same expense.
- Fixed-rate interest is a safety blanket: Unlike a Home Equity Line of Credit (HELOC), a home equity loan operates with a fixed rather than variable interest rate. Like a mortgage, the rate is locked when the loan is secured, assuring that you’ll pay it back in predictable, stable monthly installments. If you have a steady source of income and a financial plan to accommodate, routine payments for this loan should come at no additional stress.
- Assume greater risk: A lender assumes risk with an unsecured line of credit, but your house and all payments you’ve made toward it become collateral when you secure a Home Equity loan, placing a brunt of the risk on you. You could face foreclosure and the loss of your home if you’re delinquent on a home equity loan. Pay the same attention and respect to it as any other mortgage.
- Face temptation to spend outside your budget: With your house as a bartering tool, it’s easy to view it as a bottomless piggy bank for quick access to cash to fund projects you can’t really afford. Rather than saving for a home improvement or saying no to a vacation that wasn’t in your budget, a home equity loan can masquerade as financial security that’s actually well outside your means. You still owe the money you borrow; make sure you have the resources to return it.
A home equity loan can be a benefit for some and a burden for others. Receive a personalized quote by answering just a few easy answers and find out what it’ll be for you!
Iowa State Bank, Equal Housing Lender, Member FDIC
Ghosts and goblins are spooky, but know what really sends chills down the spine? Cyberattacks. Last year, nearly one million computer viruses and malicious software pieces were unleashed each day. October is Cyber Security Month, and Iowa State Bank is giving you a couple of treats to avoid sneaky hackers’ tricks.
Between costumes, jack-o-lanterns, décor, and mountains of candy, the cost of Halloween may be the most terrifying part of the holiday. According to the National Retail Federation, the average American spends about $77 on decorations, candy and costumes each year.
Treat your monthly budget by sticking to these cash-saving tips from Iowa State Bank:
The fall season is a popular time of year for many folks as it brings cooler weather, cozy sweaters, football and, of course, the beautiful colors of fall foliage. But as the temperature continues to drop, now is a great time to make those final improvements to your home before the winter comes.
We not only want to provide ways to save you money, but also make sure you can live comfortably. Here are a few fall home improvement ideas that you can make to save energy, save money and live comfortably for the rest of the fall and into the winter.
There’s a change coming to the credit cards millions of Americans carry around with them every day. To be clear, this is a positive change that will hopefully prevent credit card fraud from continuing to be a menace and monthly news story.
EMV credit cards are a safer, more secure alternative to the credit cards we currently use. Here are some of the most common questions about EMV cards to help learn more about this new financial tool.
Student loan payments can sneak up on you if you’re not careful.
You recently completed one of life’s highest achievements, graduating from college. Now that you are beginning this new chapter in your life at your first fulltime job, you likely have not thought about paying your student loans off yet. Although there is a six month grace period before you have to pay the loans off, the time is quickly approaching. Iowa State Bank is taking the time today to write about how you need to prepare to pay student loans off.
Preparing to pay student loans:
- Communicate with your loan provider. You may be receiving emails about the status of your loans, but once the time gets closer to the ending of your six month grace period, get in contact with your provider. This will give you a chance to ask questions and clarify your payment plan.
- Start saving money. This seems like an obvious way to prepare to pay your student loans, but you will not realize the importance of saving until student loan payments come around. Always plan to pay a little more than the monthly minimum. By saving money now and paying a little more off on your loan, you can save in interest later.
- Make payments on interest now. Even during the six month grace period, your unsubsidized loans are collecting interest. Depending on your rate and amount of loans, this could add hundreds of dollars. Figure the interest and start making those payments now, if you can afford to do so.
- Stick to a budget. With your first fulltime job, new responsibilities and loan payments around the corner, set a budget for yourself each month. Within that budget, be sure to save the maximum amount possible within your earnings.
Iowa State Bank wants your preparation to pay student loans easy this year. If you have questions about our savings accounts and savings options, contact us today.
The finances of single household and a married household are far different.
Now that the summer wedding season is winding down, Iowa State Bank wishes all the newlyweds in the area well. Today’s blog will focus on financial tips for newlyweds and how you can be open about financial goals, spending habits and budget plans.
Financial tips for newlyweds:
- Talk about your financial goals. Find out what your spouse’s financial goals are and see how they match up with yours. There’s no need to worry if they are different, find a balance between both of your goals and meet in the middle. You may find it’s a good thing that your financial goals are different because then you’re able to work together as a couple to meet both goals. One of you may want to save for a down payment on a house, and your spouse wants to save for a vacation. Both are valid goals, but it may take a bit more time to reach both.
- Plan for a budget. When creating a budget, set time aside for you and your spouse to get together and make a monthly budget. Account for the essentials, spending habits and financial goals when crafting a budget. Find ways to save each month, whether it’s cutting bad spending habits or cutting out unneeded expenses. Budgeting can keep you on track to your financial goals.
- Evaluate your spending habits. Being open about your spending habits can save your relationship from taking a nosedive. Honesty is the best policy when talking about the spending habits you could improve upon. If you have a shopping problem or go out on the town too much, it can blow your monthly budget. Communicate with each other on how you can improve your spending habits.
Iowa State Bank wishes you well in your first years of marriage. If you and your spouse are looking to buy a new home, or start a savings plan, look into our mortgage lending and savings account options.
The outside of your house is the first thing a buyer will see when looking to purchase your home.
You hear it time and time again when you plan to sell your home. The way it is decorated can make or break the sale of a home. Now that it’s the peak home selling and buying season, have you thought about the landscaping and backyard appeal of your home?
When selling your home in the winter, the way your yard looks is not as important, but in the summer it is. Iowa State Bank is bringing you tips in today’s blog for staging the outside of your home. From the way your patio or deck is set up, to the freshly mowed lawn, every aspect is important this selling season.
Front lawn- Mowing may seem like something that is not necessary, especially if you don’t live at the property anymore. Mowing actually is extremely important because a clean looking lawn can attract drive-by traffic. Buyers make their first judgement based on the outside of your home. If the outside looks nice, it could potentially close the deal on selling the house. Mow the front lawn at least once per week while your home is on the market.
Clear the weeds and clean up the garden- A well-maintained and low maintenance yard and backyard is appealing to buyers. Many people are attracted to a property where they don’t have to pick the weeds right when they move in.
Stage the deck- You want potential buyers to see how welcoming your home is, so let your deck reflect that as well. Set the deck up with some patio chairs, pillows, umbrella and table. This will help potential buyers imagine entertaining in the area. Staging the backyard is just as important in the summer as staging the home.
Iowa State Bank wants selling your home to be simple and a smooth process. If you are in the buying process, set up an appointment with one of our knowledgeable loan officers to talk about mortgage lending.
Iowa State Bank, member FDIC and Equal Housing Lender
Enjoy a great BBQ this summer with these money saving tips.
Do you have plans to host a barbeque at your house this July? Iowa State Bank is going to bring you budget BBQ tips so your party can be a success without spending too much money. Today’s tips will bring simple ways to save money at your next grill out.
Budget BBQ tips from Iowa State Bank-
Make it a potluck- A potato salad or macaroni dish goes a long way when it comes to feeding a larger group of people. You could also let your guests know it’s a potluck and to bring a side dish to the barbeque to make the event less stressful on your wallet. If you do not want to have others bring sides to the party, you can easily find budget-friendly side dishes to make on Pinterest.
Don’t go overboard on the meat- When having your friends over, they don’t expect you to provide steak and chicken for everyone. You can watch local grocer ads for sales on burgers, brats and hot dogs. If it’s a special event, you could ask everyone to chip in for more expensive meat like steak and chicken. Or have a party and make it clear to have everyone bring their own meat. If you have plans to make kabobs, add more grilled vegetables than meat to lessen the expense of meat.
Plates, napkins and utensils- With a little bit of time and thought, you can stick within your budget when it comes to plates and utensils. If you’re comfortable, you can use the plates and utensils you already have on hand in your home. If you’re not comfortable with that, the local discount stores have utensils and paper plates available in different colors and designs.
Iowa State Bank wants your budget BBQ in your backyard to be a success. Put these tips to use when planning your next grill out or summer get-together, and don’t forget to come by Iowa State Bank for all of your banking and lending needs!
Iowa State Bank, member FDIC