IDLE EQUITY:

Put Your Home’s Equity To Work

With Six Savvy Strategies

Do you have idle equity sitting in your home that could be building wealth instead? One of the great aspects of homeownership is that you increase your wealth every month by building equity in your home and reducing your tax bill at the same time.

After you’ve been in your home a few years, you may have some equity that you could put to work for you. Even if the property has appreciated by just a few percentage points per year, significant equity can build up fairly quickly. Just be sure you retain enough equity that you’ll be able to pay a real estate agent’s commission when you sell the home.

Home equity loans are the most common means of tapping a home’s value. In states where home equity loans are not allowed, however, you can still put your home’s value to work by refinancing it for more than you currently owe–a “cash out” refinancing.

The first way most homeowners think of using their equity is to pay off high-interest debt. That’s one popular option, but you could also invest that equity in other ways. Here are six more ways to put your equity to work for you.

1. Trade Up

Using your equity as a down payment for a larger home could make financial sense. If you’re in a $200,000 home now and it appreciates by 5% each year, your gain is $10,000 for the first year. In five years, that home would be worth $255,256. But in a $275,000 home, that same 5% growth would be $13,750 for the first year. After five years, the more-expensive home would be worth $350,977 — nearly $100,000 more than the less-expensive home.

Of course, you may not be able to count on 5% appreciation every year. It could be higher or lower, depending on the state of the economy and market conditions. Not to worry, though. Even 2% appreciation will still add up over time.

Using additional equity to trade up will allow you to put a significant amount of money down on your next home. That could allow you to own a home you never could afford before.

2. Downsize

Another way to use your equity is to scale down. With the recent changes in tax laws, homeowners may sell a home every two years and walk away with tax-free profits up to $250,000 (for singles) and $500,000 (for married couples). By scaling down, you can purchase a smaller, less-expensive primary dwelling, and use the extra cash for investments, debt reduction or even purchasing an investment property.

3. Second Home

The real estate market has been fueled during the past few years by retiring baby boomers purchasing second homes. Maybe now is the time to purchase that home on the beach, at the lake or in the mountains. We can refer you to a knowledgeable agent in a resort area to help you with this move.

If you know you’re retiring to a particular area in the next few years, study that market now. You may want to buy the home now while prices are still affordable. If you do, you could rent the home during the peak vacation season. Many second homeowners discover they can just about cover their annual property expenses by renting out during peak season.

4. Investment Property

While the stock market often bounces up and down, many investors feel comfortable with the security of real estate. Not everyone has extra money to play the stock market profitably, but landlords can enjoy income every month. The secret is selecting the right property and finding expert property management if you don’t want to manage the property yourself. We can help with both these issues.

Some buyers have found it beneficial to purchase a property in the area where their college-age children are going to school. Their child can help manage the units and share the housing with other students to defray costs. The young adults learn responsibility and property management skills, and you have a live-in manager to watch over your investment.

5. Shared Equity

Another way to put your idle equity to work is to lend it to an adult child as a down payment for his or her first home. Some parents maintain a co-ownership interest while the young adult makes the mortgage payments. At the time of the sale, the equity is then split between the two. This is called a shared-equity arrangement.

6. Remodel

If you really like where you’re living, but desire a few more amenities, consider taking cash out for remodeling or adding to your current home. The interest paid on some home equity loans is tax deductible, just as it is with your first trust. Give us a call to find out what financing options suit your situation best.

Call us, we are the experts with expert partners in mortgage and everything real estate related. 800-497-7325-3607 or kaybaker@ec.rr.com . Sign up for our newsletters and our weekly TGIF Scoop on everything Wilmington NC!

We’ve all thought about it while lying on the beach or inhaling the fresh mountain air: “Why don’t we buy a vacation home?” Owning a vacation home can be a good decision if you buy smart.

They provide another investment that includes a mortgage-interest tax deduction.

Whether you rent it out or not, you can deduct the mortgage interest as long as you use the home more than 14 days or more than 10% of the number of days the home is rented annually at a fair rental, whichever is longer.

Qualified second homes include houses, condominiums, cooperatives, mobile homes, house trailers, boats or similar properties that have sleeping, cooking and toilet facilities.

Here’s an interesting twist on the mortgage interest deduction: If you take out a home equity loan on your first home and use the funds to acquire your second home, the interest on the home equity loan is also deductible. That’s three mortgage interest deductions off your tax return!

Consult IRS Publication 936 for a complete discussion of how mortgage interest for a second home is deductible.

You can purchase your future retirement home in Wilmington NC now, at today’s prices.

Though your second home may be a vacation home now, if you buy right you can convert it into your principal residence later.

They can produce their own income.

Renting out a second home occasionally or often can help you pay for the property with OPM (other people’s money). Check with your tax advisor about how much of the upkeep and management expenses are deductible against your income.

Buying Tips From The Experts

Buy something within a reasonable distance.

Be sure you can get to your vacation home in a short amount of time. Before you make a final decision, travel the distance on a typical Friday afternoon to see whether the drive will be too much to deal with after a long work week.

Rent in the area several times before you buy.

If you really like a particular area, check it out during different seasons. This way you get to know the climate, people, pests, traffic patterns and other regional particulars first-hand.

Consult other owners.

Check with owners of nearby properties about public and private facilities, special maintenance required due to location or weather, the social climate, local development plans and prevalence of crime. Learning about the lifestyle of the area may help you narrow down your choices.

Think home first, investment second.

Although you may be able to generate rental income from your vacation home, it may not cover your ownership costs. (If you want to try real estate investments, give us a call to look at properties in the Wilmington NC  local area.)

Consider different styles of properties in a vacation area.

To minimize upkeep and have a more secure environment, a condo may be preferable to a single-family home. If you plan on converting it to a retirement home, consider what type of home you’ll want as a full-time residence.

Here are some of the current Wilmington NC real waterfront/waterview real estate  in our area.

Priced from 100,000 – 200,000  Click here

Priced from 200,000- 400,000  Click here

Priced from 400,00 -600,000  Click here

Priced from 600,000 – Click here

To search all properties please visit www.cbbaker.com

May and June are usually some of our biggest months when it comes to home sales. Our pending index is climbing; you can see our mountain tops when you look at the sold units, now go and look at the chart you will see the mountain peaks during the summer season.

Economically – Our congress will be working on our current debt ceiling? Do they raise it? Other areas are slow to come around, inflation is trying to work its way back in while employment numbers are looking better each month. Unemployment rose back up to 9.0%. Hopefully we will come out of this economic funk real soon; this current economic crisis has affected so many lives and financial interests of individuals as well as companies.

April just stole all our gains for March with a decrease in sold homes and average sales price.  The average sold price dropped to $206,698 a 14.9% loss over last month. Our sold units hit 383 a large decrease from last month. Sold units are down 33 units from last month and up 52 from April 2009. One point to keep in mind is that last year this time we were still dealing with the First Time Homebuyers Tax Credit. In the month of April we saw an increase of 40 homes in our listing inventory, we have 4,887 homes on the market as of May 1^st. This adjusted our month’s supply with just over 12.7 months a slight increase from last months 11.8. With the low sales in April this affects our month supply. Our average list price has started the year under $350,000 range; we are currently at $349,067. In April sellers paid concessions in about 30.0% of all the month’s transactions about the same as last month. Our average days on the market decreased to 148 days – we are now talking 5 months on the market. The list to sold ratio has increased a little to 93.8% this number needs to continue to get better. The number of homes that sold in 15 days or less continues to remain very low, 8.6% of April sold homes. The 30-year fixed-rate mortgage (FRM) averaged 4.63% with an average 0.7 points for the week ending May 12, 2011. We have seen decreases the last 5 weeks. Call me so I can show you or your clients how they can get the benefit of these rates. Have a great week and let me know what I can do to help you and your clients.

Despite all the media comments about our markets we are still lending money for residential mortgages. If a client has income and credit and some sort of down payment; they can get a mortgage. It goes to the basic three C’s – Capacity, Collateral and Character.

For the complete Inventory update and graphs read more here…

Source – David Flory Cunningham Mortgage

If you find that you are in need of help with your own home financial situation, or you would like to help someone out of their financial situation by purchasing a short sale,  rely on us to help.  Certified Distressed Property Expert can guide you through the selling and the buying process in a far more knowledgeable and timely process than doing it yourself.  Contact us NOW, by signing in below and we will contact you immediately to start the process of selling your home as a short sale or  looking for short sales to purchase. A free list of current short sales and foreclosures will be emailed to you.  Please sign in here.  http://www.cbbaker.com/shortsales.php

Wilmington International Airport stretches it’s wings again.  Chicago O’Hare International Airport was just added as a nonstop flight by American Eagle.  Good news for Wilmington.  Business travelers now have the option of flying out in the morning and coming home that  night.  ILM currently services 7 cities nonstop commercially:  New York, Philadelphia, Washington, D.C., Charlotte (ILM’s hub), Atlanta, Chicago and Orlando.  Talk is that Boston might become the next nonstop flight after meetings next month.  The success of these flight patterns will hopefully bring more nonstop flights into our area.  In addition to nonstop, ILM stays busy with flights to where ever you might want to go.  We invite you to fly into our hometown and visit.  If you would like to see what Wilmington NC has to offer, check out www.cbbaker.com for more information and real estate. Fly in | look at real estate | be home that night.  Easy….

Coldwell Banker Sea Coast Realty has come out strong for the start of 2011 in real estate sales.  We have sold 243 homes since January 1, 2011, with the closet competitor having sold 108 homes at 9.38% of the market.  Sea Coast holds 21.09 % of the market out of 57 of the top firms in the area.  Currently we have 168 properties under contract at  23.66% of the market.  The next competitor has 83 properties under contract with 11.69% of the market.  Pretty impressive numbers. Extensive training and courses are offered at Coldwell Banker Sea Coast, thus giving us an edge to sell your home, or purchase a new one.  Knowledge and experience makes the difference.  Call us today. Kay Baker & Associates

Google Maps is getting out of the real estate business starting Feb 10, 2011.  In July 2009 Google added “search for real estate” on their Google Maps.  Due to the increase in excellent real estate search features on real estate websites, like Coldwell Banker, and an change to API on how listings are submitted Google decided that the real estate search on maps were not being utilized.  Coldwell Banker embraces Google products such as YouTube and Google Maps on their website.  Google is already working on new features that will enhance websites and searching for consumers.  Search all real estate on www.cbbaker.com

The proverbial question every buyer who is in the loan process has is “Is this the best time to lock in my rate”.  The rates are creeping up but still under 5%.  Well, Warren Buffett, one the wealthiest and most highly successful investors  is “locking” in now.  His Berkshire Hathaway Company just sold $1.5B in fixed debt, mostly in 10-year Notes, in order to refinance their adjustable rate loans.  Mr. Buffett has not made comments on the move – but it is clear to us that he sees rates gradually moving higher over time as the US economy improves.   Business Week states “The market scrutinizes Buffett’s moves very closely and this would indicate he’s thinking interest rates in the longer term may go up,” Vijay Chander, Hong Kong-based head of credit strategy at Standard Chartered Plc, said in a phone interview. That’s consistent with our house view that the U.S. economy is improving.”

“The world’s most successful investor locked in interest payments on most of the debt as a report showed U.S. manufacturing expanded in December at the fastest pace in seven months, spurring confidence the world’s biggest economy is gaining momentum. Former Federal Reserve Governor Frederic Mishkin said yesterday that while the central bank will complete its $600 billion bond-purchase program, a third round of so- called quantitative easing to spur growth is unlikely”

So, buyers it is a great time to buy a home and lock in with a great wait.  It looks like the rates will probably be holding steady or increasing.  Search 24/7 on www.cbbaker.com .  Call and we can send you instant emails when something in your price range hits the market. Happy Buying.

Facing a budget deficit, the city of Wilmington NC would like to have your input on the 2011 budget with a little challenge.  To take the challenge you can visit www.cityofwilmingtonbudgetchallenge.com

This time of year everyone is in a hurry trying to get all the shopping done, homes decorated and cards in the mail.  Take a minute to slow down.  Think of others and ask yourselves what you could do for someone else that might help them out at this time of year.  There are many organizations that need help, especially during the holidays. The feeling you get when you help someone else is the best present you could ever receive. So, here are just a few of the organizations that would love to hear from you.

Get involved in Wilmington volunteering!

• North Carolina Food pantries and Soup kitchens Wilmington Groups and Organizations
• Angel Food Ministries
• American Legion post locator
• American Red Cross – Local Chapter
• Chambers of Commerce in North Carolina
• Habitat for Humanity – Local Affiliates
• Jaycees
• Kiwanis clubs in North Carolina
• Lions clubs in North Carolina
• Meals-on-Wheels Volunteer
• Rotary clubs in North Carolina
• VA Facilities in North Carolina
• Veterans of Foreign Wars post locator
• Volunteer Opportunities for Wilmington, North Carolina
  • VolunteerMatch.org
  • ServeNet.org
• Non-profit Groups in Wilmington and North Carolina
  • MelissaData – Wilmington Nonprofit Organizations Lookup
  • GuideStar.org Search
  • Foundations in North Carolina
  • Community foundations (by state)