Ayelet Gilad

Alpharetta Living, Real Estate and Community


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The Misconception About Closing Costs

Closing cost are the fees assocaited with the closing of the mortgage and unlike most people mistakingly think, they are the sole responsibility of the buyer, and not the seller’s responsibility. This misconception stems from the fact that as part of the negotiation of the deal, the seller pays for the closing cost. Indeed, more than 75% of the transactions last year had the closing costs paid by the sellers (in various %).

Basically, the closing costs are a cash amount, that together with the down payment, the buyer needs to “bring to the table” Often, an offer on a house will include the request to cover (partially or fully) the closing costs. If the seller agrees to this concession it means less cash for him, as this will come out of his net amount, and for the buyer it means – less cash to bring to the transaction.

If you have the cash, my advice would be to pay for the closing costs yourself, as it means that you can give a “clean offer”. This is of great importance in today’s market, which is becoming more and more seller’s market and you and your offer may be competing with other buyers & offers.

Need more info? Don’t hesitate to contact me for a free consultation! I’m always here to help!


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Is a Debt Consolidation Home Equity Loan Right for You?

Maybe you’ve indulged in impulse shopping one too many times or actually found yourself in an emergency where paying with a credit card was the only option. Either way, if you’re a homeowner who is struggling to pay those monthly bills, debt consolidation could make sense for you.

Homeowners who have equity in their homes but whose debt load has become difficult to manage are good candidates for debt consolidation loans. A debt consolidation loan allows you to pay off high-interest consumer debt, such as credit cards, by centralizing those balances with one lender in one loan. This means that you can merge a home mortgage payment, a car payment, a student loan payment and credit card debt into a single larger loan. One way to consolidate is through a home equity loan.

What is a Home Equity Loan?

Equity is the difference between the value of your home and the money you still owe on your mortgage. Sometimes referred to as a second mortgage, a home equity loan allows you to borrow against the equity you have built up in your property. With a home equity loan, your home is used as collateral for your debt consolidation loan. This type of debt consolidation allows you to benefit from mortgage interest rates that are typically lower than rates for other types of debt.

Another benefit of a home equity loan is that in most cases, interest paid is fully tax deductible.

Uses for Consolidation Loans

A debt consolidation loan lets you lower your monthly payments by combining your debt into one loan. With lower monthly payments, you can strengthen your cash flow, which will free up money for other uses. The surplus can be used to pay down your mortgage principal, allowing you to pay off the total amount owed in a shorter period of time.

Also, debt consolidation loans often have longer terms than other loans, giving you more time to pay off the money you borrowed.

People get home equity loans for a variety of reasons, including making home improvements, paying for college education or medical expenses, or buying a new car. However, home equity loans should not be used to pay for clothing, entertainment or minor repairs, according to Kathy Sweedler, consumer and family economics extension assistant with the University of Illinois.

Costs of Refinancing Home Equity Loans

While you might hear a lender advertise for “no-cost refinance,” often no-cost refinancing simply means the costs have been included in the amount of the loan.

Home equity loans usually have the same costs and fees applied to them that buying or refinancing a house does. When you refinance your home equity loan, you will often pay closing costs, application fees, attorney review fees, appraisal fees and more. Some lenders will waive these fees. However, some costs may still apply.

Disadvantages of Debt Consolidation Using Home Equity Loans

Because you’re using your home as collateral with a home equity loan, the primary disadvantage of debt consolidation this way is that, if you can’t make the payments, your house may get foreclosed. According to Sweedler, being 60 or 90 days late on a payment can put your home into foreclosure.

Transferring all of your debt to one lender can have some drawbacks. Consolidation loans can keep you in debt for much longer periods. Additionally, if the value of your home decreases and you need to sell it, you may end up owing more on your home than it’s worth.

Before signing on the dotted line, be sure you know the terms of the loan, the interest rate and payment amount, the points and fees and what the penalties are for late or missed payments. Also, check with your lender to find out if your home loan has a balloon payment – a large sum of money due all at once. If you feel you’ve made a mistake, you have up to three days to cancel the loan after signing. This can be done for any reason and must be done in writing.