Rising home prices, low-rate mortgage loans and shrinking inventory are contributing to a rapidly improving housing market. People are starting to see their homes as an asset again, one whose value may improve over time instead of decline. If you’re a homeowner who has stayed in your home, you may be asking yourself, ‘Is it time for home improvements?’
After several years of decline, the money you’ll likely recoup on home improvement projects is finally on the rise. While not a guaranteed profit generator, home improvement projects can make life easier, improve the value of your home, and make it more marketable.
Are you going?
If your goal is to increase your home’s value for resale, above all, be sure your improvement correctly mimics your community. A very high-end kitchen remodel, for example, may only pay off in an expensive neighborhood. Over building or choosing projects that aren’t universally valuable can actually harm your return on investment.
Conversely, if you’re the smallest house on your block, an additional bedroom and/or bathroom, especially if it doesn’t overcrowd your lot, could help you compete with other houses for sale in your area.
When making improvements to a home that you don’t plan to stay in over the long term, you should consider the concept of mid-range remodeling. Overspending can diminish the return on your investment; however, affordable improvements can add up to big value increases. For example, modest improvements like new counter tops, flooring or appliances can make a vast difference in the appearance of a kitchen, without adding up to big costs.
Are you staying?
If you’re planning to stay in your home for a long time, you may not be as concerned about fully recouping the money you spend. You may want to make improvements that are valuable to your family, like a new addition or a gourmet kitchen. Or, maybe you’ve always wanted a pool or an outdoor entertainment area. Now is a good time to invest in your home, your lifestyle or your family without worrying about the resale implications years down the road.
If you need to finance your home improvements, you may need to demonstrate your home’s value with a home appraisal. Typically, financial institutions lend up to 80% of your home’s value minus your first mortgage balance.
You can start by estimating your property with a home value estimator, like Zillow.com. We often find these estimates are a little off; however, they are a good start. Divide your mortgage balance by your estimated value and multiply by 100. If that number is less than 80%, your value may qualify for a home equity loan or line of credit.
If you don’t have sufficient equity for a home equity loan and have much needed home repairs to get done, you may consider a personal loan.
For more information, call one of our real estate specialists. We’re happy to help.
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Most consumers are familiar with mortgage loan refinancing. However, members often tell us they didn’t know they could refinance their auto loan.
Vehicle loans are typically established with 4-6 year terms. During the loan period, economic and financial situations can change. You may be able to proactively respond to these changes with an auto loan refinance. Improvements in market rates, your credit score or your income can add up to big savings.
Annual percentage rates periodically change. In a rate environment like we are in today, rates have been declining. If you purchased a car more than a year ago, it is possible that your current interest rate is higher than what is being offered today. Refinancing could lower your monthly payment while keeping the same term. Or, refinancing to a lower interest rate and keeping the monthly payment the same could reduce the amount of time it takes to pay off the loan.
Multiple factors are used in calculating credit scores, including payment history. After a year or more of timely repayments, a credit score may improve. A higher credit score may qualify for a lower rate. Lower rates not only reduce the monthly payment, they also reduce the amount of interest paid over the life of the loan.
If your income has increased, you may want to consider refinancing to a lower interest rate and shortening your term. Both actions will save finance charges and increase your equity in your vehicle.
Conversely, if your income has decreased and overextended your monthly budget, you may prefer to extend the loan term and lower your payment to help pay other expenses.
To find out if an auto loan refinance is right for you, try our online Loan Saver calculator. Or, if you prefer the personal touch, with a phone call and a few minutes, we can determine if we can save you money.
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by Chris, Vice President, Lending
A $200 fee applies to reduce the rate of an existing PSCU loan.
Current law allows consumers one free credit report each year. We encourage members, like you, to review your credit report annually. When accessing your report, however, you may find it complicated and not easily understandable. Here’s what you should look for and what it means to your credit.
Your credit report can help you gauge your financial picture from a lender’s perspective. However, more importantly, you should review the entire report for general accuracy. If you see any accounts that you didn’t open or any errors with existing accounts, you should contact the credit bureau to initiate the process to correct them.
Your credit report will show who has been accessing your credit report. These inquiries are categorized as “soft” or “hard.” Soft inquiries are when someone reviews your credit, but hasn’t asked for credit. For example, it’s considered a soft inquiry when you review your credit report annually or a lender receives a change in your credit status in relation to a credit card account. Soft inquiries do not affect your credit score.
Hard inquiries occur when a business has accessed your credit report with the intent to offer credit. For example, you’ll receive a hard inquiry on your report when you apply for a credit card or auto loan. Infrequent hard inquiries don’t normally affect your credit score that much. However, frequent hard inquiries indicate an increasing desire for credit and can adversely affect your credit score. If you see any hard inquiries that you don’t recognize, it may be an indicator that someone is trying to use your credit score or is committing identity theft. In that event, report the inquiry to the credit bureau.
Delinquent payments heavily influence your credit score. If you see that your bills have been paid 30, 60, 90 or 120 days late, that can be very damaging to your score and your future ability to get a loan. The greater the payment delinquency, the more it damages your credit score.
Timing also can be a decisive factor with late payments. For example, how long ago was the late payment? Was the late payment an exception? Have late payments been a regular occurrence? Over time, late payments will become less damaging, providing your recent payment history is consistently satisfactory.
Credit Utilization Ratios and Open Credit Card Accounts
Credit scoring programs also consider your debt-to-credit limit ratio, or utilization of available credit. This ratio compares your existing balances with your available credit limit. The ratio demonstrates to lenders whether or not you are living within your means. Generally a lower ratio has a more beneficial impact on your score. In addition, an excessive number of credit cards and available credit can lower your score. Lenders and credit bureaus want to see responsible spending to show that you can have the available credit, but not necessarily use it.
Accounts that have gone to collection departments or have been written off as a bad debt can stay on your credit report for up to seven years. Lenders will be more reluctant to give a loan to someone who has caused a loss.
Typically, members are aware of adverse credit experiences on their credit report and many are making efforts to pay the obligation through workout agreements or legal proceedings. It is not uncommon, though, for consumers to be unaware of low level or inactive collection activity, for example, a forgotten insurance deductible with an old medical bill. You can start to remedy this type of situation by contacting the creditor.
It’s also increasingly common to see a collection entry on a debt that is not yours. Should you encounter that situation, you must contact the credit bureau and have the entry removed from your report. Unfortunately, identity theft is a growing problem for consumers and makes the need for reviewing your credit report even more important.
Judgments, Liens, Bankruptcies
You’ll find these listings in the public records section of your credit report. These types of events are extremely damaging to your score and can stay on your credit report for up to 10 years. For further information, read more in “What is Bankruptcy?”
You can access your credit report at www.annualcreditreport.com to get started.
If you’re having difficulties repaying a debt or obligation, we recommend speaking to your creditor(s) as soon as possible.
by Chris, Vice President, Lending
Jenna, Vice President, Operations
Most of our new checking account holders switch to Pacific Service CU because they want to receive good value. But how do you know you’re getting a good deal? Here are five fees to consider when assessing a new checking account.
Typically, banks offer free ATM access to their own ATMs. However, be sure you look at the out-of-network ATM fees, the charge that results if you use your Bank of America ATM or debit card at a Chase or other bank ATM. Non-network ATM fees can range between $2 and $5 and can quickly add up over time.
You should also make note of monthly maintenance fees and requirements to avoid those fees. Sometimes the fee can be avoided simply by taking advantage of direct deposit. Often a minimum balance is required to avoid the fee. If so, be sure that the minimum is realistic for you. And finally, some checking account providers require certain activities to avoid the monthly fee; things like number of debit card uses per month or limiting to the number of checks you can write.
Generally speaking, try to avoid checking accounts that require you to pay to use or access your account. Look at the fee schedule for charges such as speaking with a phone representative or teller, limits on paper checks written or charging for paper statements.
Non-Sufficient Funds and Overdraft Protection Fees
When there are not enough funds in your checking account to cover a transaction, your financial institution may still pay the transaction using either an elected overdraft protection account or allowing you to temporarily overdraw your account. These types of services can be very reasonable, but often are very exorbitant.
We encourage our members to designate other credit union accounts to be used as an overdraft protection source in case your checking account becomes overdrawn. We will automatically transfer funds from the designated overdraft account(s) to help prevent checks from bouncing. At Pacific Service CU, this is a free service; however, we see these fees as high as $15 or more per transfer at other financial institutions.
Courtesy Pay Fees
Courtesy pay allows you to overdraw your account, up to your courtesy pay limit. For this service, a courtesy pay fee will apply because the institution is standing in for you. Our fee is a low $25. We often see courtesy pay fees at nearly $40 per transaction and some fees increase the more often you use the service.
If you regularly travel outside of the country, foreign fees should be a part of your decision-making process. Outside of the country, consumers typically pay a premium for ATM access, debit and credit card transactions and more. This can be a real differentiator for some consumers.
We pride ourselves on being a low-fee leader in the financial services marketplace. Our Fee Schedule is available online or in branch and we encourage you to compare and see how we stack up. Our low fees and great service are hard to beat!
One of the questions we hear from members is “Will a short sale damage my credit?”
In short, yes. In fact, there’s no real credit rating advantage to a short sale over a foreclosure. Credit will be negatively impacted after both. Your lender will report the financial loss as a major derogatory event on your credit record whether it’s a short sale or a foreclosure.
Here’s the difference:
A foreclosure occurs when a homebuyer doesn’t make their monthly payments on a mortgage loan. The lender then uses its legal right to foreclose on the home and take possession. The home is first offered for sale at auction. If there are no buyers willing to pay the opening bid, the house reverts back to the lender. The lender will use a traditional sale process and apply the sale proceeds to the unpaid mortgage balance to recover all or part of the loan amount.
A short sale is selling your home for less than the balance of the mortgage loan. The mortgage lender must approve this option in advance after the homebuyer provides a letter of hardship, proof of income, assets and bank accounts, along with a comparative market analysis to prove that the local property market does not support selling the home for the full mortgage loan amount.
There may, however, be differences in how a short sale and foreclosure impact your life and credit score.
When a lender forecloses, credit may be more severely damaged than with a short sale because of the impact of ongoing late payments prior to foreclosing. In a short sale, often the borrower hasn’t missed a payment.
In a short sale, the homeowner controls the transaction and can remain in the home through a traditional realtor-involved transaction. The lender is able to avoid the costly and lengthy process of a foreclosure and the borrower is able to avoid the unpleasant process of an eviction and a public sale of their home.
One big advantage in a short sale is how you may appear to a prospective lender. Credit bureau scoring models and lenders tend to be more forgiving if the loan is marked “settled,” as in a short sale, compared to a record of “default,” as in the event of a foreclosure. For a little perspective, in the event of a foreclosure, Fannie Mae and Freddie Mac typically won’t lend to you again for five years. However, in a short sale, that timeframe shortens to two years.
If you are struggling to make ends meet or are considering a foreclosure or short sale, we encourage you to reach out to your lender now. The sooner you act, the more time and flexibility you have for resolution. Fully explain your situation to your lender. Your lender doesn’t want your house, they want your payments. Show them you’re making an effort toward repayment and ask for options.
If you’re having difficulty making payments on a first or second mortgage loan with us, call one of our specialists for help. To determine the best way to assist you, we will work with you to review your financial situation and identify your options. Complete a Financial Worksheet and fax to (925) 609-3262.
by Chris, Vice President, Lending