Confused about the home appraisal process?

There are two steps in the home sale process that we frequently see our clients get the jitters over: the home inspection and the home appraisal. Both processes are performed by a disinterested third party, yet homeowners tend to treat the results as a judgment of their homes.

Then, there are those who don’t understand that the home inspection and the appraisal aren’t the same.

So, let’s clear up the confusion. Knowledge is power, and the more you understand a process, the more you’ll be able to relax into it.

Appraisal vs. home inspection

The home appraisal and the home inspection are both of value to the homebuyer. The buyer’s lender will hire the appraiser and the buyer will hire the inspector.

The home inspector’s aim is to determine if there are any “major defects that will cost the buyer a lot of money above the purchase price to repair,” according to the pros at HomeFrontInspection.com.

The inspector will only “inspect readily accessible, visually observable, installed systems and components.” In other words, he or she will not be able to ascertain what is happening behind the home’s drywall or under the floorboards.

The home appraisal, on the other hand, is a process that lenders insist on before loaning the buyer the money to purchase the home.

The appraiser is an unbiased third party who will determine the home’s value on the current market.

While this person is hired by the lender, “the Appraisal Independence Requirements, or AIR, prohibits a lender’s loan production staff from having direct contact with—or influence upon—any appraisers,” according to Kristin Demshki at PennyMacUSA.com.

The buyer typically pays for the services of both professionals and owns the home inspection report. The lender owns the appraisal but is required to supply a copy upon written request.

Other common misunderstandings about the home appraisal

As mentioned previously, the biggest misconception about home appraisals is that they accomplish the same thing as the home inspection. But, that’s not all that confuses real estate consumers.

Myth: The market value of my home is the same as the tax assessor’s value

Reality: As you know, your property taxes are based on the assessor’s value estimation. value. Assessors use a process similar to that of a professional appraiser, using many of the same public records.

Because the assessor isn’t privy to the particulars of each home (whether the home in question has been updated, for example), his or her estimation of market value may not be the home’s true market value.

At any rate, the assessor multiplies his or her estimation of the home’s value by the county or municipality’s pre-determined “assessment rate, typically 80 to 90 percent.

Here’s an example: The assessor determines that a home is worth $300,000 and the assessment rate is 90 percent. While $300,000 is the market value, the assessed value for tax purposes is $270,000.

Myth: The appraisal is always accurate

Reality: Appraisers are people and, like all of us, they make mistakes on occasion. Most buyers and sellers are satisfied if the lender is satisfied.

Typically, the only time a buyer and seller are interested in viewing the appraisal is when the suggested value is lower than what the buyer has agreed to pay. And, for good reason: the lender won’t move forward if the home is worth less than the amount borrowed.

Again, appraisal reports can contain errors and the buyers are within their rights to request a new appraisal.

When does the appraisal happen?

While time frames vary, FHA borrowers can expect the appraisal to take place shortly after the seller has accepted the buyer’s offer.

What Happens During a Home Appraisal?

Much of the appraiser’s work involves research, back at his or her office. This typically occurs after a visit to the home.

During the visit, he or she will measure the home’s exterior and take interior and exterior photographs. This visit is also necessary to ascertain any conditions that impact the home’s value, both positively and negatively.

The research aspect of the appraiser’s job involves seeking out comparable properties that have recently sold and comparing the subject home to them. He or she will compare the following (and more):

  • Age of the home
  • Condition of the home
  • Number of bedrooms and bathrooms
  • Square footage
  • Amenities
  • Updates

Again, this is a partial list, but it will give you an idea of how the appraiser comes up with a value for the home.

The most important thing for homeowners to do before the appraiser arrives is to ensure he or she has access to crawl spaces, attics, cellars and all the rooms within the home.

While some appraisers claim that the tidiness of a home isn’t considered, the condition is, and a tidy home appears better cared-for.

Flood insurance: What you absolutely need to know

While water is a critical part of life on earth, it can also be deadly. From hurricanes to flash floods, we’re often faced with water-caused disasters.

The number one disaster in the U.S. is flood and it rings up about $2 billion dollars in insurance claims annually.

We are heading into what the experts call “peak flood season,” which occurs between late spring through summer. “This is due to a combination of factors, including a slower jet stream and more humid air,” according to the Weather Channel’s Jonathan Erdman.

Folks living in flood-prone areas who lack flood insurance can be on the hook for tens or hundreds of thousands of dollars in damage.

The National Flood Insurance Program says that the average claim is $46,000 and that only 15 percent of American homeowners carry the policy.

Unless you have a lot of cash stashed away, why wouldn’t you carry flood insurance? Let’s take a look at some of the reasons the experts hear.

I can’t afford flood insurance. I’ll buy it when the time comes

This is a bit like saying that you can’t afford auto insurance and you’ll wait until you’re involved in an accident to buy it.

It just doesn’t work that way.

Besides, the Federal Emergency Management Agency (FEMA) says that there is a waiting period (typically 30 days) after payment of the first premium before the policy kicks in.

There are exceptions to this and you can find out more at FEMA.gov.

Affordability shouldn’t be an issue – at least not when you compare the monthly cost of a policy (about $54 on average) to the tens or hundreds of thousands of dollars you’ll spend to repair or rebuild your home.

I’m pretty sure flood damage is covered by my homeowners insurance

According to the Insurance Information Institute, “Standard homeowners and renter’s insurance does not cover flood damage.” If you purchased a separate policy, then you’re covered. But, as mentioned earlier, most homeowners don’t purchase it.

I don’t live in a flood plain

One-fifth of insurance claims for flood damage are from homeowners who live in low-to-moderate risk areas, according to FEMA.

Lenders typically don’t demand flood coverage to folks buying homes in these risk corridors so it’s up to the homebuyer to be proactive.

If you have flood insurance

Just as you should do with your homeowners policy, you should review your flood coverage at least annually.

The National Flood Insurance Program offers up to $250,000 in coverage for the home and $100,000 in coverage for your personal property.

Often, people will buy expensive items and neglect to obtain additional coverage to protect their loss.

Be proactive – it may save you from the devastation of losing your home. The FEMA website offers more information.

Don’t make these 3 home selling mistakes

It’s not hard to make home selling mistakes. After all, selling a home isn’t something you do every day. So, learn from others’ mistakes. Take a look at three of the biggies we see in our real estate practice.

1. Don’t disregard the value of curb appeal

There aren’t a lot of studies on just how much or how little value “curb appeal” adds to a home. The most widely-read is a decade old, published by professor Alex X. Niemiera with the School of Plant and Environmental Sciences at Virginia Tech.

What his study found is that landscaping can boost the value of home in various ways. The sophistication of the design gives the most bang for the homeowner’s buck–up to 42 percent in additional value.

Larger plants add up to 36 percent to the value and a diversity of “plant material type” is worth 22 percent.

Another study during that time period found that large plants were the hot button with homebuyers, rather than sophisticated landscaping.

The fact is, curb appeal does add perceived value to the home. Not only that, it is the sole determining factor to getting people out of their cars and into the home.

So, in that way, it may determine how quickly the home sells as well. If your landscaping can use a makeover, go online for inspiration. HGTV.com offers amazing before and after photos and we can always rely on Pinterest for inspirational photos. Go to pinterest.com and enter “curb appeal” in the search box.

2. Don’t make expensive improvements for the wrong reason

Naturally you’ll want to make the repairs necessary to get top dollar for your home. The mistake we frequently see, however, is homeowners who feel they need to make expensive cosmetic upgrades to justify a higher selling price.

“A good rule of thumb for improvements is if it costs you $2,500 to update your bathroom, you should see a market gain of $10,000 to justify the improvement,” claims Michelle LeBow at FamilyHandyman.com.

You simply will not see that large of a market gain from an updated bathroom. Let the new owners do the updates and price the home accordingly.

3. Don’t hire the first real estate agent you speak with

According to National Association of REALTORS studies, most real estate consumers employ the services of the first real estate agent they speak with. Americans apparently spend more time researching their Amazon.com purchases or on Yelp.com deciding where to have dinner on date night.

It’s amazing when one considers that a home is many people’s largest financial asset.

Not all real estate agents are alike. Just as some hair stylists, attorneys and plumbers are more experienced, more skilled and offer better services, so do real estate agents.

It’s important that you interview at least three agents before hiring one to help you sell your home.

Moving? How to make it stress-free for your pets

Nearly 70% of U.S. households include a pet. That’s 85 million families with a finned or four-legged family member, according to the American Pet Products Association’s National Pet Owner’s Survey.

We all know that moving from one home to another can be stressful on children but it can be equally challenging for our pets.

We’ve rounded up some tips from the pros on how to make the transition easier for your pets.

Visit your pet’s veterinarian

Sure, your schedule is packed in the weeks before moving, but a quick visit to your pet’s veterinarian is important.

If your pet is on medication, ask for refills for the prescription. As well, if your pet is prone to anxiety, ask the vet for medications to help during the move.

Most important of all, though is to ensure your pet is microchipped.

If your pet should get out of the new house before he or she becomes acclimated to the area, there’s a good chance it will become disoriented and find itself utterly lost.

With a chip in place, whomever finds the pet will be able to contact you.

It’s also a good idea to ensure that the pet is wearing a collar with identification tags as a backup.

Which leads us to the second part of the microchip issue. If your pet is already chipped, ask your vet how you can update your contact information to include your new address and phone number (if that will be changing).

Finally, ask for a copy of your pet’s records, including all visits and vaccination records, and a referral to a veterinarian in your new town.

Tips for a long-distance move with a pet

The American Humane Society (AHS) recommends transporting your pet by car, if at all possible.

Before making the trip make reservations at pet-friendly hotels along the route. You can find some at PetsWelcome.com or Pet-Friendly-Hotels.net.

AHS also recommend that you transport your pet in a “… secure, well-ventilated pet carrier.” Also ensure that you have an escape-proof collar, leash, water and food bowls, pet food and bottles of water for those potty/rest stops you’ll need to make.

On moving day, keep the pet in a room with a closed door or in a crate in a quiet area of the home. The last thing you need when you’re on a tight moving schedule is for your pet to attempt a great escape.

Pet-proof the new home

Upon arrival at the new home, secure the pet in a bedroom along with its bed, crate and favorite toy or a piece of your clothing with your scent on it.

Then, head outdoors and check the fence, from top to bottom, for holes or gaps that the pet can fit through. Naturally, if your pet is a cat, he or she can just go over the fence, so this tip is primarily for dog owners.

If there’s a lawn, check it for signs of being recently fertilized (pellets, etc.). Don’t allow the pet into the backyard until you’ve thoroughly washed away any fertilizer, pesticides or herbicides.

Run a quick check of the plants in the backyard to ensure they’re pet-friendly. Check the database at ASPCA.org.

Take your dog on a tour of the neighborhood

Over the course of the first week or so in the new home, make it a point to walk your dog around the new neighborhood. Very soon, he or she will be acclimated to the new surroundings.

If the dog should get out of the house, the neighborhood will be familiar and, hopefully, your dog will be able to find the new home.

Pets have different personalities and some will sail right through a move to a new area while others may become nervous and stressed. Don’t be surprised if your pet begins behaving differently. It’s all a part of becoming comfortable and acclimated with the new surroundings.

Welcome home!

 

Selling your home? 3 things you need to do during the week leading up to closing

The week before your home sale closes will be packed with activity. Not only will you be finishing up your preparation for the move, but you’ll also need to get the home ready for the buyer.

Here are the three most important things you’ll need to do to ensure that the closing isn’t held up.

1. Gather important documents and other materials for the buyer

The day Martha stepped through the threshold of her first home was exciting, to say the least. As she toured it through new homeowner eyes, however, it didn’t seem the same as when she toured it through starry, house-hunter eyes.

But, there on the kitchen counter was a lone garage door opener and a key. She assumed the key would fit into one of the boxes in the community’s bank of them down the street.

But, which one? It took several back-and-forth phone calls, over the course of about a week, to finally determine that her mailbox was number 5. And her mail had stacked up considerably during that time.

So, the moral of that story is to yes, leave the mailbox key but leave a note describing which mailbox the key fits.

Other items to remember to leave for the buyer include:

  • Garage door openers
  • Landscape irrigation system instructions
  • Pool/spa operating manual
  • Security system instructions

2. Complete all of the buyer’s requests

If any non-fixtures were included in the sale, set them aside so that they aren’t accidentally packed for your move. In fact, put a note on the item or items so that movers and family members understand that the items are to remain in the home or garage.

Often, buyers request that the seller remove certain items from the home. This may include things you have stored on the side of the house, an above-ground pool and appliances.

Ensure that these items and any other personal property are removed from the home before you begin cleaning.

3. Time to clean

Buyers are told to expect the home to be “broom clean” and most sellers haven’t a clue as to what this means.

At minimum, you should:

  • Wipe down the insides of cupboards
  • Sweep and wash the floors
  • Vacuum carpets
  • Remove trash from the property (even if this means making a dump run)

Some buyers expect the oven and the interior of the refrigerator to be clean as well.

Finally, plan on leaving the utilities in your name until the sale is finalized. The buyer will perform a final walk-though of the home just before closing and will want to ensure that the major systems are working.

Here’s who to notify when you move

One of the lengthiest “to-do” lists is the one you’ll make when it’s time to move. From gathering moving materials to hiring movers and trying to time everything around a closing date – there’s a lot to do.

One very important chore that often falls through the cracks until it’s found again at the last minute is notifying people of your new address.

Here are the most critical moving notifications you’ll need to attend to.

U.S. Postal Service

This is the most critical notification you’ll make and, thankfully, they’ve made it easy for you to do. You can even specify the date on which you want to start receiving mail at the new address.

Navigate to USPS.com and fill out the form or pick up a change-of-address card at the local post office.

Utility companies

You’ll need to leave the home’s utilities on during the escrow period so that the buyer can conduct inspections. Once your moving date is firm, however, contact all utility companies with a shut-off date.

You’ll also want to determine a date for the utilities to be turned on at the new home and make a request from each company.

Add the ones that fit your situation to your list:

  • Electric
  • Gas
  • Water
  • Trash
  • Sewer
  • Propane delivery
  • Internet service provider
  • Landline phone company
  • Mobile phone provider

Notify those who provide ongoing services

This list includes:

  • Gardener
  • Pool service
  • Pet waste pickup
  • Housekeeper
  • Dog walker

Your pet’s microchip company

Sadly, failing to keep a pet’s microchip information updated is common. Pets in unfamiliar surroundings often get loose, become disoriented and, without a way to find you, the pet usually ends up at the pound.

If you remember which company your pet’s microchip is with, go to the company’s website and file a change of address and phone number (if it will be changing).

Otherwise, take the time to visit your pet’s veterinarian. They’ll typically scan the pet for free. Then you can notify the company of your new details.

Voter registration, Social Security and government benefits offices

Learn how to change your voter registration at USA.gov.

Social Security benefit recipients can change their address online as well. If you don’t have an account at the Social Security website, you’ll need to create one first (it’s free). You can do that at SSA.gov.

Collecting unemployment insurance benefits or public assistance? Call the offices to determine how they prefer you to file a change-of-address.

Your bank

Yes, the USPS will forward your mail, but banking information is just too important to trust anyone else with it.

Take the time to notify your bank, retirement fund companies and credit card companies of your new address.

Driver’s license and registration

DMV.org offers a handy tool for people in all 50 states to determine what is required to change their address with the DMV.

This list is by no means comprehensive, but it does list some of the most important notifications you’ll need to make when you move.

What you need to know before you buy a vacation home

A vacation is in order right about now, don’t you agree? And wouldn’t it be amazing to have your own little place, tucked away at the lake, by the sea or in the mountains to get away from the rest of the world and the craziness we’ve been enduring?

If you’re thinking of buying a vacation home, there are a few things you should know and maybe even run by your financial planner.

Can your budget handle two mortgages?

Unless you are fortunate enough to be considered wealthy, making two mortgage payments every month may be challenging.

Before letting the dream of a vacation home carry you away, keep this in mind. Ensure that you can make those two payments and still live comfortably.

PNC Investments senior vice president, Jay Mastilak, suggests that “The basic rule of thumb is that your housing costs – including those for your primary home – should be a third of your overall income.”

Housing costs, as we all know, include more than a mortgage payment. Take a look at the following costs to consider when thinking about buying a vacation home.

Upfront costs

Remember when you bought your current home? You paid a lot of lender fees, which are probably a blur at this point. Here’s a short list of the most common:

·         recording fees

·         loan origination fees

·         credit report fee

·         title insurance premium

·         private mortgage insurance

·         points

·         homeowner’s insurance

·         escrow deposits

·         miscellaneous fees

Naturally, if you pay cash for your vacation home, you’ll avoid all the aforementioned fees.

Ongoing Expenses

In addition to your mortgage payment, consider these additional ongoing fees:

  • Insurance coverage for anything not included in your homeowners insurance. Flood coverage is just one example.
  • HOA fees if the home is located in a managed community.
  • The cost of maintaining the home
  • Utilities
  • Security if you won’t be renting out the home in the off-season.
  • The cost of travel to the home.

Remember that older homes and those that are larger than normal, will most likely have higher maintenance fees than newer, smaller homes.

Will you rent it out?

One way to help pay for all of this is to rent the home out while you’re not using it.

A part of the rental income may be subject to federal and state income tax, so you’ll want to run this by your accountant before making a decision.

You’ll also want to take into account that the home will experience more wear and tear if it’s lived in for a good portion of the year. And, if you’ll be hiring a management company to help locate tenants and collect the rent, there will be a fee involved for that as well.

Your accountant can help you calculate how long you’ll need to rent out the home to cover the costs of owning it.

“If your monthly mortgage payment is less than or equal to one peak week rental, and you rent approximately 17 weeks per year, you should have break-even cash flow on your vacation home,” according to Christine Hrib Karpinski, author of “How to Rent Vacation Properties by Owner.”

Again, we aren’t accountants or financial professionals, so run this by yours when making the decision as to whether or not you can swing buying a vacation home.

 

3 Tips for buying a new toilet

Your bathroom is the workhorse of your home. It’s designed to be useful and durable. But, at some point, fixtures will need to be replaced.

Thankfully, when you replace an old toilet, the chances are quite good that you’ll be choosing a more efficient model which will pay for itself over time. This is especially true if the current toilet was manufactured before 1980, according to the U.S. Environmental Protection Agency.

Those toilets use up to six gallons of water during each flush. In fact, toilets are the water hogs of the entire home, “… accounting for nearly 30 percent of an average home’s indoor water consumption,” according to the experts at EPA.gov.

When you replace the old model with a new, more efficient one, you’ll save water and money. Go for a WaterSense-labeled toilet and you can save “… more than $110 per year in water costs, and $2,200 over the lifetime of the toilet,” according to the EPA.

The sheer volume of different brands and models of toilets you’ll find at the local home improvement store can make shopping for one a bit challenging. We’ve rounded up some tips that will help.

One piece or two?

Depending on model, a toilet can be one piece or constructed of two pieces (the more traditional design).

A one-piece toilet, because it lacks gaps between the tank and the bowl, is easier to keep clean and recommended for families with children.

The two-piece, or traditional-style toilet may cost less and it is easier to install, especially if you’ll be doing the install solo.

Get the right size

The hole over which the toilet will be mounted and the distance from the wall to the center of the hole is called the “rough-in.” This distance is 10, 12 or 14 inches.

Take the rough-in measurement before you head out to buy a new toilet to ensure it will fit.

How much water does it use?

Different toilet models come with different flush options. All modern toilets (those manufactured since the mid-1990s) use a maximum of 1.6 gallons per flush. That’s the standard toilet.

Low flush toilets, on the other hand, may use as little as 1.28 gallons. “While low-flow toilets are often more expensive to install and maintain than traditional toilet fixtures, they can also save you a significant amount of money over time,” according to the experts at home warranty company, American Home Shield.

Since the bathroom is the most-frequently used room in the home, and the toilet the biggest water user, choosing a new toilet with care will pay off in the long run.

Sick of renting? Take these Easy Steps to Homeownership

So, are you tired of paying your landlord’s mortgage payment yet? If you answered yes, and you’d much prefer to be building your own wealth instead of your landlord’s, it’s time to start saving for a home of your own.

Yes, it seems daunting. It seems like it will take forever. But there are some very simple changes you can make that will have your savings account bulging in no time.

It requires discipline, but we know you can do it.

Sell what you no longer need or use

We have a friend who went through her home, every room, every cupboard and drawer and even the garage, to find items the family no longer used or wanted.

She put them up for sale on Facebook Marketplace and in one month she’d made more than $500. And, she hadn’t even sold everything. That $500 gave her down payment savings account a huge boost.

Next, she’s going to tackle their storage unit and hopes to make twice what she made selling things around the home.

Facebook Marketplace is but one online arena on which to sell things. Try posting to these sites as well:

Having trouble finding Facebook Marketplace? Check out the reasons why and how to fix them at BusinessInsider.com.

The key to making online sales is in your description of what you’re selling and, most importantly, your photos. Get tips at CNET.com.

If selling online isn’t something you want to do, hold a garage sale. Get success tips online at DaveRamsey.com, HGTV.com and ConsumerReports.org.

 Take in a roommate

If you have a spare room, consider renting it out. It’s one of the best ways to accumulate a lot of money quickly.

Not only will you make money by charging rent, but you can also charge the tenant for a portion of the utility bills.

Need some tips on how to go about renting out a room in your home? Check out LandlordStudio.com, MoneyCrashers.com and Realtor.com.

Consider a side hustle

  • Drive for Lyft or Uber
  • Deliver food for Instacart, Uber Eats, Postmates, GrubHub, DoorDash
  • Babysit
  • Clean houses
  • Mow lawns
  • Walk dogs
  • Offer handyman or woman services
  • If you sew, create coronavirus masks and sell them online
  • Grocery shop for the self-quarantined
  • Offer errand running services

Advertise your services on Facebook Marketplace and Nextdoor.com.

Go hunting for down payment/closing cost assistance programs

Did you know that there are several mortgage programs that have no down payment requirement? If you or your spouse served in the military, check out the VA-backed mortgage.

If you don’t mind living in a rural area, the United States Department of Agriculture (USDA) offers several programs that require no money down. Explore the options for the Single Family Housing Direct Home Loan or the USDA Single Family Housing Guaranteed Loan.

If you don’t qualify for a zero-down program, consider other avenues that include down payment and/or closing cost assistance.

Federal programs include assistance for first responders and teachers. There are also down payment assistance programs for Native Alaskans, Americans and Hawaiians.

Then there are the low-down payment mortgage programs, such as FHA, Freddie Mac and Fannie Mae.

We’re happy to help in your hunt, so feel free to reach out to us.

Cut out the money wasters 

  • Have your coffee at home
  • Stop eating out or calling food delivery
  • Shop for cheaper ISP and cell phone service
  • Workout at home (cancel the gym membership)
  • Give up cable (buy a streaming stick)
  • Brown bag it at lunchtime
  • Walk or ride your bike for errands, etc.

Even if you only use one or two of these tips, you’ll have a good chunk of money to put toward your dream of homeownership.

Again, don’t hesitate to contact us – we are happy to help!

What is home equity?

You’ve heard of home equity loans, home equity lines of credit and maybe you’ve read the studies on how home equity is the pathway to wealth.

It’s one of those real estate terms that nobody bothers to explain, just assuming everyone knows what it means.

Today, we take care of that.

What is equity?

Equity is a term used in several industries. It may refer to stock, or shareholder’s equity. In real estate, equity is “… the difference between the property’s current fair market value and the amount the owner still owes on the mortgage,” according to the experts at Investopedia.com.

“It is the amount that the owner would receive after selling a property and paying any liens.”

The simple equation for equity looks like this:

Total Assets − Total Liabilities = Equity

If your home (the asset) has a current market value of $250,000 and you still owe $200,000 on the mortgage (the liability), your equity is $50,000.

Equity, by the way, isn’t fixed; it can fluctuate according to market conditions. Building equity, however, is far more common than losing it.

Building equity

On a new loan each payment you make goes primarily to pay the interest. As the loan ages, however, more of the payment goes to whittle away at the principal. Every house payment, however, builds equity.

Making a large down payment when you buy the home provides what some refer to as “instant equity.” Not only do you build instant equity with that large down payment, but your monthly payments will be smaller than they would be had you made a smaller down payment.

Another way to build equity quickly is to make larger house payments every month. “Making additional principal payments will shorten the length of your mortgage term and allow you to build equity faster,” according to the pros at AmericanFinancing.net.

They go on to offer an example: “Consider your loan amount is $300,000 with an interest rate of 4% and a 30-year loan term. If you pay $150 additional toward the principal each month, you can expect to save $40,282 and pay off your mortgage almost 5 years earlier.”

There are pros and cons to this strategy, however, so consult with your financial adviser before taking action.

Getting your hands on that equity without having to sell the home

The most obvious way to use your equity is for a down payment on a new home when you sell the current home.

But you don’t need to sell to get access to your home equity; there are numerous ways to borrow against that equity.

The home equity loan is a second mortgage. The amount of equity you borrow against creates a new loan. Each month, you’ll not only have a mortgage payment, but a second loan payment as well.

The maximum amount you can borrow with a home equity loan is typically 85 percent of the equity in your home, according to the Federal Trade Commission (FTC). Learn more about the home equity loan on their website, at FTC.gov.

A HELOC, short for home equity line of credit, is a more flexible type of loan that acts more like “… a revolving line of credit, much like a credit card,” according to the FTC’s website.

Borrow on as as-needed basis, using either a credit card (that the lender supplies) or by writing a check. “… you make payments only on the amount you actually spend, not the full amount available,” according to the FTC.

HELOCs offer tax advantages that the home equity loan doesn’t, so talk to your financial adviser to get the details.

Refinance: Refinancing is a bit like selling the home in that you’ll take out a new first mortgage, minus your equity in cash. For instance, if the market value of your home is $200,000 and you have $100,000 in equity, you can refinance the home for what you owe on the mortgage and get your equity in cash.

Remember that your home is the security for each of these solutions, so always speak with your financial advisor before making a move.

You may also want to get to know the various “Harmful Home Equity Practices” by visiting consumer.ftc.gov and learn about the Three-Day Cancellation Rule, here.