Most people don’t realize that their Home Equity Line of Credit (HELOC) could be facing some stiff payment increases in the coming years.  If you bought a home in the 2000’s chances are your lender discussed adding on an interest only line of credit to your first mortgage in case you needed money in the future.

 

Lines of Credit Payments About to Skyrocket

Home equity lines of credit origination chart by year
HELOC Origination Chart

Some people used the line of credit from the get-go to avoid paying PMI insurance.  It was an attractive option as it was probably interest only and the payment was affordable.  Many are as low as 3.25%  Rates are still that low today but the rates can go up at anytime, but that’s not what has the banking industry worried.

The part that wasn’t fully explained to consumers is that the interest only portion lasts for the first 10 years.  After that, the borrower must begin making principal and interest payments, which will add money to your monthly payment even if rates don’t rise.  But here’s the kicker.  The new payment is amortized over 15 years, not 30 years, so essentially you have to pay back the entire HELOC over 15 years in addition to your 1st mortgage.

Let’s say you have a 1st mortgage and a $200,000 interest only HELOC.  At 3.25% the HELOC monthly payment is $541.67.  With the new amortization that payment increases to $1,405.34  If it was based upon a 30yr amortization the payment would be $870.41, still a substantial increase.  Unfortunately it’s not, so get ready to pay a lot more.

Now, let’s assume the interest jumps to 4.5%.  These rates can adjust at anytime as the market changes, and most economists predict they will go up.  At 4.5% amortized over 15 years that same payment jumps to $1,529.99

You can see from the chart when the HELOC originations started jumping.  Many SW Florida homeowners are up against this reset now and many more will be hearing about this subject in the next few years.  It is a shock when you’re not expecting, but homeowners who act now have a chance to do something about it.

You can start making the extra payments voluntarily now which will reduce the principal when your loan does reset.  This also gets you used to the higher payments and allows you to budget properly.

For some this will not be feasible.  If you have equity now and good credit you might look at refinancing both loans into one mortgage.  It’s much harder to get a loan today than it was 10 years ago, but if you can that may be a great option.  If you cannot refinance, you may want to look at selling now, especially if you have equity.  It would be a shame to come up against the deadline and be forced into delinquency because you can’t afford the higher payments if you have equity.

If you are upside down on your mortgage, you can either start talking with your lender now or look at doing a short sale.  Nobody wants to go into foreclosure.  Many have resisted a short sale up until now, but a short sale is much better on your credit than a looming foreclosure would be.

We’re not here to tell you what you should do. That’s a personal decision and maybe one to be discussed with your attorney or accountant.  We are here to educate you on what’s coming and tell you about your options.

If you think you may want or need to sell, please give us a call.  We’re experts at looking at the situation and listening.  We’ll get you top dollar for your home and help you move on.  So many people have been locked into their homes waiting for the market to rise, and it has.  Perhaps the market has risen enough for you to sell now.  Perhaps it makes sense to down size, upgrade, and move to another location, etc.  We can help.  Give us a call at 239-489-4042  If you’d like to search the MLS first, go to www.Topagent.com and you can see what homes like yours are selling for.  Of course there’s no substitute for meeting with us and us evaluating your home.  We look forward to working with you to sell your home, or to buy one.
To search the MLS for properties go to www.TopAgent.com or give us a call at 239-489-4042 You can even search for waterfront property in Fort Myers, Cape C oral, or all of SW Florida    Good luck and Happy House Hunting!!!

Feel free to view our Virtual Tours .

Visit our Google+ Business Page

 

 

2013 final sales numbers are in and again we saw price increases inline with expectations.  The median sales price of a single family home in Lee County Florida popped up to $177,000, up from $170,000 in November and up 24% over last December’s $142,750.  The mean average sale price was only up 12.8% over last year with December 2013 coming in at $269,789 versus $239,186 in December 2012.  2012 numbers were revised upward about $15,000 so that helped to keep the average down to an increase of only 12.8%.

2013 Final Sales Numbers Are In

Aiding in the increase to local housing prices is the limited supply of homes, or scarcity as some buyers like to call it.  About this time of year inventory begins to rise but last year it was hardly enough to keep up with all the seasonal buyers that arrived.  This year it seems the seasonal buyers have arrived earlier, and if they stay as long many are wondering if the inventory levels will hold up.

Season sets the tone for the rest of the year. At the Ellis Team we are working on bringing several homes to the market.  The past several months it seems like we’d list 5 homes per week and sell 7, so inventory levels have gone down for us.  Thankfully they are increasing right now for the overall market.

SW Florida single family home inventory Fort Myers, Cape Coral, waterfront homes

Unfortunately in the 6,169 single family homes currently for sale some will never sell regardless of how low the inventory is.  This is because some sellers are still overpricing their home even in a good market.  This is nothing new, some sellers will always over-price a home and buyers will continue to reject it.  What hurts is missing a good opportunity to sell.  Some of these over-priced sellers actually do want to sell their home; they’re just misinformed about the market.  Either that or they’re under the impression that the seller can always come down but you can’t go up, so they overprice it.

In reality, you can go up if it’s priced correctly because a fairly priced home in a low inventory market attracts multiple buyers who may bid up the price.  An overpriced home attracts buyers who are expecting more and when they compare the over priced home to similarly priced homes they find they get more value in the other homes.  They don’t make offers on the over priced homes, they make offers on the homes that offer more value.

This is probably the biggest misconception sellers have about selling their home.  When you read in the paper it’s a seller’s market, that’s not a license to overprice your home.  It simply means if you price your home at or close to market value, it should attract buyers.  This isn’t always the case in a buyer’s market.  Many years ago we’ve had listings that were priced properly but due to lack of buyers some homes just sat on the market. It took extra marketing just to get a sniff from a buyer.  Of course back then the average time on the market was 9 months or more compared to now.  The median time on the market in December 2013 was 43 days.

If you’re interested in selling, now is a good time.  It’s also a good time to talk to a professional that can help you price it correctly, market it correctly, and take advantage of the many buyers we have shopping for homes.  If you’d like to speak with us, call us at 239-489-4042.  You can search the MLS on our website www.Topagent.com

If you’re looking for a waterfront home to purchase, keep in mind our team is waterfront specialists.  Not every waterfront home in SW Florida is the same.  Some canals have varying depths which limits the size of boat you can have in that canal.  Sometimes the waterfront behind your home may be deep but the waterfront  entrance to the community may have silted in and restrict the depth at the entrance.  Sailboats need more clearance, so you really need to know how much draft your boat pulls, or how much your future boat might pull.

We can help you with all your waterfront needs.

 

Good luck and Happy Selling!
If you’d like to search the market as either a buyer or seller, visit www.Topagent.com If you need extra help we’re always available to talk to you and help you make better decisions. Our phone number is 239-489-4042 Good luck and Happy House Hunting!

To search the MLS for properties go to www.TopAgent.com or give us a call at 239-489-4042     Good luck and Happy House Hunting!!!

Feel free to view our Virtual Tours .

Visit our Google+ Business Page