New Ways Of Funding Remodels

For many homeowners hoping to remodel their kitchens or add square footage, borrowing against their home equity is a logical way to finance such a project.

That, or winning the lottery.

But for some homeowners, a construction loan is another option.

In decades past, construction loans were generally for homeowners who were building new homes on land they already owned outright. The loan covered only the construction process, and the homeowner typically had to seek out a long-term mortgage once construction was finished.

Find out more about the new ways of funding remodels…

Investing Borrowed Money Can Be Risky

You're getting into risky territory when you start investing borrowed money. At first glance, your plan may seem like an easy way to use the bank's money to easily rack up investment gains for yourself.

After all, you can probably get a home equity line of credit at or below the prime rate, which is now 8.25 percent. Assuming the interest on the loan is tax-deductible (which you can ascertain by checking out IRS Publication 936), you're actually paying 6.2 percent in interest after taxes, assuming a 25 percent tax rate.

So all you've got to do to come out ahead is earn more than 6.2 percent after-tax on the borrowed money you invest.

Some may think that sounds like a sure thing. But actually, several things could go wrong.

Buying a House in a Buyer's Market

Now is a great time to buy a house.  Prices are falling, and so are mortgage rates.  Millions of houses are for sale, and sellers are getting anxious. 

That's one way of looking at it.

Alternatively, you could say:  This is a bad time to buy a house.  Prices might be lower in a few months.  Same with mortgage rates.  With more than 4 million houses on the market nationally, and more being added daily, sellers are bound to become desperate.  Why not wait them out?

In many places, it's a buyer's market in real estate, with sellers outnumbering potential purchasers.  The resulting downward push on prices makes buyers happy.  But it complicates matters for buyers, too.  In some markets, there are too many choices to sort through.  Even more bewildering, buyers wonder if they should wait a few months.

If you're serious about buying a house, this is both the first step and the final goal. To put it more precisely, you have to decide whether you will actively shop and then negotiate a fair deal, or if you'll just passively browse houses, hoping to stumble on a steal.

You're more likely to succeed with the active approach instead of waiting (possibly in vain) for prices to fall further. You can't predict when the local market will hit bottom.  Even if prices do fall, someone could buy your favorite house out from under you.

If you find the right house at the right price, buy it.

10 BIGGEST Home Buying Mistakes

Based on 25 years of home-building experience for 30,000 people, here are the 10 biggest mistakes in home buying:

1. Not doing your homework. Knowledge is power. Tremendous information is available on the Internet. There is no excuse for entering the market unprepared.

2. Trying to make a shrewd investment. People need to buy based on what fits their family. Don't try to guess what will happen to the market.

3. Choosing a poor location. Even within a neighborhood, location matters. Is it on the busiest street? Is there a shopping center out the back window?

Read about other home buying mistakes…

Selling Your House

When you put your house on the market, in order to attract the potential buyers, you spend days cleaning it; painting and even planting flowers in the garden. What sellers tend to forget about is that houses for sale have to be de-personalized so that buyers can easily imagine themselves living there.

The process can be really painful, especially when sellers still live in the house when it is already on the market.

Houses are usually full of memories and filled with things that help us remember. Pictures of children on walls, drawings firmly attached to a fridge or any religious exhibitions need to be taken away or at least put in the place where they would be hard to see. Shelves should be emptied of any travel souvenirs and any toys left by our children on the floor should be taken out of sight.

It can be really hard, especially for somebody who has raised his family there. But a seller needs to understand that once he decides to sell his house, it is not really his home anymore.  We need to provide a lot of free space in our house for our potential buyer so he can easily visualize himself living in it surrounded by things dear to his heart.