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Protecting Your Home, Your Castle

Your home is your castle. More than just providing shelter and security, your home represents your family's lifestyle and standard of living. But even beyond that, if you're like most people, your home is also your greatest single asset - an investment that, over the long term, should continue to increase steadily in value.

At the same time, your home is your greatest expense. Between mortgage payments and — for a growing number of people today — home equity loans, your home is the collateral for what is probably the largest debt you owe.

This is why it is important to get the best value when seeking home mortgage and home equity loan financing, as well as to protect this valuable asset from possible loss. Here are some guidelines you may want to consider:

  1. Shop around for the best mortgage value when buying a home. Factors you should consider include:
    • Interest rates, points and length of mortgage. Make sure you are comfortable with the mortgage payments from the start. Don't stretch your financial resources so thin that you're always living on the brink of trouble.
    • Buy the house you need, with the payment you can afford. And if you think that a few percentage points in the interest rate don't make much of a difference, think again.
    • Always check the reputation and stability of the financial institution. It is common practice among some institutions to sell mortgages to companies which offer limited, if any, service after you sign. Ask before you sign
  2. Shop around for refinancing.
    Though inching up, mortgage rates are still down considerably from years past. Now may be the best time to review your mortgage and see if you can refinance at a better rate — and a lower monthly payment. The rule of thumb is that if you can get a rate at least two percentage points lower than your current one, refinancing may be your best bet.

    Recommendation: Contact your lender for a review of your current mortgage.

  3. Be aware of the do's and don'ts of home equity loans.
    Home equity loans have become the primary source of instant cash for millions of families. Be sure to know your options before you take out a home equity loan. For one thing, there are two types of home equity loans. One is a fixed loan, the traditional second mortgage. The second is an equity line of credit. Once the loan is approved, a sum of money is ready and waiting for you when you need it. It sometimes comes complete with check writing privileges.

    Home equity loans can be a valuable source of funds. But keep in mind that you are actually borrowing from yourself - tapping the equity you have accumulated in your home.

    Consider home equity loans as a source of financing only when:

    • You would ordinarily borrow money anyway — such as for home improvements or major repairs, college expenses, a new car.
    • You expect to remain in your current home for several more years.
    • You have a plan — and the means — to pay yourself back. A home equity loan should be used to help you achieve major objectives - not bail you out of trouble. And remember, you are borrowing from your own future.

    Don't consider a home equity line of credit if:

    • You are in a financial bind. If you're already strapped for cash, taking on the burden of that extra payment could jeopardize your home.
    • You are thinking about using it to fund a vacation or some other well-deserved treat.
  4. Protect yourself and your family with adequate life and disability insurance, in addition to your home-owner's coverage.
    • If you have a mortgage or home equity loan obligation, it is crucial that you carry adequate insurance on household income earners. The premise is that, as long as everyone remains alive and well, the debt will be paid off as planned.

      But what if one of you dies or becomes disabled? That's where the insurance helps. It can provide needed cash at a critical moment to either pay off the debt or enable your family to continue making payments.

Recommendation: Review your insurance package today. If you have a mortgage or a home equity loan, you owe it to yourself and your family to find out how to best protect your investment.

Financial Footnote: You may be able to get a better deal on your home escrow account. As of 1995, federal rules are in effect that standardize and simplify what lenders can do with your money. Best bet: Contact your lender and ask that your escrow account be refunded so you can take charge of your own property taxes and homeowners insurance.

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Protecting Your Home, Your Castle

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