Almost anywhere you look you’ll see them — ads for debt consolidation.  It almost sounds to good to be true, so is it really the best move to consolidate your debt?

Here are some reasons why you might want to consolidate your debts: 

1. You’ll have just one payment to make which makes managing your money MUCH easier.

2. Generally a debt consolidation loan utilizes your home equity, so you’ll have a much lower interest rate than you’d ever get on a credit card.

3. Debt consolidation loan payments are often lower than the total of what you’d be paying if you were paying each loan or credit card balance individually.

There are some negatives you should consider before jumping into a debt consolidation loan, however.  First of all, you need to make a commitment to stop using your credit cards so that you don’t end up in the same place all over again.  Second of all, if you choose to consolidate fixed-term loans, such as car payments, you’ll likely end up extending the length of the payments.  Lastly, you need to be absolutely sure you can afford the new payment every month because it is tied to your house.  If it ever happens that you cannot make your payments, you could lose your house.

Home improvements are great ways to increase the value of your home.  Increasing the value of your home will help you get a larger home equity loan or line of credit in the long run.  Home improvement projects can easily become larger and more expensive than intended but simple projects can be completed yourself in one or two weekends. 

Start your improvements by making a game plan.  Figure out what you need and what you are going to do.  Also figure out how much of a budget you are willing to give yourself or spend.  Projects that are great for weekends are minor landscaping projects in both the front and backyard and interior painting.  Installing shelves and storage will help you organize your belongings while adding storage space that will make you home more valuable.  Your backyard can benefit greatly from privacy fencing, decks, and other backyard renovations.  If you have a large dogs, sprucing up the backyard and fixing any animal damages will also help to increase the value of your home. 

Saving major renovations for professionals is essential.  Do not try to renovate your kitchen or bathrooms without the help of a contractor.  If you really want to be a part of the job, they may have some small duties that you can help them out with.  Kitchens and bathrooms contain large amounts of plumbing and electrical areas that only a professional should handle.  You don’t want to get started on a large expensive project and have to hire a professional to fix your mess-ups. 

Do-It-Yourself projects will increase your home’s value little by little and they can be worked on little by little, which is all that most people have time for anyway.  You will be excited to see what you can do in one weekend.

A new option in home equity is becoming available, largely with seniors, but not limited only to families who are free and clear of their mortgages: a reverse mortgage.

With the reverse mortgage, owners pull equity out of their homes without having a house payment, with loans that aren’t due until they sell the house or pass on.  Instead, their lenders are paying them.

The benefits follow: the money is tax free, as it is still considered a loan, there is more cash available for vacations or health needs, there aren’t restrictions on how the money is spent, and it can be received in payments or one lump sum.

The caveats are that they usually come with high interest rates and upfront fees.    The loan is still open to be charged mortgage insurance as well as loan origination fees and other closing costs.

The amount available depends on where the borrowers live and how much equity they have in their house.

People are always looking for the best ways to increase the value of their homes whether they are thinking about selling in the near future, are trying to eliminate a mortgage insurance payment or just simply want to improve their home.  If you are one of these people, here are some tips to help you get started:

1. Improve the outside appearance of your home.  It’s called curb appeal.  Do some landscaping, plant shrubs and get rid of any junk in the yard.

2. Spend your money where it counts — on the things you can see.  Especially if you have a limited budget, move the most visible improvements to the top of your priority list.

3. Update the kitchen.  When people are looking for a home to purchase, the kitchen can often be a deal maker or a deal breaker.  You can make an outdated kitchen look great with a few simple changes — paint the walls and cabinets, replace old faucets and sinks and get new flooring.

4. Remove the clutter.  Get rid of all the little things cluttering up your house.  REmmove stuff that could be causing musty or otherwise unpleasant odors and take some time to give everything left a thorough cleaning.

Whatever you decide to do, just don’t take it too far.  You don’t want your house to be the most expensive in the neighborhood because you’ll likely not get as big of a return on your investment.

A Home Equity Line of Credit (HELOC) is a revolving line of credit where your home serves as the collateral.  Generally, banks will allow up to 75% of the home’s value minus what you currently own on your home as a credit limit.  Of course, the banks will also look at your debt-to-income ratio to determine whether or not you qualify for a loan of that amount.

Generally what happens is that you’ll be allowed to borrow up to the limit of your credit approval throughout the life of the loan.  Often times, however, banks will have a minimum amount that you can spend at any one time to prevent you from using it for everday expenses — most people reserve this line of credit for major expenses such as education and remodeling.

One thing to be aware of, however, is that the interest on HELOC loans are often variable rate instead of fixed-rate. You’ll want to make sure there is a cap on the amount of interest you pay over the course of the loan to prevent it from getting out of hand.

California has enacted a new law that will make obtaining a reverse mortgage in California a bit easier.  Governor Arnold Swarzenegger has signed the law that will provide protection to California homeowner’s who are looking to obtain a reverse mortgage.

California homeowners will now receive independent counseling advice from certified counseling agencies.  These agencies will explain the pros and cons of obtaining a reverse mortgage and will not be a part of the deal.  These counselors will be from outside agencies that do not deal with the bank or lender.

All documents will be translated into the language of the borrower.  With so many languages being spoken in California, this will help insure that the process is completely understood by the borrower. 

Lenders will now have to stop forcing borrowers to obtain annuities as a part of the reverse mortgage deal.

This new law and these new changes will insure that homeowners know exactly what they are getting into when obtaining a reverse mortgage.  The new law also insures that lenders will not be able to take advantage of borrowers or add additional conditions to the loan agreement.

You’re thinking about working on the house and taking out a home equity loan to pay for it all.  But you’re worried about getting your moneys worth out of the work.  What if you’re making a bad investment?  Here are a few things to consider:

Will it make your living situation more comfortable?  If you’re scrambling for space, ran out of enough cabinets, or try to beat the rush hour for the bathroom, it’s probably a good idea to take the plunge.

Will you be living there for a while?  Home equity loans won’t pay off if you plan to move within the next two years.  Decide how committed you are to the house you’re in to determine if it’s worth the costs.

What are you upgrading?  Typically, bathrooms and kitchens have the best return for their investment when you’re updating them.  Thermal windows and new roofs are nice too and likely to help, but no one’s going to care if you put in new carpet.  If making your money back should you sell the house matter to you, make sure your equity is going towards a project with an expected return.

With these three questions in mind, you should have a solid start to making your decision.

Home equity basically the value of your home minus what you owe on your mortgage.  Home equity loans allow you to borrow that money and your home’s equity is the collateral.  If used properly, home equity loans will actually help you build your home’s equity.  They are great if you plan on using the money to reinvest them back into your home.  By reinvesting the money back into your home, you in turn raise your home’s value. 

Home equity loans are basically second mortgages on your home and allow you to turn your equity into cash.  Home equity loans are generally paid back in a shorter time frame than your home’s first mortgage. Most first home mortgages are paid back within 30 years while a home equity loan may be paid back in 15 years. 
 
The cash received from home equity loans are great for purchases that are going to have to be paid back over a longer period of time anyways.  They are great for home improvements that are rather large like additions to your home, remodeling a kitchen or bathroom.  These are typically expensive renovations and the use of a home equity loan allows you to pay them off over a longer period of time than a regular bank loan.  Other uses of home equity loans are for college educations for your children.  You can withdraw the amount of money that you plan on the education costing and pay for the education over time.  At the same time you will be able to pay off the loan in a longer amount of time. 
 
During the repayment period of the loan you are not allowed to add any new debt to the loan, which makes it great for projects and education.  The interest rate is fixed from the time you borrow and you cannot borrow any more from the loan.  You have to decide how much you need or are going to spend and stick with it. You will also be able to enjoy fixed payments over the life of the loan.
 
Home equity loans are great if used responsibly and on large projects that you know you will need a lump sum for.   You may be able to increase your home’s value or your children’s education opportunities.
 

With the downturn in housing markets, people may wonder if they wouldn’t be better off going back to renting instead of buying a house.  Allow me to say, renting is never the prudent financial choice to make if you can help it.

Sure, you can rent an apartment for less than a house payment in most areas of the country.  But your money is going into someone else’s pockets who is getting the income, the tax breaks, and the slow building of a nest egg though equity.

For your $1000 rent a month, you could be making a mortgage payment with a guaranteed return on your money over time.  You could be writing off the interest on your taxes, and working towards house ownership, a comfortable place to be come retirement.

Prices are dropping with the market spiraling down.  Don’t let that discourage you from a house purchase.  Take advantage of the lower prices to get a bargain payment.  After all, renting is just as good an investment for you as flushing your money like toilet paper.

While most people know that they should get a home inspection before buying a home to make sure there aren’t any hidden issues such as electrical problems or plumbing leaks that could cost a lot of money down the road, many people overlook the idea of getting a home inspection for a house that they already own and live in.

There are a few occasions when you might want to get a home inspection on your current home.  If you’ve done a lot of work on your home yourself, you might want to have it inspected to make sure you have things up to code. 

Also, if you’re thinking about selling your home in the near future, a home inspection is helpful so that you aren’t faced with a bunch of surprises that could interfere with the closing of your sale once you do agree upon an offer. 

If you’ve lived in your home for 10 or more years, an inspection is also helpful to help you see the wear and tear on the mechancial, electrical and other systems of your home that you might not be aware of.  This allows you to be proactive in terms of updating things like the furnace, hot water heater and even electrical work before they are so worn out it becomes an even bigger expense to repair or replace.

Finally, if you’ve recently purchased a home and chose to skip the home inspection prior to the purchase, you might want to find out what exactly you’re dealing with in terms of the property.  A liscensed and qualified home inspector can walk you through the home and let you know what areas you should be concerned about as well as how to handle potential problem areas before they get out of hand.