Use Your Home Equity to Pay Off Your High Interest Credit Cards



If you are motivated to pay off your high-interest credit cards or other debt, you’re not alone. Fortunately, there is a way to generate additional income to pay off your debt with something you already have–your home equity.

Because home equity loans are secured loans (credit cards are unsecured), they almost always offer much lower interest rates. This lower interest rate will lower your monthly minimum debt payments significantly.

Find out more about utilizing your home equity to pay off debt with TwinCity Lending here.

In this article, we will discuss three ways to use your home equity to free yourself from debt.

Option #1: Refinance Your Mortgage Loan

Refinancing a mortgage loan is an excellent way to drastically reduce your monthly debt payment while slashing the often high-interest rates credit cards charge.

In 2018, the average interest rate of new credit card offers was 16.73%. Contrast that with the average 30-year fixed mortgage refinance rate, which was 4.52%.

There are several other factors to consider, including the additional length of the mortgage loan. However, you stand to cut your monthly debt payments by a sizeable amount instantly with this option.

You likely will not know the precise terms of your refinancing loan until you start applying. You can, however, estimate the benefit of refinancing based on:

  • Approximate closing costs.
  • Your home’s value.
  • How your credit-worthiness will affect a change in the loan’s terms.

Many easily accessible mortgage refinance calculators will help you figure out when the savings will surpass the costs. This break-even point is one of the most important things to consider.

How it compares to how many years you plan on staying in your home is very important.

To calculate your break-even point, divide your total costs my month-over-month savings. The result equals the number of months required before the savings surpass your refinancing costs.

Option #2: Home Equity Loan

House Key

Ever since taking out your first credit card, you probably had dreams of owning your own home. Now that you do own your house, you can use its equity to pay off some of your high-interest cards, and other debt.

home equity loan has an advantageous interest rate for the duration of the loan. It is a fixed interest rate, and you will have the opportunity to free up extra cash to pay off debt every month.

Other advantages include:

  • Fewer upfront fees compared to refinancing the mortgage loan
  • No paying extra to pay the loan off (no early pre-payment penalty)
  • Tax deductible

Remember, because it is a secured loan, a home equity loan will almost always offer a much lower interest rate.

Interest on a mortgage is tax deductible. In general, you can claim interest paid on your home equity loan in the same manner you do on your original mortgage. Compare this to other loans, which include no tax advantages.

Thus, the more your mortgage interest is, the more you may deduct from your taxes. Therefore, this type of loan can be very advantageous when used to pay off high-interest loans. A car loan would be one example of this.

So that they are competitive with other kinds of loans, home equity loans present many advantages. For example, a home equity loan typically carries a fixed interest rate and a set monthly payment. This monthly payment never changes.

You can often choose the length of the loan term, which will lower or raise your monthly payment accordingly.

In some cases, lenders offer adjustable-rate home equity loans. With these, interest rates may go up or down, fluctuating your monthly payment. The fluctuation is dependent on the national prime interest rate.

So if you are interested in paying off your debt, why choose an adjustable-rate home equity loan? These loans often start at a lower interest rate, thus freeing up more cash flow to address your debt at a lower interest rate.

However, keep in mind the interest rate can increase at any time, thus increasing your monthly payment.

Option #3: Home Equity Line Of Credit (HELOC)


Taking out a line of credit with your home equity is the most flexible option. You will be approved for the entire amount of equity, but you will only be charged interest on what you use.

Additionally, whatever you money you pack back will again become available for you to borrow from.

Just like a home equity loan, interest rates on a home equity line of credit are usually low.

This will free up liquid assets for you each month to pay off any outstanding debt you may have. Better yet, you can take out a line of credit of any amount up to your total home equity value.

The flexibility of a home equity line of credit (HELOC) makes it an appealing choice for paying off debt. Some more benefits:

  • They are 100% liquid, as good as cash in the bank.
  • They are often eligible as forms of down payment.
  • Relatively inexpensive compared to a home equity loan.

How Home Equity Loans Affect Your Credit Score

Another advantage of home equity loans is the positive impact it will have on your credit score. Your credit card accounts carrying balances will now have fully-available credit limits.

Because of this, your debt-to-income ratio is significantly lowered. Because this ratio represents a third of your credit, your credit score will rise quickly with this reduction in credit card debt.

The Importance Of Selecting The Right Mortgage Lender

Business Meeting

Taking out a home equity loan to pay off your debt can be a great strategy. However, not all mortgage lenders have your best interests at heart. It is important to discuss the decision with your family and pick a lender who is right for you.

Refinancing your mortgage offers many benefits, including reducing your interest rate and monthly payment. It also can allow you to extract cash from the equity you’ve generated on your home.

TwinCity Lending is Minnesota’s premier mortgage company and takes pride in offering the best home equity loan rates. Learn more and get a free mortgage review today.

Vital Home Maintenance: Protecting Your Investment



Your home is potentially the most important investment you’ll ever have. Keeping your investment in tip-top shape helps it to maintain or even increase its value over time.

If you’re like most homeowners, you might imagine that home maintenance equals thousands of dollars of expenses going into a new roof, water heater, or massive kitchen and bath renovations.

We’re here to let you know that maintaining your home is easier than you think. We’ve got several items for your maintenance checklist that you can mark off on your own. Read on for all the details.

From the best interest rates to professional and trustworthy customer service, TwinCity Lending is your go-to lender from pre-approval to closing. Call us today and speak with one of our lending specialists about your new home loan or refinance.

Start by Checking Your Home at the Top


We suggest you take a good look at your roof first. Every season, be sure to stay on top of curled shingles, missing shingles, old or worn-looking sections of your roof.

Clear away sticks or branches–they encourage pests to hop a ride onto your structure.

Some minor roof repairs are easy to manage on your own; others may involve calling in a professional. If you don’t know what’s up there, though, a small problem can become a catastrophe surprisingly fast.

Next, check the attic. Your insulation should be fluffy and functional, with a proper R-value (the rating that measures the efficiency of your insulation.)

As a rule of thumb, you should not be able to see the joists beneath the padding. This rating typically equates to about 10-14 inches of material.

If you’re running a little low, you can add new loose insulation (the kind you blow in) over the old material, as long as there is no plastic barrier of any kind between the two different elements.

If you determine you need more insulation, it may be best to call a professional to do the job safely.

Also, having a good look around the attic will give you a chance to check for pests like bats, squirrels, or bug damage to your wood beams.

If you notice the signs of critters, call a pest removal service to help you determine where the access points are, and to remove any unwanted guests.

Spotlight on the Exterior


Now, carefully inspect the outside of your home. Are there siding cracks or missing panels? Are your gutters in good shape? What about the seals around your door and window frames?

If you’re noticing a few trouble spots, you might consider getting an Energy Audit from your local power company. There are also many independent vendors that perform this service for their would-be customers.

You can schedule an energy audit in most regions for low to no cost, depending on the provider. Try a Google search for “energy audit near me,” and you’ll have a straightforward list of resources at your fingertips.

Basements are Always Interesting


Basements have the potential to be maintenance “hot spots,” depending on the age of your home, your region, and your weather patterns.

In the basement, keep an eye out for the following:

  • Small patches of moisture, especially around the seams in the foundation
  • Bugs of any kind, like spiders in large numbers, silverfish, roly-poly worms, or centipedes.
  • Drainage problems
  • Sump pump function–test and inspect often
  • Water heater corrosion on the bottom panel
  • Washing machine hose connections and drainage
  • Water softener age and function
  • Water pressure gauges (extensively high water pressure puts extra wear and tear on your appliances and pipes, not to mention wasting water and adding to your bill. Check your water pressure periodically with water faucet pressure gauge to be sure you’re staying in the “safe” zone.)
  • Water heater temperature. A setting of 120 degrees is the most energy efficient.
  • Age and efficiency of furnace and whole-home air conditioning systems
  • Dirty air filters in the HVAC. Change them every couple of months.
  • Adequate pipe insulation, especially in crawl-spaces, to prevent pipes freezing and cracking.

Some basement issues, like high water pressure, air filter replacement, and rock salt for your water softener, are easily monitored or repaired on your own.

When you notice small issues becoming bigger, get a repair estimate right away from two or three service providers. It’s vital to have someone you can trust for preventative solutions as well as emergency repairs on speed dial.

Strategize Larger Repairs and Updates

Remodeling Home

When you know you have a substantial repair project or a cosmetic update you want to add to your home, plan for it in advance.

Roofs, kitchens, and bathrooms are typically among the higher-cost projects in the general homeowner maintenance plan. However, appliances and exterior work can also tend to “break the bank,” especially when emergencies happen.

When your spot-fixes are no longer enough to solve the issue, begin planning and saving for replacement or renovation. Tackling one large project per year is a place to start your strategy.

Are your bathroom grout, household flooring choice, and seam caulking getting on your last nerve already? Begin now to craft your repair or renovation budget with estimates and materials planning.

You’ll want a clear picture of how your strategic plan can help you save on future maintenance. It pays to spend a little more upfront on higher quality appliances and materials if it saves you time, money, and trouble later on.

Save up the money you’ll need over several months, and then pull the trigger on your project without plunging into debt, or worse yet, getting caught in a nasty surprise when the shower breaks or the floor joists are rotten with moisture.

When you stay on top of your small home maintenance repairs, they are less likely to become huge, expensive, disasters.

At TwinCity Lending, we’re here to help you keep your investment in prime condition for as long as you own your home or rental property. Call us today for more information on our new home loanshome refinance, and home equity products. Let’s build your wealth and keep it valuable together.

Need a Safe Place to Park? Try a 10-Year Bond



Bear market. Bull market. Trade tariffs, a tumultuous real estate market, buyer panic, buyer confidence. How does a novice investor make smart choices for growing money in the economic times we are all currently facing?

When you’ve made a little money (well done you, you hard worker) and you want to see it grow, making sound investment decisions today for a financially secure future can be confusing at best and confounding at worst.

Today, we’re going to talk about investing in bonds that can help you modestly grow your money while you gain more confidence in your market knowledge. As you learn more about all your choices for investment, you can begin to make sense of all the ways your nest egg can increase as well as the level of risk or commitment present in each investment choice you make.

At Twin Cities Lending, we’re here to help you with all your home financing needs. Call our team for a free mortgage review today.

What are government bonds?

A bond is a way for our government to fund itself from investment from both domestic and foreign investors. Bonds are a low-risk investment, which means that you are very likely to get back what you paid in, and sometimes extra in the form of interest.

There are several different types of government bonds that are selling today. They are:

  • Treasury Bonds: A long-term investment bond, with maturity, dates at 30 years from the date of purchase, this means that you get the full amount of your investment back, plus some interest 30 years after you purchase the bond. Payments on your bond from the government are issues twice per year until the bond maturity date.
  • Treasury Bills (T-bills): These are short-term investment bonds, with a maturity date of up to a year from the date of purchase. The securities get sold at discounts to their face value (similar to seasonal sales at a retail store) T-bills mature between four and fifty-two weeks and pay you the face value of the bond.
  • Treasury Notes (T-notes): T-notes are mid-term securities that mature in two, three, five, seven, or 10 years. The government makes “payments” on these T-notes twice per year, which includes a bit of interest over the life of the note. Interestingly, T-note rates of return are used in the financial world as a benchmark for other markers like mortgage interest rates as well.

In Short Term Investments, Flexibility is Essential


When looking for a “parking spot” for your money while you make more significant decisions, it’s paramount to have as much flexibility as you can leverage. Ten-year T-notes are a flexible investment option that allows you a lot of choice about when and how to move your money around, should you choose to do so.

Once you purchase a T-note, you could hold onto it for the entire term of the bond, in this example, that’s ten years. If you decide you need the cash or want to change your investing strategy, you can sell the T-notes early on the secondary market before the maturity date.

The Tax Man Cometh, but Not as Much for T-notes

Whenever you decide to invest, you must be familiar with the tax implications of every financial move you make to place yourself in the best position for the growth of your capital.

Ten year Treasury Notes are a great purchase in part because local or state governments do not tax the interest earned from T-notes. That means the money you invest in T-notes can grow without the shadow of taxation down the road as the treasury yield curve on this type of bond builds.

(Check in with your accountant for information on how T-note interest income may be taxed federally, though.)

T-Notes are Easy to Buy


Many hard-working Americans think they have to have thousands or even millions of dollars to be an active investor and build wealth, but this is not true with T-bills. You can purchase them online at the U.S. Treasury website, or directly through a broker or a bank with a minimum investment of $100. Start with buying a bunch of bonds or just a few in $100 increments.

You could begin to build your money a little at a time by setting aside $100 each month to purchase T-notes if you so desired, which incidentally, could be a great way to build up a sizeable down-payment on your first, or next, home purchase.

Putting money aside into a short-term, low-risk investment like T-notes can help you feel you are progressing toward greater wealth. The money you put away is still very accessible, but also just enough removed from you that you are not tempted to spend your pile of cash before you get to your goal.

Every investment has Risk; be a Smart Shopper

While government bonds held to maturity are guaranteed to collect interest and a full return of initial investment, bond purchasers could experience a loss when selling a T-note before it’s maturity date.

Though bond investment has historically been considered a very safe investment option, interest rates are still subject to market fluctuations. Selling a bond early at a lower yield than when you purchased it means that your capital could reduce a bit.

Talk to your broker or a fiduciary financial advisor (“fiduciary” means the person you work with must advise you based on your best interests, not theirs) to make the best decision for your current financial goals.

If you plan to make a larger purchase relatively quickly (like a home) with the money you’ve placed in T-notes, a shorter term bond may make more sense for you than a longer-term note.

Finally, when it comes to saving money and growing your financial power, you are the best judge of what is right. Take time to evaluate your investment options, consult experts you trust, and make the decisions that fit for your future savings goals as well as your immediate larger purchase desires.

At TwinCity Lending, we are here to help you secure the mortgage product that is a fit for your best future financial outcome. We are proud to offer ethical and friendly service to all our local customers and to provide timely education on financial matters, so you feel confident in the “money” driver’s seat.  Come see us today and let us help you land the home of your dreams!