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Saturday, November 11, 2006

Line of credit home equity

Using a credit (find here!)
line to borrow against the equity in your home has become a popular source of consumer credit. And lenders are offering these home equity credit lines in a variety of ways. You will find most loans come with variable interest rates, some come with attractive low introductory rates, and a few come with fixed rates. You also may find most loans have large one-time upfront fees, others have closing costs, and some have continuing costs, such as annual fees. You can find (find here!) loans with large balloon payments at the end of the loan, and others with no balloons but with higher monthly payments. No one loan is right for every homeowner. The challenge, then, is to contact different lenders, compare options, and select the home equity credit line best tailored to your needs.

Is a home equity credit line for you?

If you need (find here!) to borrow money, home equity lines may be one useful source of credit. Initially at least, they may provide you with large amounts of cash at relatively low interest rates. And they may provide you with certain tax advantages unavailable with other kinds of loans. At the same time (find here!), home equity lines of credit require you to use your home as collateral for the loan. This may put your home at risk if you are late or cannot make your monthly payments. Those loans (find here!)
Those loans with a large final (balloon) payment may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you cannot qualify for refinancing. And, if you sell your home, most plans require you to pay off your credit line at that time. In addition, because home equity loans give you relatively easy access to cash, you might find you borrow money more freely. Remember too, there are other ways to borrow money from a lending institution. For example, you may want to explore second mortgage installment loans. Although these plans also place an additional mortgage on your home, second mortgage money usually is loaned in a lump sum, rather than in a series of advances made available by writing checks on an account. Also, second mortgages usually have fixed interest rates and fixed payment amounts.

How much money can you borrow on a home equity credit line?

Depending on your creditworthiness (your income, credit rating, etc.) and the amount of your outstanding debt, home equity lenders may let you borrow up to 85% of the appraised value of your home minus the amount you still owe on your first mortgage. Ask the lender (find here!) about the length of the home equity loan, whether there is a minimum withdrawal requirement when you open your account, and whether there are minimum or maximum withdrawal requirements after your account is opened. Inquire how you gain access to your credit line -- with checks, credit cards, or both. Also, find out if your home equity plan sets a fixed time -- a draw period -- when you can make withdrawals from your account. Once the draw period expires, you may be able to renew your credit line. If you cannot, you will not be permitted to borrow additional funds. Also, in some plans, you may have to pay your full outstanding balance. In others, you may be able to repay the balance over a fixed time.

What is the interest rate on the home equity loan?

Interest rates for loans differ, so it pays to check with several lenders for the lowest rate. Compare the annual percentage rate (APR), which indicates the cost of credit on a yearly basis. Be aware that the advertised APR for home equity credit lines is based on interest alone. For a true comparison of credit costs, compare other charges, such as points and closing costs, which will add to the cost of your home equity loan. This is especially important if you are comparing a home equity credit line with a traditional installment (or second) mortgage, where the APR includes the total credit costs for the loan. In addition, ask about the type of interest rates available for the home equity plan. Most home equity credit lines have variable interest rates. These variable rates may offer lower monthly payments at first, but during the rest of the repayment period the payments may change and may be higher. Fixed interest rates, if available, may be slightly higher initially than variable rates, but fixed rates offer stable monthly payments over the life of the credit line. If you are considering a variable rate, check and compare the terms. Check the periodic cap, which is the limit on interest rate changes at one time. Also, check the lifetime cap,(find here!)
which is the limit on interest rate changes throughout the loan term. Ask the lender which index is used and how much and how often it can change. An index (such as the prime rate) is used by lenders to determine how much to raise or lower interest rates. Also, check the margin, which is an amount added to the index that determines the interest you are charged. In addition, inquire whether you can convert your variable rate loan to a fixed rate at some future time.

What are the upfront closing costs?

When you take out a home equity line of credit, you pay for many of the same expenses as when you financed your original mortgage. These include items such as an application fee, title search, appraisal, attorneys' fees, and points (a percentage of the amount you borrow). These expenses can add substantially to the cost of your loan, especially if you ultimately borrow little from your credit line. You may want to negotiate with lenders to see if they will pay for some of these expenses.

What are the continuing costs?

In addition to upfront closing costs, some lenders require you to pay continuing fees throughout the life of the loan. These may include an annual membership or participation fee, which is due whether or not you use the account, and/or a transaction fee, which is charged each time you borrow money. These fees add to the overall cost of the loan.

What are the repayment terms during the loan?

As you pay back the loan, your payments may change if your credit line has a variable interest rate, even if you do not borrow more money from your account. Find out how often (find here!) and how much your payments can change. You also will want to know whether you are paying back both principal and interest, or interest only. Even if you are paying back some principal, ask whether your monthly payments will cover the full amount borrowed or whether you will owe an additional payment of principal at the end of the loan. In addition, you may want to ask about penalties for late payments and under what conditions the lender can consider you in default and demand immediate full payment.

What are the repayment terms at the end of the loan?

Ask whether you might owe a large payment at the end of your loan term. If so, and you are not sure you will be able to afford the balloon payment, you may want to renegotiate your repayment terms. When you take out the loan, ask about the conditions for renewal of the plan or for refinancing the unpaid balance. Consider asking the lender to agree ahead of time and in writing to refinance any end-of-loan balance or extend your repayment time, if necessary.

What safeguards are built into the loan?

One of the best protections you have is the Federal Truth in Lending Act, which requires lenders to inform you about the terms and costs of the plan at the time (find here!) you are given an application. Lenders must disclose the APR and payment terms and must inform you of charges to open or use the account, such as an appraisal, a credit report, or attorneys' fees. Lenders also must tell you about any variable-rate feature and give you a brochure describing the general features of home equity plans.

Monday, November 06, 2006


August 15, 2006 06:33 AM"Super Lawyer" listing still OK in GeorgiaLast month there was a news story about the New Jersey Committee on Attorney Advertising, a panel appointed by the Supreme Court of New Jersey ruling that attorney advertisements that tout listings such as the "Super Lawyers" listings violate professional responsibility rules against ads that compare lawyers’ services or create an "unjustified expectation about results." That gave me pause, as it did the marketing folks at every big law firm in Atlanta, since the profile on my web site includes listings in the "Super Lawyers" issue of Atlanta Magazine, "Legal Elite" issue of Georgia Trend magazine, and the Bar Register of Preeminent Lawyers.However, the Fulton County Daily Report published an article on August 11th reporting an analysis to the effect that, while Georgia’s ethics rules contain proscriptions against comparative advertisements and ads that create unwarranted expectations, the language in Georgia is more permissive than that found in New Jersey’s ethics rules. The New Jersey rule prohibits as false and misleading any advertisement that "compares the lawyer’s services with other lawyers’ services." Under Rule 7.1(a)(3) of the Georgia Rules of Professional Conduct, the rule against comparisons does not apply if the comparison "can be factually substantiated."The "Super Lawyers," "Legal Elite," and "Preeminent Lawyers" lists are all based upon periodic surveys of our peers in the legal profession, and cannot be purchased. While the methodology is certainly not perfect, neither is it meaningless or factually unsubstantiated. Therefore, we will continue to include those designations on the web site.I love it when I see a court use my points to rule my way on an unrelated case.We have a case in which we represent the estate and siblings of a young man who was killed by a drunk driver. Their father had more DUI's than anyone in the history of Georgia on spent most of the deceased son's life in prison including a conviction for DUI/vehicular homicide. On one of his times out of prison he physically abused the son. A juvenile court made a judicial finding of physical abuse and gave custody of the kid to an adult brother. Of course, when the young man was killed several years later by a drunk driver, the father who was a DUI recidivist promptly filed suit for wrongful death. Representing the siblings of the decedent -- the other adult offspring of the abusive drunk -- I filed a petition to determine heirship. A Superior Court judge agreed with our position that the father forfeited parental rights by cruel treatment when he was adjudicated to be guilty of physical abuse, did not appeal, and did not take advantage of the opportunity for family reunification. We also had arguments about abandonment, but there was some small shred of evidence of de minimis support that made that a jury issue. Well, we won summary judgment in the Superior Court and the father appealed to the Georgia Court of Appeals. Now in another case, the Court of Appeals has adopted virtually the same arguments we used in our appellate brief in another case, finding that another deadbeat dad forfeited his parental rights, including the right to recover for wrongful death of the child, through abandonment. In Baker v. Sweat, A06A0892 (decided October 13, 2006), the administrator and siblings of a deceased adult were ready to settle with the insurance company for the wrongful death with deadbeat dad showed up claiming all the money. Much as in our case, there was a long, sad litany of the sperm donor's failure to support the child or engage in the child's life. The Court held:If it is established that a parent has lost his or her parental power under OCGA § 19-7-1 (b), the parent’s right to share in the proceeds of a claim for the wrongful death of his or her child is also forfeited.OCGA 19-7-1 (b) provides for loss of parental rights through either abandonment or cruel treatment. Since anything can go wrong at any time, we are keeping our fingers crossed that we will get the same result in our case.Shigley Law Firm, LLC3166 Mathieson Drive, Suite 200Atlanta, Georgia 30305, USAVoice: (404)364-1999Fax: (404)364-0880

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