Be Cautious When Using Your Nest Egg As An ATMWritten by James Dimmitt
About five years ago I moved from ranks of being a renter to that of being a homeowner. Now, not a week goes by that I don’t receive some type of offer through mail encouraging me to refinance my mortgage, open a home equity line of credit (HELOC), or apply for a home equity loan.
Payoff High Interest Credit Card Debt! Lower Your Monthly Payments! Buy A New Car! Refinance And Get Money Now! scream slogans splashed across envelopes.
The promotional letters inside point out how easy it will be for me to “get extra cash you need NOW!” They promise “no out of pocket costs” with a newly refinanced 30-year loan.
Could I use some extra cash NOW? You bet I could! Who needs high interest credit card debt? Not me, no way, no how! Buy a new car? Hmmm, I like that new Pontiac G6 I’ve seen on tv, maybe in a sleek titanium color with black trim?
For thousands of U.S. households “Home Sweet Home” is rapidly being replaced with a new sentiment - “Home Sweet ATM.” According to latest Federal Reserve study, 45% of homeowners who have refinanced their mortgages pulled cash out and 74% wound up lengthening their mortgage by about six years. Only 17% shortened their loan term opting to downsize to a 15-year mortgage.
In a period of six years, Americans have more than doubled amount owed on home equity loans and lines of credit, nearing $766.2 billion, according to Federal Reserve.
If you’re in your 40’s and you refinance on a new 30-yr. loan, you’ll be in your 70’s by time your loan ends. Even if you shave off a few years by paying down your principle, you’re still risking not owning your home “free and clear” as you approach retirement age.
Condo-Hotels – A New Second-Home Alternative To Time SharesWritten by Leon Altman
Condo-hotels have evolved as a better, more reliable second home alternative to time-shares. They are usually attractive, high-rise hotels on ocean or in other prime locations, and range in price from mid $200,000s to over 1 million, depending on size, location, and amenities.
Many of biggest names in hotel industry have condo-hotel buildings, including Hilton, Four Seasons, Clarion, and Ritz-Carlton. Donald Trump has numerous condo- hotel facilities across country, including a building in Fort Lauderdale and another in Sunny Isles, Florida.
In general, condo-hotel properties have been highly successful with all or nearly all units selling out within months of first offering. For example, Ritz-Carlton Key Biscayne is a beachfront property with 188 condo-hotel units, all of which sold out a year before building was even finished. Needless to say, values of condo-hotels in this building have gone up significantly.
There are several reasons for popularity of condo-hotels. When you purchase a property, you purchase a condo unit in hotel. Unlike a time share, you have access to property whenever you want, and it is put into a rental pool when you are not in residence. Although developers can’t guarantee properties will rent, management by a well-known hospitality group will typically result in several weeks of rental income. This is one of biggest appeals of condo-hotels because rental income can offset some of costs of owning a vacation property.
In addition, management company takes care of renting unit, using their connections and expertise. You don’t have to worry about any of these details. Most rental agreements split income 50/50 between management company and owner. However, some properties offer more favorable arrangements, and this is another aspect to consider when deciding which property to purchase.