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[C260]Cash For My House

by Debbie Rood, Deb

If we check out the Trader's Corner today we will find a very basic formula that works like magic. As the title suggests land plus cash can be traded for a house easier than land alone. The reason this works is because it couples a low priority property, land, with a high priority commodity, cash. When we set priority levels, we are estimating the acceptability scale of commodities. Let's agree that all ?things? are commodities. Cash in our economy is universally acceptable so it would be number one on the list for most sellers. Precious metals would also score high on the list because they are easily convertible to cash.

Because cash is so pleasing to people we can use it to attract the interest of sellers that may not have considered trading for our vacant lot. The more we understand the concept of priorities or acceptability the more successful we will be in trading properties. Let's consider we had $50,000 to invest and we had only two choices. A rental property worth $500,000 but would have a negative cash flow of $3,000 per month or a $50,000 vacant lot located in the path of growth. Some of us would go with the rental property, others would take the lot.

Understanding this basic principle will help facilitate a trade. Both parties in a trade do not want the property they have. Worded a little differently, they want what the other party has more than they want what they have. I hope that makes sense.

Sellers are attempting to do the same thing we are trying to do with our lot, use the value of what they have to acquire something else. They may need a larger or smaller home, relocating to another city or getting a divorce. People sell properties for all types of reasons. By understanding the desires of the other party we can make an offer that make sense for both sides.

Property trades are more common than you may realize. They would be much more common if sellers gave it a little thought. If you have a smaller home and want a larger home, why not look for someone that is downsizing? But the other side must want our lot, right? Not necessarily, remember they must want what we have more than they want their existing property. I showed several homes this weekend above the medium price range for my market, well okay, double the average. The point is more than one of these estates had been on the market for over a year. Do you think any of the sellers would not entertain taking an unencumbered vacant lot in trade?

So here is how the formula lot plus cash equals house works. Let's assume we own a lot worth $50,000 and we want to trade it for a home in the $400,000 price range. We would advertise: HAVE: $350,000 cash and vacant lot worth $50,000. WANT: Singe family home.

Have you ever seen an ad like that in the real estate section of the Sunday paper? Probably not, that is why it will raise more than a few eyebrows.

But we do not have $350,000 in cash you protest. What would happen if we made a $50,000 cash down payment and bought a home? We would put a $350,000 loan against the home we are buying. Same thing is true in a trade; all we do is make it a part of our offer.

Why would a seller do this? It goes back to their circumstances of ownership. What if the seller has already bought another home and is making two house payments? The vacant home they are trying to sell has a $2,500 per month house payment, utility bills and landscaping expense. It could very easily be costing $3,000 every month the home is on the market. Along we come and offer to give them cash and a free and clear lot without mortgage payments. Poof, we traded for a house. I told you it would like magic.

Will it work in reverse? Absolutely. Have: Single family home in desirable neighborhood, will trade for land. This time we do not mention cash until someone steps forward with land.

Selling a home is a lot easier if you are flexible about how you get from point A to point B. If you take off the blinders and really look at what you have, the solution may present itself.

These days it's difficult to get by without some form of financial assistance – most of us have loans, mortgages, credit cards, store cards or other types of debt. Taking out a personal loan is one of the most common and convenient ways in which to borrow money. There are two main types – unsecured or secured. Unsecured loans are loans without any form of security tied to them as a guarantee of repayment, whereas secured loans are guaranteed by some form of security to safeguard the lender in case of non repayment. Normally the security used in such loans is your house – whether you own it outright or have a mortgage on it. (Loans secured against a house that already has a mortgage tied to it are known as second charges, and loans secured against a house that is fully owned are known as first charges.)

Homeowners therefore have a real advantage when it comes to borrowing money, as owning property provides great potential for freeing up capital for personal use. Homeowner loans, as they are often known, allow you to use the equity available in your house to borrow money. (Equity means the value of your home minus any outstanding debts secured on it, such as a mortgage.) They have many benefits:

Equity is the key to unlocking large sums of cash from the value of your property. Homeowner loans allow a much higher amount of lending over a longer period than unsecured loans, as they are guaranteed against the value of your property and are therefore considered less of a risk to the lender than an unsecured loan. Even if you have negative equity (i.e. your mortgage or debt is higher than the value of your home) it's often possible to get a homeowner loan, as many lenders will lend up to 120% of the value of the property.

For the same reason, homeowner loans tend to have a lower rate of interest than unsecured loans. This means lower, more affordable monthly repayments than an unsecured loan.
As with any other personal loan, the money is yours to spend in whichever way you want. You might want to make some home improvements, purchase land, use the capital to start up a business, buy a car, go on holiday or consolidate debts or loans.

Some people have problems obtaining unsecured loans, often because of poor credit history. However, as homeowner loans are secured and provide a guarantee to the lender, people who have previously been unable to qualify for an unsecured loan often find it much easier to get a secured loan, thereby giving them access to borrowing that they could not otherwise have obtained.

Homeowner loans can also be as flexible as you want them to be. At the outset you'll discuss and agree with the lender what terms and conditions best suit your needs. Typical repayment terms may be anything from three to 25 years, normally paid in monthly instalments, and loan amounts tend to range from £2,000 to £60,000. Interest will be charged on the amount that you borrow, which is known as the APR or annual percentage rate. The specific details of your loan – the amount, interest rate and repayment term – will be calculated based on the equity available in your property (which will need to be valued), your personal financial status and credit history and the lender's confidence in your ability to repay.

Research the cost of your loan carefully before you sign up to anything. As with any other purchase, it's essential to do a bit of research and shop around until you get the best deal. You may find that the interest rates seem to vary considerably from lender to lender. However, beware of how the APR is advertised – different companies calculate their APR in different ways, and often display their monthly rates more prominently than the APR, so it's not always easy to compare. (Monthly rates can be cheaper than the APR, which is very misleading.) For each product, find out what the APR is and how it is calculated so that you understand exactly how much the monthly repayments will be and how much you'll be repaying in total. This will enable you to compare like for like between products.

Charges and penalties can make a big difference to the cost of the loan. Many policies penalise early repayment, and others contain hidden fees and charges. Always read the small print and ensure that you understand the terms and conditions exactly. Ask the lender to explain any areas that you're unsure about before you commit to anything.

Another useful tip to bear in mind is that the shorter the repayment term, the less interest you'll be paying and therefore the lower the total cost will be to you. It's therefore best to find the shortest term that you can manage.

Remember that it's not just traditional banks, building societies and mortgage lenders who sell financial products. Nowadays there are many other types of lender in the market providing competitive deals at competitive prices. You'll probably find that supermarkets and online providers offer the best value for money.

Most importantly, weigh up the risks and benefits of using your home as security for a loan to ensure it's the right thing for you. On the whole, homeowner loans offer much better value for money than unsecured loans and are very convenient for people who are unable to qualify for an unsecured loan. However, before you proceed, you should analyse your personal finances, work out your budget and be confident that you'll be able to keep up the repayments, otherwise you could end up losing your home.

When you've considered all these important factors relating to homeowner loans and looked around for a suitable product, you can be sure that you'll be getting a better deal with a homeowner loan than you would be with an unsecured personal loan – your property is the key to raising the cash you need in an affordable way.

Article Source : Newfoundland Canada Real Estate

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Both Debbie Rood & Benedict Rohan are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Debbie Rood has sinced written about articles on various topics from Real Estate, Mortgage. Debbie Rood is a Realtor in Louisville, Kentucky. She is a residential real estate specialist. She publishes many articles on real estate and mortgage financing on her web site. Debbie Rood's top article generates over 18100 views. to your Favourites.

Benedict Rohan has sinced written about articles on various topics from Computers and The Internet, Mortgage and Business Plan. Website: Benedict Rohan is a financial expert with over 25 years of experience in accounting and mortgage brokering.. Benedict Rohan's top article generates over 6600 views. to your Favourites.