A couple of important notes about rolling other debts into home equity loans. On the one hand, they are the best kind of loan because the interest is tax deductible. On the other hand, if you burden your home with too much debt, and you are unable to make your payments, you could lose your house. I asked loan officer Aimee Johnson why she felt comfortable offering the home equity loan as a debt management tool in the Gunn's case. She explained that they have a healthy loan-to-value ratio of about 50 percent. They have been making payments on their home since 1999 and it has also gone up in value since then (despite a dip in 2008) so they have already paid off about half the value of their house. That gives them a lot of equity to tap into. The Credit Union also structured this second home equity loan as a three-year loan, so the debts are put to rest quickly and efficiently. That way there is less time for something to go wrong.
Do these offers seem over-the-top generous? Oswego County Federal Credit Union CEO Bill Carhart assured me that his people provide affordable products like these to their members all the time. It's startling in an era when many people are frustrated with big banks, but it makes sense when you consider that credit unions are non-profit companies essentially owned by their members. If you do not belong to a credit union you are missing out. And contrary to popular belief, they are not hard to join. It used to be that you had to work for a certain company or be related to someone who did, but now there are all sorts of creative ways to join. To find a credit union near you, visit www.FindACreditUnion.com.
There is one final savings strategy I suggested to the Gunns that I did not cover on the air because the precise savings figure is hard to predict. I want them to appeal their property tax assessment. Here's why. Using addictive real estate website www.Zillow.com, I checked twenty different properties on their same block and only two were assessed for more than theirs – and both were far bigger. I also spotted several that are very similar in size and amenities but are assessed for much less. And I found a recent comparable sale that should be very helpful: a house a couple blocks over that has 3 bedrooms and 2 baths just like theirs just sold for only $40,000, even though homes in the neighborhood generally go for $100,000 plus. Very few people appeal their property taxes, and this is how you do it, by analyzing neighboring assessments and recent sales. If the Gunns can knock $15,000 off their assessed value, they will save $517 each and every year. And there's one other benefit to a successful appeal: it resets your rate, so that even when your assessment starts to creep up again, it is a creeping from a lower point.
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