A nice way to start the day, sending out a ‘thank you’ email, arranging to pay an overdue bill, contacting a doctor I actually enjoy visiting, and a hopefully scheduling a massage. Money makes things move. For several months I’ve done very little moving because there wasn’t much money to move, which meant I almost had to move myself. Now, thanks to a local bank, I have resources, cash, a loan. – And a better appreciation of the process and why it isn’t instantaneous.
That’s who the thank you went to, a loan officer. That may seem like an odd thing to celebrate, but I recognize some of what they have to do to make a loan work. Her efforts made a lot possible, possibly a lot more than she can realize.
My business is still busy, but it hasn’t been profitable. As I’ve written about before, when there are several offers for every house that’s for sale, then the seller and their broker may be happy, the successful buyer and their broker have reason to smile – but all of the other buyers and brokers must move on to the next listing or decide to do something else. It’s easy to imagine a crowd of disappointed buyers loading themselves into a bus to get delivered to the next possibility. Just prior to the pandemic I decided to concentrate on representing buyers. Bad timing, that was. (And, of course, the optimist in me knows it can all change with a phone call or email or chance encounter.) (Required Disclosure: I am a real estate broker with Dalton Realty, Inc. on Whidbey Island.)
Browse back through this blog and find when I started finding other sources of funds. Social Security came first. There was the interruption with the truck, the Jeep, and the good news that I had a great credit rating (which was a surprise considering almost losing my house about ten years ago.) For a while there I realized I might have to sell my house and move – somewhere.
The news about the credit rating meant I had another possible option or two: refinancing the house, or getting a Home Equity Line Of Credit. A quick talk with a friendly and patient banker was encouraging.
Refinancing – My mortgage was low to start with back in 2007, but the Great Recession and My Triple Whammy meant I almost lost my house, which led to a mortgage modification that dropped the rate (and extended the period) to historic lows. Now, the rates are even lower, which is why the refinance business and everyone in the process is busy, very busy. That’s certainly one way to get a lot of money out of the house, refinance for the max, take the money, and pay off bills and reinvest the rest maybe with some set aside for some fun. The mortgage payments reflect the new debt and terms. People can frequently lower their monthly expenses that way. Tempting.
Home Equity Line Of Credit – Sometimes I think refinancing is more popular than some of the other options simply because refinancing is one word instead of a phrase like Home Equity Line Of Credit – which also is called a HELOC, which sounds like someone in a superhero movie. (He-Man’s banker?) A HELOC utilizes the difference between the house’s mortgage and a conservative market value of the house. A refinance basically does that too, but as I understand HELOC, it doesn’t affect my existing mortgage, and it only calculates payments based on how much I borrow. Here’s the thing. I don’t have to borrow the maximum amount. If I get a HELOC for $100,000, but only use $1,000, I only pay interest on the $1,000. Then, if I want to borrow $10,000 later, I can get $10,000 from the HELOC, and the payments are adjusted on that, too. It is a nice way to create a buffer while giving me more control over how much debt I’ll deal with.
Cool. Cool; especially because estimates of my house’s market value are much higher than they were three years ago.
OK. Sounds simple enough. Sign me up! A HELOC sounds like a good choice for me.
Here’s why it is not instantaneous.
Pick a lender. I made it easy on myself by choosing local, not a national. It’s more personal that way. Good luck to all who do a much more thorough search.
Collect the paperwork. Fortunately, the paperwork I collected for Social Security was also used for my Jeep loan and was also what the bank needed. Those folders have been sitting on the kitchen table or shoved into a briefcase for months. Someday they’ll be put back in storage.
Deliver the paperwork to the bank after also signing some disclosure information, as I recall.
Await the answer of Yes or No, which was quick.
Yes! Well, yes; but provisionally. The bank verifies my information, so wait while they do that.
OK, that’s done; but only provisionally. The bank needs to verify my house’s information. That wait is longer, and expensive. Because there are so many people refinancing, appraisers are busy and have raised their rates. I could either spend $850 for an appraisal within about three weeks, $950 for one within ten days, or over $1,000 which wasn’t competitive.
Three weeks. Groan. I started this process because I needed the money. Social Security can help, but isn’t enough. A promising customer decided to buy somewhere else. I didn’t like having to do it, but I sold a sliver of MVIS from inside my IRA to fill that gap. In the last ten years I’ve done that so much that more than half my original position is gone. Sigh. Everyday, however, optimist me hoped the appraisal would come in early.
Ha! They stuck to their schedule. Well, at least it wasn’t late. Also, at least the bank will have everything they need in enough time to release the funds before the end of the month. Maybe that stock money can go right back into the account and get turned back into shares.
Nope. And watch the end of the month go whooshing by.
It takes a few days for the appraiser’s report, then there’s a required third party review period, then for my own additional protection I was given a few business days during which I could back out if necessary, but then finally I’ll have the money.
OK. Got through the protections layered on protections while I’m left vulnerable to the situation that prompted the actions. Finally, I can pay those bills.
Nope. Setting up a checking account was simple enough, and done earlier. We still had to wait for the County to record the loan. Then, it took some time for the bank’s system to set up the loan’s account. Then, it took a while for system to acknowledge my login, and my ability and authority to transfer the funds.
From the outside and from the eventual future, the process is remarkably straightforward and quick. From the inside while worrying about the possibility of failure and dealing with the reality of a large late bill and a desire to pay off a car loan, every day was an exercise in waiting while doing nothing. It is easy to assume that the loan will be approved. As the homeowner, though, I had to consider the possibility that the loan would not be approved, in which case I would have to sell my house.
For the last month and a few weeks before that, I prepared myself and my house in case I had to move. The sale would probably go quickly. The record I’ve seen was a house listed and sold within about two weeks. That part didn’t worry me. I’m a real estate broker. I’ve seen how much and how little is required of sellers in a market with more buyers than sellers.
My biggest task was to begin clearing the property of a decade of postponed projects. Old repurposed lumber wasn’t going to find a new purpose. Off it goes to the dump. Old concrete, same thing, recycled. The same for metal fencing. A heat-scorched garden, sad to see it not succeed; but dismal dried flowers don’t add to curb appeal. Lots of trips to recycle and dump yards cleaned up the lot, and would make it easier for me to move if I sold.
As a real estate broker, I also can not advertise the sale of my house until it is listed. So, for over a month I was on edge about finances, keeping myself busy by doing house chores, and wondering every day about whether I’d have to move. Partway through I’d run out of chores, had to be careful with my money, and found myself in limbo while waiting for news to come. I also couldn’t tell all my friends about what was going on, which shrunk the opportunities for social distractions.
In the midst of worry, a marvelous bit of generosity from long-time friends who actually knew what was going on, could guess the rest. They offered one of their well-equipped tiny houses as a retreat and refuge. Ah. A major anxiety managed.
Now that the money and the accounts and the uncertainties have been resolved, it is time to get busy, again. The adage of “It takes money to make money” comes to mind. Without money I spent a lot of time trying to not spend any money. Poverty means having insufficient funds. I can see the contrast between too little and hopefully enough. I’m glad this has worked out for me.
The processes involved in accessing funds sound supportive, but each avenue I’ve pursued has required significant effort, has impacted life in the process, and aren’t guaranteed. In the last three months I’ve listened to people who didn’t get their stimulus checks, to folks who haven’t been able to pay the rent, whose businesses are severely hindered, who’ve suffered from bureaucratic mistakes that suspended their benefits – and sometimes being threatened with fines as a result.
I am fortunate enough to have kept this house on this island and to be made aware of the possibilities. I hope others can take advantage of their situations, as needed; but I wanted to also chronicle what it may require procedurally, logistically, financially, and emotionally. If it feels like it is tougher than it should be, you’re probably right, and you’re undoubtedly not alone; but good things can happen. I wish you good luck.
Congratulations! Why did you decide on a HELOC instead of a reverse mortgage that you don’t have to pay back but that you can pay down? Just curious.
A reverse mortgage seems like a longer-term commitment. I see HELOC as more temporary, something that will be easier to pay back without interfering with title to the same extent. I keep in mind that I might move some day, especially if I can find some place I like better. Things change, and the current pace of change convinces me to be ready to adapt. (I also buy lottery tickets, and winning a jackpot would definitely be a change.)
I think you made the best decision, and having followed your journey….I am so relieved for you! May Autumn bring you homes to match with some of those buyers, and closing transactions. 🙂