Educational Articles

Using Equity Loans to Winterize Your Home

November 2016


There are all sorts of ways to guard your home from the winter elements. Some are cheap and may even fall in the do-it-yourself category, like adding weather stripping and caulking.


Other endeavors, such as swapping out single-pane windows for energy-efficient double panes, or replacing a furnace, are beyond the skill set of most homeowners - and often beyond the balances in many savings accounts as well.

In that case, taking out a home equity loan or line of credit may be the answer. Here's what you should know before you do.

Take stock

If you know your home needs winterizing, it makes sense to get going on those projects in summer, or sometime before it gets really cold. It's a lot easier to work a caulking gun when your teeth aren't chattering or to have your furnace serviced when demand is down.

What's on your list? Many utility companies offer free energy audits and tips on improvements you can make so that your home doesn't lose heat so quickly, saving you money on your heating bill.

Drafty doors and windows may be something you or a handy friend can handle. For many homeowners, though, installing storm windows or storm doors and adding insulation to an attic - particularly if access is tricky - might start to push the envelope.

Hire a contractor

If you know your heater is reaching the end of its run, or your gas furnace's flame is burning yellow instead of blue, it's probably time to hire a contractor.

You can avoid headaches that come from dealing with unscrupulous or second-rate contractors by researching their backgrounds and reputations before seeking bids. Check government websites that compile licensing and business records, as well as consumer-oriented sites such as Angie's List, your local Better Business Bureau or, if you live in one of the many metro areas it serves, the Consumers' Checkbook.

It's usually a good idea to get at least three bids, and to ask for client references.

Decide how to pay for it

If you don't have enough savings to afford winterizing your home, look into taking out a home equity loan or home equity line of credit. Typically, both loans and HELOCs:

  • Carry lower interest rates, compared with, say, a credit card.
  • Are secured by the equity in your home; this means you can qualify for a bigger loan but also that you are using your home as collateral.
  • Allow you to deduct interest come tax time, under the IRS' home mortgage interest deduction.

And when evaluating whether to grant either type of loan, and when setting an interest rate, lenders are likely to weigh the value of your home, how much you still owe and your creditworthiness.

But there are significant differences. With a home equity loan, you receive your money in one lump sum, and the terms call for a fixed interest rate and repayment over a specific period of time.

By contrast, a HELOC is a revolving line of credit, similar to a credit card. You pull from it as needed, up to a specified amount. HELOCs also come with variable interest rates. You pay only on what you draw, but the rate may rise or fall from what it was when you took out the line of credit. Many HELOCs also come with specified draw periods, followed by a repayment period to pay back the outstanding balance plus interest.

Keeping warm in the winter is certainly a good reason to tackle a home improvement project. And because your home is probably your single most valuable asset, it makes good sense to keep it in top condition - to maintain or boost its value for resale, or to pass it along to your kids. For important big-ticket items, home equity loans are a reasonable route.


© Copyright 2016 NerdWallet, Inc. All Rights Reserved


Is Fall the Best Time to Buy a House?

October 2016


Sometimes it's smarter to buy certain items according to the season, like sweaters near the end of winter and swimsuits in late summer. But what's the best season for buying a house?


The answer: the fall. As temperatures cool and trees shed their leaves, enough factors break in the buyer's favor to make it the No. 1 season for homebuying. Here's why.

Less competition

Many homebuyers are families who want to minimize a move's effect on their kids' schooling. They want them to start at a new school on the first day, not midyear. And so if their spring and summer searching didn't work out, they might well wait for the next go-round. This means fewer buyers bidding on the same houses you're interested in and more negotiating power when you do. (A chart in this article shows how home sales drop starting in the fall.)

Of course, this works both ways: Sellers might not want to uproot their families in the middle of the school year either. But while this brings housing inventory down, you might just find it easier to focus and pinpoint exactly what you really want in a home.

Sellers are more motivated

Spring and summer are the high seasons for homebuying: Days are longer, the weather's nice, and open houses are well-attended. And that means sellers can sit back and be a bit choosier with offers.

But as Labor Day recedes in the rearview mirror, sellers start to wriggle in their seats. The prospect of trying to sell during the holiday season or, more likely, waiting until the next year, is dispiriting. And so these sellers can become, in a sense, settlers - willing to reduce their prices and conditions. There is some variation by region, but overall in the U.S., prices have peaked by the end of August.

Buyers can use this increased motivation to their advantage, offering less and asking for more during negotiations.

Taxes and discounts

Buying a home costs a lot of money but comes with good tax breaks as well. The IRS allows deductions for the interest you pay on your mortgage, on the premiums you might pay for mortgage insurance, on property taxes and more, including some of these that went into your closing costs. Buying a home in the fall means seeing those tax breaks sooner, the following April.

Also, much like those motivated sellers, many homebuilders discount their inventories during this time of year to help them meet year-end sales goals.

The decision to buy requires serious consideration of where you are in life, what your goals are and how much you can afford. But if you are indeed ready, buying during the fall can be a good call. Just try to find time in between football games.


© Copyright 2016 NerdWallet, Inc. All Rights Reserved


Defending Yourself Against Identity Theft

August 1, 2016

As technology advances, you can be sure that identity thieves are not far behind. Here are some common methods cyberthieves use to steal your personal information and how you can increase your security while shopping or banking.


Phishing/vishing

Your email messages may not be quite what they appear to be if you're targeted by a phishing scam. Phishing is the act of sending fraudulent emails that seem to come from familiar businesses. These messages contain links to phony websites designed to steal personal information either directly or through malware and keyloggers. Often you'll see a problem referenced with a request to click on the link provided to correct it. Once you've entered your information, ID thieves can access your accounts.

Vishing is the telephone version of phishing. Callers are sometimes bold enough to suggest the victim call back to verify authenticity. But the vishers don't actually hang up; instead they play a recorded dial tone to make the victim believe he's making a call.


Debit and credit card fraud

Most shoppers love the convenience of plastic, and identity thieves use this to their advantage whether it involves skimming, phishing, vishing, malware, mail theft or just looking over a victim's shoulder to steal account numbers. When debit cards are compromised, it's particularly alarming because fraudulent purchases drain your checking account instantly.


BEC scams

Business email compromise, or BEC, scams have cost companies more than $1.2 billion. A phony email from a CEO requesting that funds be transferred per attached instructions is sent to an employee. Because the email appears to come from the employee's superiors, and because the message so closely resembles requests this employee receives regularly, the transfer is often made without question. The money then ends up in overseas accounts that are almost impossible to trace.


Tips to protect yourself

To even further reduce fraud risk:

  • Install the latest editions of antispyware, antivirus, firewalls and browsers to all devices, and password-protect them.
  • Use strong passwords for all accounts and change them frequently.
  • Monitor accounts and credit reports to detect fraud early
  • Don't use public Wi-Fi networks for financial transactions.
  • Keep cards away from public view, and shred personal documents before discarding.
  • Opt in for two-factor authentication on accounts.
  • Turn off bluetooth and near field communication when not in use.
  • Don't click on email links. Type full web addresses to access business websites.
  • Never share sensitive information with unsolicited callers or email senders.
  • To verify calls, hang up for at least one minute to insure the first call is disconnected.
  • To protect your business from BEC scams, use a two-step verification process for all money transfers. Verbal confirmation is also wise.

Staying informed and adopting smart fraud prevention practices will go a long way toward protecting your identity. Between your efforts and your bank's security, you should be able to stay a step ahead of identity thieves.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved



How Debit Card Fraud Happens and How to Avoid It

July 6, 2016


For many people, debit cards are the perfect plastic. They offer most of the conveniences of credit cards with no risk of accumulating debt.

But like credit cards, debit cards are vulnerable to rip-off artists. And debit card fraud is particularly scary because thieves can withdraw money directly from your checking account.

Here's how debit fraud happens and how to protect yourself.

How identity thieves operate

Debit card fraud can be sophisticated or old-school. Thieves use techniques including:


Hacking

When you bank or shop on public Wi-Fi networks, hackers can use keylogging software to capture everything you type, including your name, debit card account number and PIN.


Phishing

Be wary of messages soliciting your account information. Emails can look like they're from legitimate sources but actually be from scammers. If you click on an embedded link and enter your personal information, that data can go straight to criminals.


Skimming

Identity thieves can retrieve account data from your card's magnetic strip using a device called a skimmer, which they can stash in ATMs and store card readers. They can then use that data to produce counterfeit cards. EMV chip cards, which are replacing magnetic strip cards, are expected to eliminate this risk.


Spying

Plain old spying is still going strong. Criminals can plant cameras near ATMs or simply look over your shoulder as you take out your card and enter your PIN. They can also pretend to be good Samaritans, offering to help you remove a stuck card from an ATM slot.


Smart ways to protect yourself


Adopt these simple habits to greatly reduce your odds of falling victim to debit card fraud:


  • Be careful online: Shop and bank on secure websites with private Wi-Fi. If you must shop or bank in public, download a virtual private network to protect your privacy.
  • Monitor your accounts: Review your statements and sign up for text or email alerts so you can catch debit card fraud attempts early.
  • Don't ignore data breach notifications: The majority of identity theft victims received warnings that their accounts might have been breached but did nothing. If you get one of these messages, change your PIN and ask your provider to change your debit card number. You can also ask one of the major credit card bureaus to place a fraud alert on your file.
  • Inspect card readers and ATMs: Don't use card slots that look dirty or show evidence of tampering, such as scratches, glue or debris. And steer clear of machines with strange instructions, such as “Enter PIN twice.”
  • Cover your card: When using your debit card or typing your PIN at an ATM, block the view with your other hand. Go to a different location entirely if suspicious people are hanging around the ATM, and if your card gets stuck, notify the bank directly rather than accepting “help” from strangers.

Even if you've taken precautions, debit card fraud can still happen. If your card gets hacked, don't panic. Tell your bank or credit union right away so you won't be held responsible for unauthorized charges, and file a complaint with the Federal Trade Commission.


Roberta Pescow, NerdWallet


© Copyright 2016 NerdWallet, Inc. All Rights Reserved


5 Steps to Safeguard Your Financial Data From Thieves

February 11, 2016

Most people leave a trail of data nearly everywhere they go. Some of that data links to critical information, such as bank and credit card accounts.

Hackers want access to that information and are constantly deploying new tactics to steal that data from unsuspecting consumers.

You don't have to make it easy for them. These five simple steps can help you protect your financial information from data thieves.


1. Use secured networks and websites

The majority of Americans shop online, and data thieves try to exploit that fact. You can help protect your bank and credit card accounts by sticking to secured websites, which typically include "https" in the Web address and display a locked padlock icon near the address. When using a wireless network outside your home or workplace, avoid making financial transactions unless the network is password-protected.


2. Beef up your passwords

Make it harder for hackers to access your data by choosing complex passwords that include a mix of numbers, upper- and lower-cased letters and symbols. Steer clear of passwords that use personal information, such as your birth date or address, and avoid using the same password across multiple sites or accounts. Tools such as LastPass and PasswordBox will generate a random password for each site, store them securely and automatically fill them in when you log in to a site, so you only need remember one password.


3. Protect your phone

A stolen smartphone could be as risky to your finances as a stolen wallet, especially if you use mobile apps to manage your finances. So, while you're strengthening the passwords you use online, consider doing the same on your phone. Some newer handsets are now equipped with fingerprint scanners, which could give you an added level of security if your phone is swiped.


4. Be smart at the ATM

Getting cash from an ATM is a fairly routine transaction. Many people insert their card, enter their personal identification number, or PIN, and take their money without giving it much thought. Doing so could put you and your money at risk, though. Before using a cash machine, check your surroundings, and the ATM's card reader and PIN pad, for anything suspicious or unusual. If something seems amiss, it might be wise to find another machine.


5. Upgrade to an EMV card

Credit and debit card issuers are upping their security game by adding microprocessors to newly issued cards. Known as EMV chips, the devices create a unique code for each transaction with a given account, making it harder for hackers to steal your data or skim it from a card reader. Even if a hacker does get your account information, it's virtually impossible to copy your card and its chip. EMV cards also require users to enter a PIN or give their signature to complete the purchase, adding a layer of security.


Despite taking every precaution, it's possible your data could still be compromised. Use caution when doling out your account information, especially online or over the phone, and keep a close eye on your bank and credit card statements. If you spot signs of a breach, alert your financial institution as soon as possible to help stop the fraud in its tracks.


© Copyright 2016 NerdWallet, Inc. All Rights Reserved


7 Banking Tips for Young Millennials

February 11, 2016

Once you start receiving your first paychecks after graduation, knowing how to spend or save your money wisely can be tough. While you may be able to do your banking with just a few taps on your phone, managing money well is much more complicated. Here are a few tips to help you get started.


1. Budget using apps

Tracking how much you spend weekly and monthly shows you where your money goes and how you can save more. You can use a budgeting app that tracks your cash automatically, such as Mint, or one where you enter information manually, like Spending Tracker. Choose an app that lets you spend as little or as much time on budgeting as you want. From there, you can identify your total fixed expenses, such as rent and car payments, and more flexible costs such as shopping and dining out.


2. Set up automatic transfers to savings

When you have a rough idea of how much you can save regularly, create a recurring transfer from your checking account to a savings account. By making savings automatic, you can get used to spending "below your means" and never have to worry about remembering to transfer.


3. Avoid overdrawing your checking account

Before you pay rent or spend any other big chunk of money, take a look at your checking account's available balance. This can prevent you from spending more than you have in your account. If you overdraw, you may be charged a fee.


4. Establish credit

Student loans and credit cards can help you build good credit -- as long as you stay current on monthly payments and don't overuse your cards. Your credit score, which shows how responsible you are with credit, is an important factor that lenders check before approving car loans and mortgages. The better your score, the lower the interest rate you may be eligible for.


5. Repay debts strategically

If you have debts from multiple credit cards and student loans, pay the minimum on each and then contribute more to your higher-interest debts. By making those a priority, you can reduce how much interest you're paying faster than by treating all debts the same.


6. Start an emergency fund

Being financially prepared in case of health emergencies or unexpected unemployment can save you from going into debt. Have a separate savings account just for this purpose -- don't mix it up with your regular savings. A good rule of thumb is to save enough to pay three to six months' worth of living expenses.


7. Set long-term savings goals

Consider saving for retirement in an employer-sponsored 401(k) plan or individual retirement account. When you start saving early, you take advantage of compounded returns to make more money off your contributions overall.


From smart budgeting to setting goals, make good money choices now. Since time is on your side, you can benefit from building credit and saving early to be ready for big financial decisions in the future.


Spencer Tierney, NerdWallet


© Copyright 2016 NerdWallet, Inc. All Rights Reserved