Experts offer 10 resolutions for homeowners -- Page 2

It happened to Bierfriend once, and he had to make a supplemental payment to the insurance company. Call the insurance company and the county tax collector once or twice a year to make sure the mortgage servicer is doing its job correctly.

• If you pay mortgage insurance, find out if you need to keep paying it.

Mortgage insurance usually is required if your down payment is less than 20 percent of the purchase price. You pay for mortgage insurance, but the lender is the beneficiary if you default on the loan. The insurance isn't tax deductible.

This resolution is Hall's idea, and he suggests asking your lender if you have accumulated more than 20 percent equity.

You can avoid paying mortgage insurance altogether by getting a piggyback loan or by choosing a loan program that charges a higher rate but doesn't require mortgage insurance, Hall points out. A piggyback loan is a second, higher-rate mortgage that "piggybacks" on an 80 percent primary mortgage.

Sometimes it's better to pay mortgage insurance rather than get a piggyback loan or pay a higher rate. This is especially the case when you believe that you'll reach the 20 percent equity threshold within a few years.

• Find out whether you should move credit card debt to your home's equity.

Hall and Bierfriend both bring up this resolution. Home equity debt generally is tax-deductible, with rates that are far below those on credit cards. You can save a lot of money by paying off your credit card debt with a home equity loan or equity line of credit.

You could also lose money if you're foolhardy or unlucky. Credit card debt is unsecured, so if you lose your job or your health and you can't pay your credit card bills, you can declare bankruptcy and walk away from your credit card debt. But home equity debt is secured, meaning that if you don't pay the bills, you have to walk away from your house.

The surest road to debt hell is to consolidate your credit card debts into a home equity loan, then charge up the cards to the max again. If you do that, charge some nice clothes on your credit cards so you'll look presentable in bankruptcy court.

• Get a home equity line of credit (HELOC) for emergencies.

"It's the most flexible way to access cash," Hall says. "It's cheap and it's deductible."

If you lose your job, you probably won't be able to open a HELOC. But if you already have a HELOC and you lose your job, you can tap into it to pay living expenses. A HELOC can pay for emergency medical procedures and bail, too.

• Make sure your homeowners insurance is sufficient.

"You should periodically contact your insurer to make sure you're covered for home improvements or increases in value and to make sure you're properly covered for any type of risk," Bierfriend says.

Ask detailed questions to find out how much the insurance company would pay if you, say, lost utterly everything in a fire. Would the insurance pay 100 percent of the value of the house and its contents? Would the insurance pay to rebuild your home to newer, stricter building codes?

• Draw up a will if you don't have one, and make sure it's up to date.

This resolution is suggested by Neil Garfinkel, a lawyer with Abrams Garfinkel Margolis Bergson in New York. "You're never too young to have a will," Garfinkel says. "If something happens to you and you don't have a will, the state will step in and say, 'This is how your assets will be distributed.' I would strongly recommend everyone having a will."

Owning a home makes a will even more important.

• Check smoke detectors and buy a carbon monoxide detector.

This is another resolution suggested by Garfinkel. Test smoke detectors at least twice a year; January is as good a time as any. A carbon monoxide detector could save your life, especially if you have a furnace that burns oil or gas. Garfinkel suggests getting your chimney swept, too.