Join Park State at the Lake Superior Harvest Festival

250px_250px_LakeSuperiorHarvestFestival2015-1Park State Bank is proud to be a sponsor of the Lake Superior Harvest Festival, from 10 a.m. to 4 p.m. Saturday in Duluth’s Bayfront Festival Park.

Held rain or shine, the event is a free, family-focused day that brings thousands of producers and consumers together to celebrate healthy communities through sustainably produced food. Admission and parking are free.

Harvest Festival features local farmers, artisans, live music, active organizations and businesses devoted to sustainability. Park State Bank is one of those businesses. Just as we build a sustainable local economy by buying local, we add even more strength by banking locally. All of Park State Bank’s activities go to help individuals and businesses right here in our region.

This year, Harvest Fest has new activities, demonstrations and displays dedicated to renewable energy, energy conservation and action to prevent climate change. Festival-goers can compete in an energy obstacle course and win points for conserving energy. This year also features a greater recognition of our shared Western Lake Superior “foodshed” and includes more farmers from the Chequamegon Bay area of Wisconsin. For more information about the festival, click here.

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What’s the real story with reverse mortgages?

Park State Bank logoBy Dale Lewis

I’ve had a number of questions recently about reverse mortgages. They seem to be on the minds of many people, perhaps because there are lots of solicitations out there—particularly TV advertisements—urging older people to consider them.

Those who have asked me about reverse mortgages seem to know there are risks as well as the reward of cash that come with these financial products. They want to know the full picture and my thoughts. So let me share them with you.

Most of us are familiar with a standard home mortgage—a loan we take out to buy our homes and pay back over time. With a regular mortgage, we gradually increase our ownership stake, or equity, with every payment. Eventually, the idea is that we fully pay off the loan and own the home.

At the core of a reserve mortgage is the notion that your home equity is worth something and that you can tap it by making an arrangement with the bank. You get cash back through a loan. The bank gets a security interest in your home under that loan. For some people, that is just fine. But I suggest that it’s often a steep price to pay for not as much cash as those TV ads might imply.

Let’s understand some of the fundamentals of reverse mortgages to determine if this tool is right for you. First, you must be an older homeowner, usually 62 or older, to enter into a reverse mortgage. The amount you may borrow also depends on the interest rate you receive and, of course, your home’s value.

Typically, a borrower can get back in cash only a small fraction of the value of the home. Less than half of the home’s value is not uncommon. Fees and other restrictions may reduce that amount further. The amount you may take immediately at closing also is usually limited. Spread over the expected lifetime of the reverse-mortgage borrower, those funds quickly can look small, indeed. A reverse mortgage also will reduce the amount of money you will leave to your children or other heirs.

One of the questions that often come with reverse mortgages is, “Can I stay in my home?” You can without repaying your reverse mortgage loan, as long as you keep up your home to preserve its value. And upon the death of you or your spouse, your children or other heirs can use their own money to repay the reverse mortgage loan and reclaim the home. They also can sell the home, using the money they receive to repay the loan.

In addition to considering the fees associated with reverse mortgages, one of the questions you should ask if you are considering this tool is whether you can afford to stay in your home and keep it up. Usually, borrowers have to prove that they can do this, as the reverse mortgage will require it.

If you plan to leave your home, a reverse mortgage probably isn’t your best option, as you’ll only receive a relatively small share of the value of your home. A better choice would be to sell the home and benefit fully from the value you have built up, recognizing, of course, that you’ll need to find another place to live.

Other options exist, too, for older people and others who want to tap the equity in their homes for cash. Home-equity loans and home-equity lines of credit are two common tools for homeowners to extract cash for life needs. They generally offer more flexibility for the borrower.

Reverse mortgages exist because they do fit some people’s needs, but not as well as those TV advertisements imply. If you are considering a reverse mortgage, my advice is to talk with your local community banker about your needs. Your banker will have information about reverse mortgages as well as other options you may want to consider.

Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at or 218-722-3500.

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We’re celebrating 100 years with 1 percent loans

Park State Bank logoAs we prepare to mark 100 years in business, we’re celebrating with a special 1 percent loan program.

Qualified lenders can secure a 1 percent loan on a car, boat, ATV or other vehicle. Here’s more on our program.

For additional information, please contact Steven Raj, Vice President of Lending, 218-727-8001 or

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When to consider tapping the equity in your home

Park State Bank logoBy Steven Raj

Our homes are usually our biggest investments.

They also are likely one of the biggest and best source of loans for projects ranging from fixing up our properties to buying a car to obtaining funds for life needs, such as retirement.

The equity in our homes is valuable. And in this environment of low interest rates, a loan secured by home equity is a relatively easy, safe and effective way to free up funds for needed or desired spending.

In addition to the current environment of low interest rates, home-equity loans have an additional attraction: They may be tax deductible for some borrowers. Check with your tax adviser to be sure. But these days, there are not a lot of tax advantages with other types of borrowing. Loans secured by one’s home remain, with some exceptions, one of the few tax-advantaged options.

So why take out a home-equity loan? Here are some scenarios that might make considering doing so worth your time:

Improving your home: This is the classic home-equity loan. The homeowner borrows against equity to free up cash to make that same home a more valuable property. Think kitchen or bathroom remodeling, or building an addition.

These kinds of loans are popular because they enhance the value of the property that is the underlying security for the loan. When and if the homeowner goes to sell, the home improvement may make the property more valuable. Even if you’re not looking to sell, a home-equity loan enhances your enjoyment of the place you call home. Fixing up also can be cheaper and less stressful than buying new.

Buying another long-term asset: Tapping the equity in your home to buy something else can make a lot of sense. It also can be dangerous. One of the rules of thumb we like to use at our bank is reserving long-term borrowing for long-term assets.

So it could make sense to use a home-equity loan to buy a car, a business property or a new furnace. But borrowing against your home to take a family vacation generally is not a good idea.

Check the rates and talk with your local community banker. Other borrowing options may make more sense. But it’s a good idea to ask how a home-equity loan might be an option if you are considering purchasing a long-term asset.

Freeing up cash for life needs: Having urged caution above, a home-equity loan still might be a better option than, say, a reverse mortgage for freeing up cash for life needs, such as spending in retirement.

Reverse mortgage loans may be an option, too, when considering borrowing for life’s needs. But you will want to review the long-term costs associated with a reverse mortgage. A conversation about a reverse mortgage with your banker, accountant and financial adviser is always a good idea.

If you are considering a reverse mortgage to provide funds later in life, also think about tapping the equity in your home in a more traditional way through a home-equity loan. It’s another idea to put on the table as you consider your options.

Our homes are where we live, and we want to be careful to protect our ownership. But many of us would be wise to consider a careful tapping of the equity in our homes when we seek funds to purchase needed items or accomplish life goals.

Keep a home-equity loan in mind as a possibility and ask your community banker for advice about whether this tool could be an option for you.

Steven Raj is vice president of lending at Park State Bank in Duluth. You can reach him at or 218-727-8001.

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Helping Millennials–and others–buy a first home

Park State Bank logoBy Dale Lewis

In the Twin Ports and nationwide, we’ve seen a trend: Young people, and especially Millennials, are buying homes at a much lower rate than previous generations.

Why? Theories include student loan debt and a lack of employment opportunities, both of which have become a burden for young people as they try to establish solid long-term financial futures. Some also wonder whether Millennials, having seen their parents and others suffer from the effects of economic downturns—including waves of home foreclosures—simply don’t want the risk of home ownership.

All of these concerns are real. But as a banker, I will tell you that all are issues we have seen before with individuals who never thought they could buy homes. After working with a local community bank, many of these individuals are proud home owners today.

Let me take you through some of the steps we have used to help home buyers who never thought they could achieve the American Dream do just that.

A house doesn’t have to be forever. A big obstacle for many home buyers, especially first-time buyers, is a worry that once they buy, they’re locked in forever. They won’t have the flexibility for job or lifestyle changes—or even a different home.

In reality, mortgages have become much more flexible, and most of us will own more homes in our lifetimes than our parents and grandparents did. Home prices also are reasonable, and interest rates remain near historical lows. As long as you make sure your loan has no prepayment penalty, you should have plenty of flexibility to buy and finance a home and still accommodate changes in your life that may require you to look at other housing options down the road.

Renting costs about as much as buying. Especially in our market, this is true. With a limited number of rental properties, the cost to rent here can be greater than the amount a typical first-time homebuyer would pay in a monthly house payment.

Yes, homebuyers need to put money down to buy, and that can be an obstacle—especially if student loan debt and the applicant’s employment situation present issues. But even in those cases, it makes sense to talk to a banker. There may be opportunities to overcome the down payment hurdle with government and veterans’ programs, if you qualify. Once we get past the down payment, the monthly cost of buying often is about the same as renting for many first-time buyers.

Pay yourself instead of a landlord. The biggest benefit to home ownership is that buyers to pay themselves instead of a landlord for the right to live in their home. This is called building equity—essentially building your ownership stake instead of watching all of those rent dollars go to someone else.

When we sell, we benefit from the equity we have built up in our homes, as well as increased market value. For most of us, that helps purchase our next home—often a larger home that can accommodate lifestyle changes, such as a growing family. For most of us, home equity will be our single largest investment. So it’s best to start early and watch your investment grow.

The financial issues facing Millennials and other young prospective home buyers are real. But many of those issues are not unlike the financial concerns that have worried first-time homebuyers for years. For example, when I bought my first home in 1979, interest rates were at 16 percent

Today we have more options than ever to help young people and others achieve the dream of home ownership. If you’re wrestling with any of these issues, come in and talk to us or contact us online. Find out which options might work for you.

Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at or 218-722-3500.

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