Home Equity Loans
A home equity loan is a
loan secured by a home or second home. This loan can be up to
the amount of home equity the homeowner has invested in their
home. Home equity is calculated by subtracting the amount of
debt left in the mortgage loan from the fair market value of the
Home equity loans are often used to consolidate other debt with
higher interest rates such as credit card debt, or to finance
costly expenses such as a wedding or educational expense. Two
main types of home equity loans exist. The first type is the
traditional second mortgage, and the second is a home equity
line of credit.
Home Equity Loans allow you to
borrow money using your home as collateral. When deciding on a loan,
though, you must be wary of unscrupulous lenders. Donít agree to
a Home Equity Loan if your income is not sufficient to make the
monthly payments Ė you could lose your home and all the equity
youíve built in it. With a home equity loan or line of credit,
you can borrow up to 80% of the equity in your home.
Equity loans come in two flavors: term loans and open-ended
lines of credit. Which works best for you?
Home equity loans are an
1) The interest is tax deductible
2) The rates are
usually lower than those on other types of loans
easy to obtain.
But there can be a downside, and you should know
what it is.
must-dos for a
great home equity loan
1. Find out the value of your
2. Learn how home equity loans work.
3. Pros and cons of home equity loans
4. Go for fixed rate or line of credit?
5. Calculate your monthly payment.
6. Recognize your tax benefits.
7.Check your options for using the equity.
8.Watch out for scams
9. Be careful with your nest egg
10.Check home equity rates
Home equity loans should not be used lightly. Keep in mind that
you're putting your home up as collateral on the loan. If you
fall behind on the payments, you could lose your home. And the lender takes ownership of
your property and sells it in an attempt to recover the money they lent you.
The bottom line is this: if your home is worth more than you owe
on it, a home equity loan can be a great way to take advantage
of this, but it can also get you into serious financial trouble,
and should be used wisely. Why not use the equity in your home
as part of your retirement fund instead of spending it on things
that may not last?