To make the deal work out in your best interest, make sure that it is the right deal in the first place. Is a home equity loan a better fit for your needs than a simple credit card account? If you’re not sure, figure it out before you put your home at risk.
Plan out your budget ahead of time. Make sure that taking the loan will not overburden you.
Review and consider insurance to cover the payments if something happens. You may or may not need insurance. If you’re going to include it in your program, try to pay the premiums monthly – not up front.
Monday, October 29, 2007
How to Find the Best Home Equity Loans
Finding the best home equity loan can save you thousands of dollars – at least. In order to get the best loan, I recommend that you:
Shop around. Try a variety of sources (banks, brokers, and credit unions)
Manage your credit score and make sure your credit reports are accurate
Ask your network of friends and family who they recommend
Compare your offers to those found on websites and advertisements
Shop around. Try a variety of sources (banks, brokers, and credit unions)
Manage your credit score and make sure your credit reports are accurate
Ask your network of friends and family who they recommend
Compare your offers to those found on websites and advertisements
How to Find the Best Home Equity Loans
Finding the best home equity loan can save you thousands of dollars – at least. In order to get the best loan, I recommend that you:
Shop around. Try a variety of sources (banks, brokers, and credit unions)
Manage your credit score and make sure your credit reports are accurate
Ask your network of friends and family who they recommend
Compare your offers to those found on websites and advertisements
Shop around. Try a variety of sources (banks, brokers, and credit unions)
Manage your credit score and make sure your credit reports are accurate
Ask your network of friends and family who they recommend
Compare your offers to those found on websites and advertisements
Common Home Equity Loan Uses
Borrowers use home equity loans for some of life’s larger expenses, because homes tend to have a lot of value to borrow against.
loan for any purpose, you should be aware of the pitfalls of these loans. The main thing is that you can lose your home if you fail to meet the payment schedule required by the loan.
Another common pitfall of home equity loans is that scammers have found plenty of ways to cheat homeowners out of their most valuable asset. Be sure that you know who you’re doing business with. If something smells fishy (like a high-pressure sales pitch or an inability to put things in writing), then take a step back and make sure the deal is legitimate.
loan for any purpose, you should be aware of the pitfalls of these loans. The main thing is that you can lose your home if you fail to meet the payment schedule required by the loan.
Another common pitfall of home equity loans is that scammers have found plenty of ways to cheat homeowners out of their most valuable asset. Be sure that you know who you’re doing business with. If something smells fishy (like a high-pressure sales pitch or an inability to put things in writing), then take a step back and make sure the deal is legitimate.
Advantages of Home Equity Loans
Home equity loans are attractive to borrowers for a few main reasons:
They typically have a lower interest rate (or APR)
They are easier to qualify for if you have bad credit
Payments on a home equity loan may be tax deductible
Borrowers can get relatively large loans with this type of loan
They typically have a lower interest rate (or APR)
They are easier to qualify for if you have bad credit
Payments on a home equity loan may be tax deductible
Borrowers can get relatively large loans with this type of loan
The Basics of Home Equity Loans
Home equity loans allow a homeowner to borrow money by pledging the house as collateral. Borrowers who want to borrow a relatively large amount of money or who don’t have good credit often find the home equity loan to be attractive.
Lenders may be more liberal because they view home equity loans as relatively safe. You can’t disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the collateral. Also, you are likely to make your payments a priority if your home is on the line.
Lenders may be more liberal because they view home equity loans as relatively safe. You can’t disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the collateral. Also, you are likely to make your payments a priority if your home is on the line.
Home Equity Loans
Home equity loans are an attractive borrowing tool for many people. After all, the interest is tax deductible, the rates are usually lower than those on other types of loans, and they're easy to obtain. But there can be a downside, and you should know what it is.
With a home equity loan or line of credit, you can borrow up to 80% of the equity in your home. For example, if your home is valued at $125,000 and your mortgage balance is $50,000, you could borrow up to $60,000 (80% of your $75,000 equity).
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 through foreclosure, where the lender takes ownership of the property and sells it in an attempt to recoup the money they lent you.
Many people refinance their mortgage or take out a home equity loan to take advantage of the equity in their home. They then use the money for purchases, vacations, and other expenses, counting on the house appreciating in value to cover these expenditures once they sell. If it doesn't, they owe more than the house is worth and are "upside down" on their loan.
Being "upside down" on your loan means that you owe more than your home is worth, and this can easily happen if real estate values fall. If you try to sell your home under these circumstances, you will incur losses that you will have to pay for out of your own pocket when you pay off your mortgage at the time of the sale. This can cause severe financial hardship or can force you to stay in a house you no longer want to live in.
Just because you have equity in your home doesn't mean you can afford the monthly payments of an additional loan. Be sure to do a careful analysis of whether the home equity loan payments fit comfortably into your budget.
Home equity loans are best used for home improvements that will increase the value of your home. Some improvements, such as swimming pools, don't usually increase the value upon resale. Others, such as additional bathrooms, living space, renovated or updated kitchens, etc., generally do increase the value of your home.
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?
With a home equity loan or line of credit, you can borrow up to 80% of the equity in your home. For example, if your home is valued at $125,000 and your mortgage balance is $50,000, you could borrow up to $60,000 (80% of your $75,000 equity).
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 through foreclosure, where the lender takes ownership of the property and sells it in an attempt to recoup the money they lent you.
Many people refinance their mortgage or take out a home equity loan to take advantage of the equity in their home. They then use the money for purchases, vacations, and other expenses, counting on the house appreciating in value to cover these expenditures once they sell. If it doesn't, they owe more than the house is worth and are "upside down" on their loan.
Being "upside down" on your loan means that you owe more than your home is worth, and this can easily happen if real estate values fall. If you try to sell your home under these circumstances, you will incur losses that you will have to pay for out of your own pocket when you pay off your mortgage at the time of the sale. This can cause severe financial hardship or can force you to stay in a house you no longer want to live in.
Just because you have equity in your home doesn't mean you can afford the monthly payments of an additional loan. Be sure to do a careful analysis of whether the home equity loan payments fit comfortably into your budget.
Home equity loans are best used for home improvements that will increase the value of your home. Some improvements, such as swimming pools, don't usually increase the value upon resale. Others, such as additional bathrooms, living space, renovated or updated kitchens, etc., generally do increase the value of your home.
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?
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