An Equity Loan Could Reduce Your Monthly Bills
Home equity is the value of your home less the remaining
outstanding mortgage balance. While you may be worrying about
currents debts or wishing you could refurnish or remodel your
home, you may be sitting on the cash you need.
With a home equity loan or equity line of credit, you can use
the value of your home (less the balance owing) and consolidate
debts or even remodel your home.
What is an Equity Loan or Equity Line of Credit?
Unlike a typical loan which deposits a set amount of money in
your account and begins charging you interest and payments at a
fixed rate until repaid, an equity line of credit acts as a
revolving credit (like your credit card). In addition, you do
not need to pay interest on the full amount you have access to,
you only pay for the money you have borrowed. Like a credit
card, when the debt is repaid you still have access to the
credit.
Using an equity line of credit (also known as a Home Equity Line
of Credit or HELOC) gives you greater flexibility with the least
cost. Not only can you access the credit only as you need it,
but your monthly payments will reflect only the balanced used.
The less used the lower your payment. Some lines of credit have
only the interest as the minimum payment, which can be helpful
when finances are tight.
What Can I Do With My Equity Loan or Line of Credit?
While you can probably find numerous uses for your line of
credit, here are samples of the more common reasons for
obtaining an equity line of credit.
Consolidate Debts - Using your equity line of credit to
consolidate other debts can not only eliminate the stress of
multiple bills but can also give you a more favorable interest
rate or tax benefit.
Second Mortgage - Use your line of credit to pay off the
existing mortgage for better interest rates.
Remodel, vacation, new car, etc. - You may use your line of
credit for renovating your home, buying new furniture, a car, or
taking a vacation. You would pay less interest payments than
using a credit card or store card making it a wise choice for
large purchases.
Using Your Equity Loan or Line of Credit Wisely
Before succumbing to what seems like easy money, it is important
to evaluate the additional risk.
Some debts, as student loans have features that you may not be
entitled to if you switch them to an equity line of credit.
Other items like cars and vacations may seem like a good idea to
buy with your home equity line of credit, but with the ability
to pay only the interest you may find the motivation to pay off
the debt is lacking and end up owing for items that have lost
their value or were consumable. Plan to pay off the debt quickly
for the most advantage.
Second mortgage (or refinancing) may or may not be a good idea
depending on interest rates and your repayment terms. While
lines of credit take advantage of current low interest rates you
may find that your regular loans protect you better from
fluctuating rates if you will not be paying the loan down in the
next few years.
By understanding, the risks and making good financial decisions
you can get relief from debt and financial freedom.
For more information about an equity home loan, visit
http://www.equityhomeloanguide.com and
http://www.equityloananswers.com