Taking Advantage of Home Equity Loans

When a home equity loan (HEL) or a home equity line of credit (HELOC) is not an option, or not in your best interest, there are a few other options that help utilize your home’s equity. You can take advantage of cash-out refinancing plans, or if you’re 62 and older, a reverse mortgage may be of interest to you.

With cash-out refinancing, you refinance your mortgage for an amount over what you currently owe, and then cash out the difference. Cash-out refinancing differs from a home equity loan in several ways:

●      A cash-out refinance replaces your first mortgage, while a home equity loan is a separate loan on top of your first mortgage.

●      The interest rates on a cash-out refinancing are usually lower than the interest rate on a home equity loan.

●      A cash-out refinance requires you to pay closing costs on your mortgage, while a home equity loan usually doesn’t.

A reverse mortgage applies to homeowners 62 and older. The lender makes payments to the borrower throughout their lifetime based on a percentage of accumulated home equity. The loan balance does not have to be repaid until the borrower dies, sells the home or permanently moves out.

To be eligible for a reverse mortgage, you must be 62 or older, use the home as your primary residence, and your home must be paid off or the mortgage balance is low enough to be paid off at the closing with funds from the reverse loan.

Payments from a reverse mortgage can be received as a fixed monthly payment, line of credit, lump sum, or a combination of the three. Typically, the older you are and the higher the market value of your home, the more money you can qualify for.

There are no restrictions on how the money can be used. However, homeowners interested in taking out a reverse mortgage are required to receive free counseling by an independent third party.

A home equity loan or line of credit allows you to borrow money at lower interest rates by using your home’s equity as collateral. Both are often referred to as second mortgages, because they are secured by your property.

A home equity loan has a fixed interest rate and is received as a lump sum, designed to be paid off over a set amount of time with the same payments each month. Once you get the money, you cannot borrow any more from the loan.

A home equity line of credit has an adjustable interest rate and works more like a credit card that has a revolving balance. It allows you to borrow up to a certain amount throughout the term of the loan. During the home equity line of credit term, you can withdraw money as you need it. After paying on the principal, you can use the credit again.

Debt consolidation is a very common reason for taking out home equity loans. Many people struggle with large credit card debts and turn to home equity to ease the burden of high interest rate accounts. By using equity to consolidate debts, you can reduce monthly interest charges, since rates on home equity loans and credit lines are often 10 percent lower than credit card interest rates. Furthermore, you can ask your tax advisor if the interest on your home equity loan is tax deductible. On average, borrowers can deduct the interest on loans up to $100,000 on their taxes.

While debt consolidation is a good reason to use a home equity loan, there are some things to consider before jumping in. When you put up your home as collateral, you are guaranteeing that you will repay a debt; and, if you don’t repay the debt, the lender can take your home and sell it for the money owed.

Using home equity to consolidate your debts can reduce monthly interest charges, get you the same monthly payment, and provide some tax benefits. However, be careful not to run up the credit card balances again or be tempted to spend the money on unnecessary things.

Equity is the difference between the market value of your home and how much you owe on the mortgage. If you use your equity to consolidate debts, and then rack up more credit card debts, you will be left with big debt and no equity. When done responsibly, consolidating your debts with a home equity loan can help you save money and climb out of debt. So, be honest with yourself before setting up a plan.

Home equity loans are available as a fixed rate loan or an adjustable rate line of credit. A home equity line of credit is ideal if you need access to money periodically and not all at once. The loans carry lower interest rates than unsecured personal loans and can be used for many things, such as debt consolidation, home improvements, tuition, medical bills, and large expenses.

A home equity line of credit is a good option when you need money every semester to pay college tuition for your kids, or for periodic medical treatments that are not covered by insurance. Unlike a home equity loan, a home equity line of credit gives you the flexibility to borrow what you need, when you need it.

There are several ways to save money by taking advantage of a home equity loan. For example, you may use a home equity loan to consolidate debt. Some borrowers use the money to refinance their existing mortgage. Other popular uses for these loans include financing a new car, college tuition, or home improvements.

By using a home equity loan to pay off high-interest debt, such as credit cards, your monthly payments can drop. A low-interest home equity loan can lower your monthly mortgage payments, helping you pay off your mortgage faster. No matter what you spend the money on, the interest you pay on the first $100,000 of a home equity loan becomes tax deductible.

Many people struggle with debt from high interest credit cards, loans and mortgages. It’s not uncommon for people to take on more debt in order to pay for another, creating yet more debt. If you find yourself in this situation, the solution may be debt consolidation.

For homeowners who have paid down some of their mortgage, you can get a debt consolidation home equity loan. With a debt consolidation loan, you will be able to consolidate all of your high interest credit cards, as well as your consumer loans, into one affordable monthly payment with low interest.

A debt consolidation home equity loan is a secured loan where your property is held as collateral against the loan. Until you pay off the loan, the lender will have a lien on your house. As long as you meet your monthly payments, you keep your home and the debt consolidation loan will keep the creditors away and keep you out of bankruptcy. With single monthly payments, you will be able to spend less money than what you would be paying on multiple accounts.

Once you obtain a debt consolidation loan, make sure you are not tempted to use any of your credit cards again, since increasing your debt would cause more trouble than you had in the first place.

When unexpected expenses arise, not knowing where to get the money from is a very frustrating experience. Opening a home equity line of credit may be a good solution to prepare for these difficult situations.

A home equity line of credit gives you the flexibility to borrow what you need, when you need it. These adjustable rate loans function like a credit card, but with lower interest rates and higher credit lines. As you pay on the borrowed balance, you can continue to spend on the account. Having a home equity line of credit available to you can keep you from falling behind when you are facing a tough time.

Have you thought about how you are going to pay for your kid’s college? With tuition rates climbing at a steady rate, many families are faced with the challenge of paying for their children’s higher education. You may however, find the solution in your very own home – your equity, that is.

A home equity loan or a home equity line of credit can be used to finance college tuition. For instance, if you have paid $100,000 on your $200,000 mortgage, and the current market value of your home is $300,000, you have $200,000 of equity in your home. There are several options available in order to utilize this equity to finance tuition fees.

Typically, home equity loans are more difficult to qualify for when the borrower is self-employed. Lenders want to know that your business is profitable and sometimes require two to three years of income statements proving that your business is indeed profitable. However, if you have a low debt to income ratio and your credit history is clear, you should be able to find a good deal on a home equity loan.

As an independent contractor, there are times when fluctuations in income make the monthly bills difficult to meet. An adjustable-rate home equity line of credit is the ideal solution for this problem. A home equity line of credit works like a credit card that you only pay back the amount that you borrow. Once you do, it’s available for you to use again. It will allow you to take out money during slow business times, and pay interest only on what you use.

For a larger lump sum, you can apply for a traditional home equity loan. However, you will need to provide two to three years of documentation proving that your business is profitable.

Finally, there is one other option called a no-income verification home equity loan, which is basically a second mortgage that does not require you to provide income documentation. To qualify for this kind of loan, you will need good credit and may pay a higher interest rate.

You can benefit from tapping into your home equity, but it’s important to do it the right way. Popular uses for home equity loans include consolidating debts, financing a new car, college tuitions, and home improvements.

Whether a home equity loan is a smart move or not depends on what you want to spend the money on and how much you would save each month.

Since you are going to be making payments for 15 or 30 years, it makes sense to spend the money on something that will have lasting effects. For example, paying for medical treatments that make you healthy, or adding a second bathroom that will increase the value of your house would be worth the long-term loan payments.

For most people, your home is your most valuable possession – and not without good reason. A home is not like most purchases that decrease in value the moment you buy them; instead, a home maintains what you put into it, and more often than not, builds some profit. As you begin to pay down your mortgage, you start building equity. Equity is your money: the money you have paid on the principal and any increase in the home’s value, minus what you owe.

For first-time homebuyers, putting up a large down payment on the home gives you equity in the home right away. If you put $20,000 in the home, you have $20,000 in equity. This number grows as you pay your mortgage. When you need financing down the road, you can borrow against the equity with a home equity loan. For example, if you are starting a family and want to add a bathroom downstairs, you can use your equity to finance the project.

For homeowners who have lived in a home for 25 years, reaching the end of the mortgage term means you have a large amount of equity in your home. A home equity loan may be helpful to pay for your kid’s college, or a new business venture.

For homeowners entering retirement, using your home equity for extra income may be helpful. A home equity line of credit allows you to withdraw money when you need it.

For any stage of life, home equity is a great tool for financial planning.

Home equity loans are secured by your home. Therefore, if you use the money for an investment, remember that it is borrowed money. If you are not able to pay back the loan, you could lose your house to the lender.

When you love the home you live in but the size is just too small, consider financing a renovation with a home equity loan. While you may still have to pay closing costs on the loan, you will save on real estate agent commissions and relocation fees. But, more importantly, you get a bigger home while staying in the home you love.

Today, people everywhere are dealing with unmanageable debts. For most, more debt is taken on in order to pay for the others. When you are struggling with this situation, the solution may be debt consolidation.

For homeowners who have paid down some of their mortgage, you can get a debt consolidation home equity loan. With a debt consolidation loan, you will be able to consolidate all of your high interest credit cards, as well as your consumer loans, into one affordable monthly payment with low interest.

A debt consolidation home equity loan is a secured loan where your property is held as collateral against the loan. Until you pay off the loan, the lender will have a lien on your house. As long as you meet your monthly payments, you keep your home and the debt consolidation loan will keep the creditors away and keep you out of bankruptcy. With single monthly payments, you will be able to spend less money than what you would be paying on multiple accounts.

Once you obtain a debt consolidation loan, make sure you are not tempted to use any of your credit cards again since increasing your debt would cause more trouble than you started with.

When unexpected expenses arise, and your debt starts growing out of control, not knowing how to pay your bills leaves you feeling very hopeless. Using your equity with a home equity line of credit may be an option in these difficult situations.

A home equity line of credit gives you the flexibility to borrow what you need, when you need it. These adjustable rate loans function like a credit card, but with lower interest rates and higher credit lines. When you pay on the borrowed balance, you can continue to spend on the account. And if your income increases, you won’t have to pay back the entire loan amount. Instead, you pay back what you borrowed.

With a traditional home equity loan, you can consolidate all of your debts into one easy monthly payment, with lower interest rates. However, you will be paying it off for 15-20 years.

Buying a car with a home equity loan is common; however, you should weigh your options before making this move. A home equity loan has the advantage of tax deductible interest. But if you can get a much lower rate from the dealer, such as zero percent financing, that may be a better deal. Also, a typical home equity loan has a term of 15 to 20 years. If you extend your car payments over this term, the additional interest paid over the life of the loan could negate the benefit of lower payments and tax deductible interest.

Have you been thinking about tackling a big remodeling project, but you didn’t know how you could afford it? A home equity loan may be able to help you.

Low-cost financing in the form of a home equity line of credit is a great way to start a remodeling project. With the down economy, remodeling is one way to boost the value of your home. Instead of using credit cards to finance the work, consider taking out a low-interest home equity line of credit that allows you to draw on the funds as you need them, so you can pay for the project as it’s completed.

With a traditional home equity loan, you receive the money in a lump sum, which is ideal if your remodeling project requires that you pay a large retainer to a contractor.

A renovation can be one of the most expensive projects you undertake. But, it is also a great way to add value to your home. Taking out a second mortgage can help you update your home.

If you plan on paying for the work in multiple payments, a home equity line of credit is a low-interest financing option that can get you the money you need to renovate your home. Home equity lines of credit allow you to draw on the funds as you need them, so you can pay for the renovations as they are completed.

If you need to pay for your materials or contractor upfront, a traditional home equity loan provides the money in a lump sum. It usually has a higher interest rate than a first mortgage, but lower closing costs.

A cash-out refinancing loan is another way to finance a home remodeling project. If you have some equity built up in your home, you can refinance your first mortgage for a higher amount than you currently owe and pocket the difference to pay for your renovations.

Your home’s equity is determined by the current market value of your home minus what you owe. Thus, this number can fluctuate in both directions according to the market. While prices do tend to rise over time, owing more than your home’s market value is never a good thing. If you do decide to take out a home equity loan, be cautious and know the market you live in.