Do You REALLY Need a Home Equity Loan?

Your equity is the amount your home is worth, on the market, minus the amount you owe to your mortgage broker. For example, if your property is worth $200,000 and the balance you owe your mortgage broker is $100,000, then your home equity - the part of your property that you own free and clear - is $100,000.

A home equity loan is a loan that uses the equity in your home as collateral. That means you are using your home as a guarantee that you will repay the loan. Before you even consider borrowing against your home equity, you need to understand that a home equity loan reduces your home equity by the amount of the loan and that if you do not repay the loan, you could lose your house.

These loans have advantages and disadvantages compared with other kinds of borrowing. You should consider the "Pluses" and "Minuses" of borrowing against the equity in your property before apply for a equity home loan.

Pluses

*The interest paid on a home equity loan is tax-deductible, just like the interest on your mortgage. This of course is not the case with credit card interest.

*Equity home loan rate may be lower than other kinds borrowing, such as credit card debt, because you're using your property to guarantee the loan will be repaid.

*A home equity loan gives you a source of funds for important big purchases: a college education, home improvement, a medical emergency, or other emegencies that may arise.

Minuses

*Your payments on your home loan must be met or you could lose your home.

*Often you will have to pay closing costs, which can be substantial, this is money which will not be recoverable and will diminish your loan value.

Having excess equity in your home will make you a target of unscrupulous sales tactics designed to get you to rush into an expensive loan you may not need. If you feel like you're being pressured to borrow, just say no - always take your time when you take out a home equity loan.

There are reasons that make a home equity loan a good choice but also reasons that are not good. You should consider them wisely.

Good reasons to take out a home equity loan.

*Improving your finances - A home equity loan can consolidate your debts, by paying off high-interest credit cards or other high interest loans which are not tax deductible.

*Investing in your home - You can use a loan to increase the value of your home by using it for needed home improvements or repairs.

*Investing in your future - Home equity loans can help finance an education or start a business.

Bad reasons to take out a home equity loan.

*Spending the money on luxury items - Don't risk your house to buy that new car, big boat or take an expensive trip. You should save until you can afford it.

*Using the money for living expenses - If you're spending more than you're earning day after day, a loan will only delay the "inevitable." Try to find ways to cut your expenses instead. A credit counselor can help.

*Loan the money to a friend or relative - Remember, it's your house that's on the line. Don't let a friend or relative pressure you to take out a loan for them. If they don't pay you back, they lose nothing - but you could lose your home.

If you're thinking about taking out a home equity loan as a last resort to get out of serious financial trouble, DON'T. Chances are, you'll just run up your debt again and will soon be just as bad off as you are today, and possibly lose your home as well. Get help instead! A credit counselor can help you improve your finances at little or no cost to you.

This article may be freely distributed and reprinted as long as the author's information and web link are included at the bottom of the article. For more info

Copyright 2005. William McNutt. All rights reserved

About the Author

Bill McNutt is a freelance writer and web designer. Having retired as an Aerospace Engineer after 30 years, he became fascinated with web site design, retirement got boring. He now writes articles about his website contents and adds to his websites. For more info Click Here

---

Refinance Your House

If you have seen all the advertisements regarding refinancing your... Read More

A Guide to UK Buy to Let Mortgages

Essentially there is little difference between the process that one... Read More

Council Right To Buy Mortgage ? Transform Your Accommodation Into Home

Homeowner - does this term catch your attention every time... Read More

Residential Mortgage - Finding The Best Home Mortgage Lender

Most people approach the act of getting a home mortgage... Read More

Bad Credit Mortgage Refinance - Should I, Shouldnt I?

It is a common financial scenario across households in the... Read More

Where To Find The Best Rates For Your Mortgage?

As with all of my articles this will be based... Read More

Home Buyer Beware ? Know the Signs of Real Estate Market Trouble

Lots of articles have appeared recently about the booming real... Read More

What is a Buy To Let Mortgage?

A buy to let mortgage is a mortgage on a... Read More

Bad Credit History? How Financing and Buying a Home Can Help You Improve Your Financial Situation

Financing and buying a home can help improve your financial... Read More

Short-Term Interest Rates on the Rise; Adjustable Rate Mortgage Holders Prepare for Increase in Rate

Interest rates are on the rise and many home owners... Read More

Home Equity Line of Credit or Second Mortgage Loan Online - Things To Do With Your Homes Equity

If you are wanting to get a home equity loan,... Read More

Bridging Loan Basics

A Bridging Loan is a short-term loan used as a... Read More

Guide to Flexible Mortgages

Outlined below is a useful guide to flexible mortgages. Flexible... Read More

How to Shop Around for the Cheapest Mortgage Deal Online

Before you start shopping around for a mortgage, you need... Read More

Bad Credit Loans Authenticate What Is Positive About Bad Credit

This might not be the front page news but it... Read More

Home Equity Loan Considerations

In other words, the benefit of the loan must outlast... Read More

Mortgage Terminology for the First Time Home Buyer

Buying a Home for the first time can be a... Read More

Adjustable Rate Mortgages - Understand the Benefits Compared to a Fixed Rate Mortgage

Adjustable rate mortgages can be very tempting to home buyers,... Read More

For Mortgage-Refinance Help, Get the Best Mortgage Professional, Not a Bank Loan Officer

When you need a mortgage -- either because you are... Read More

Securing a US Commercial Mortgage

What's the most efficient way to secure a US Commercial... Read More

Refinancing Your House - How to Know Whether to Refinance or get a Second Mortgage

Refinancing your house's mortgage is not the same thing as... Read More

Online Mortgages in 5 Easy Steps!

We're all entitled to the opportunities and benefits of home... Read More

Refinancing Your Home Mortgage Loan With Bad Credit

There are numerous reasons a person has bad credit. Late... Read More

Home Mortgage Lenders - How to Find A Good Mortgage Broker Online

Mortgage lenders have set up shop online, but they aren't... Read More

What is a Home Equity Loan?

A home equity loan is a loan that is guaranteed... Read More

Home Loans: To Substantiate Financial Possibilities On Your Land

Availability of Home loans is in full bloom. They are... Read More

New Home Loan - Understand The Various Types Of Mortgage Lenders

So, you've decided to buy a house, and you're ready... Read More

Mortgage Questions to Ask Your Lender

Buying and financing a home today can be overwhelming. Here... Read More

Mortgage Refinancing Companies -- Choosing The Right One

Searching for a mortgage refinance company can be a daunting... Read More

Doing a California Refinance Online

Californians are passionate people. I know. I have lived in... Read More

Adjustable Rate Basics

An adjustable rate loan, most simply stated, means that your... Read More

Kippers or Red Herrings?

Recent news has made much of parents stretching their finances... Read More

Reverse Mortgage ? Be Sure You Need It Before Applying For One

Reverse mortgages used to be considered the last resort of... Read More