VIDEO: Home Equity Podcast


The equity you have in your home can be a powerful tool in managing your situation. Your equity, the value of your home minus your existing mortgage, can serve as collateral for additional borrowing.

While there are risks with this strategy home equity loans usually offer lower rates, convenience and tax benefits.

Most lenders often are willing to lend you depends on the amount of equity you own in your home and other credit characteristics.

The interest rate usually charged is variable and will be tied to a published index, like the prime rate with the initial interest being very low and then change to a different, much higher rate.
Loans are paid in installments with minimum payments required, with some home equity loans the borrower pays only on the interest on the loan.

The attractions of home equity loans are:

  • Convenience
  • Interest Rates
  • Flexible use of the proceeds of the loan
  • Tax benefits

The process is often simpler than if you were applying for a new mortgage. Always read documents carefully to understand your obligations.

Once you are approved, the home equity loan acts like a line of credit, with interest rates being greater or bigger than on first mortgages. Even though you are borrowing against your house there is no need to use the money towards your house.
As with any borrowing you need to be aware of the risks. Borrowing against your home should be considered carefully. Most people use home equity loans for conservative purposes and not for extravagant purposes.

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