Have you owned your home for a least a couple of years? If so, you most likely have some home equity built up then. In today's real estate market, building up cash equity in your home happens rapidly.
A home equity loan allows you to borrow the equity you've built up in your home. Keep in mind that there are home equity loan rate pros and cons. This article will address some of the major ones.
Pros
A home equity can be a good deal if you're needing access to a large amount of money. You can borrow the money and repay it over a 5-10-15 year period at very favorable interest charges.
You can use the proceeds from a home equity loan for anything you want, from making home improvements to taking a vacation. It's your money to use as you wish.
A home equity loan can be a good way of paying for college education expenses.
A home equity loan is much easier to obtain than any other type of conventional loan.
Cons
A home equity loan is a loan, and you have to keep that in mind. You're paying interest on this money. There are some people who see it as a type of revolving credit, and get themselves in financial trouble later on when they have trouble making the loan payment.
Don't get a home equity loan and fail to make your payments. If you default on the loan it could cause you to lose your home entirely. Depending on the size of the home equity loan, you could have a cross-default clause which would cause your first mortgage to be in default also.
Be careful in taking out a home equity loan if you plan on moving in the near future. By stripping out your equity, you may leave yourself in a bad way when it comes time to find a new home.
These are just a few home equity loan pros and cons. Used wisely, they can be the solution to a financial burden you have, but used the wrong way they can be a financial disaster.
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By Terry Edwards
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