About Home Equity Loans

April 12, 2012 by  Filed under: Loans 

Home equity can be defined as the value of a property (home) minus the sum of money that is still owed on it. It is among the easiest, cheapest and smartest methods of accessing the money that is needed to help you achieve the financial goals you’ve set. The formula to determine home equity is simple. The value your home has in the market currently minus the amount of mortgage balance. It’s a great way to purchase a house and a fantastic monetary resource for your needs. The loans are considered as a great resource if you’re familiar with the facts to do with them. It is also a smart lending product. If you’re looking to improve or renovate your home, or pay off a debt, or purchase another house, or a new car, home equity loans are a great option to consider.

How they help with other debts

You can pay off the high interest rates, non tax-deductible debts or meet any other short term or long term needs through home equity loans. You can also use them to repair or reconstruct your house, or for educational or medical expenses. You can also get rid of debts on your credit card and more. Substituting one or more credit cards, or other debts with high interest rates using home loans has a lot of advantages. This helps you considering that the interest on this loans is subject to tax deduction, while the interest to be paid on debts on credit cards in not.

Equity loans can also be used as method of debt consolidation. Understanding and managing debts is crucial to well being and financial security. They must be used carefully though, like any other debt.

Interest rates

The Real Estate market may not be doing too well, yet the rates of interest charged on short-term equity loans is on the rise. This raises concerns among homeowners as they will find it very hard to repay the money they have borrowed for purchasing or improving their homes. However, these are still the most appealing option among homeowners who look to borrow money.

You will find that the interest rates while going for an equity loan are much lower than the traditional financing methods like personal loans and credit cards. This is the reason why almost all homeowners prefer equity loans over traditional financing. The interest rates are fixed and your home will be considered as security when you take a home loan, and your monthly payments are fixed as well. Equity lines, on the other hand, feature variable interest rates so your payments every month can either decrease or increase. This will be based on change in your principal balance.

It is important to remember that home equity loans cannot be secured by everyone. You must have a very good credit history in order to secure a loan. You can also take the help of brokers. They have a good idea about the market trends and also have contacts with the best lenders. They will advice you on the best deals and will help you make a proper decision when you’re in for a loan.

For more information on Home Equity Loans and Debt Consolidation, contact a mortgage specialist at Home Base Mortgages, Toronto, Canada. 

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