Financing With A Home Equity Loan
Written by: Joseph Kenny
If you have good credit, a homeowner, your mortgage is paid on
time every month and you are thinking about borrowing money, the
home equity route may be the way to go. What this allows is
suppose your home is worth substantially more than your current
mortgage, for example, your mortgage is for £100,000 but your
home is worth £200,000, you will have an equity of £100,000 in
the value of your home that you can borrow against.
A home equity loan can be used for many purposes:
-Paying off other debts; -Taking a holiday; -Paying for
The loan is secured over your home, and therefore, the interest
rate will generally be lower than for other types of credit that
may be available. This makes them a good option for paying off
higher interest debts, so long as you don't rack them up again,
or taking on a larger project such as a house extension. It is
often a good idea to use a home equity loan to renovate your
house, as the house value increases as a result, and often by
more than what you pay to renovate it. You can also receive a
tax credit on the interest paid on the loan.
However, it must be remembered that such loans are not
appropriate for everybody in every situation. They should
generally only be used for large projects of long term needs.
For smaller loans, it may be better to look at other options
such as personal loans. The rate and terms, as with all loans,
will vary depending on your payment history and the amount and
length of the loan.
The loan can be offered as a lump sum or as a credit line. The
lump sum gives you the whole amount of the loan all at once and
interest is payable on it immediately. With a credit line, you
only use the money as needed, up to an agreed maximum, and
interest only accrues on the amount you use.
You should always carefully review your finances before taking
on more debt, especially if it is to be secured on your home.
Using your home as security means that if repayments aren't made
on the loan, you could lose your house. It is therefore
important that you are comfortable with the amount you are
borrowing. You should also look at the differences in costs
between a lump sum and a line of credit and decide carefully
which one better suits your needs.
About the author:
Joseph Kenny writes for the loan comparison sites,
http://www.ukpersonalloanstore.co.uk and also
http://www.selectloans.co.uk. The latest loans are reviewed in
detail at the Loan Store.
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