Home Equity Loans - the smart choice for home owners
Written by: Karin Boode
There are several loan products available in the market place.
The amount of money that you are looking to borrow, your
personal circumstances and how much you can afford to pay on a
monthly basis dictate what loan type will be best for you. If
you own a home and you need to borrow a larger sum of money, a
home equity loan seems to be the way to go. There are
considerable benefits to this type of loan, provided you have
the equity in your home to cover your loan.
Your home equity is the market value of the property minus any
outstanding mortgage or other loans secured upon it. The balance
is the equity, and with home equity loans you can borrow against
this equity. Over the last few years property prices have risen
substantially. As a result, homeowners have seen their equity
rise also. This equity can be used as collateral to borrow money
when the need arises.
What it comes down to, is that a home equity loan permits the
home owner to use the added value of the house without having to
sell up or move. The security of the equity makes it possible to
borrow more money than would be possible with an unsecured loan.
The loan can oftentimes be spread out over longer periods of
time, and as a result the monthly payments are more reasonable.
Be careful, not to spread out the loan too much. If the value of
your property goes down during the time of the loan, you loose
equity and your loan is no longer fully secured. This could
potentially cause problems if you need to repay your loan and/or
you are selling your house. The sale of the property may no
longer be enough to repay your home equity loan. The balance of
the debt needs to be repaid with other means and that could
potentially be a problem. Another benefit of a secured loan is
the fact that interest rates are lower, as the risk for the
lender is less. This, obviously, results in even less monthly
payments. Or, if so desired, you can borrow more money without
paying more on a monthly basis. In both cases you come out the
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