Question : What are the benefits of a home equity loan?
What are some benefits of a home equity loan? How does it work? Whats a good interest rate for someone with OK credit? My is good, but my husbands is fair. We are planning on consolidating high interest cards and possibly using sometowards a newer vehicle.
- asked by cheerful2
All Answers:
Answer #1
A home equity loan or line of credit allows you toborrow money, using your home's equity ascollateral. Wait. Don't click to another page. Ifthe above paragraph seems like gibberish, you havesurfed to the right place. We will explain whathome equity is, what collateral is, how theseloans and lines of credit work, why people usethem, and what pitfalls to avoid.First, somedefinitions:Collateral is property that you pledgeas a guarantee that you will repay a debt. If youdon't repay the debt, the lender can take yourcollateral and sell it to get its money back. Witha home equity loan or line of credit, you pledgeyour home as collateral. You can lose the home andbe forced to move out if you don't repay thedebt.Equity is the difference between how much thehome is worth and how much you owe on the mortgage(or mortgages, if you have more than one on theproperty). A home equity loan (or line of credit)is a second mortgage that lets you turn equityinto cash, allowing you to spend it on homeimprovements, debt consolidation, collegeeducation or other expenses.Equity loans, lines ofcredit defined ... There are two types of homeequity debt: home equity loans and home equitylines of credit, also known as HELOCs. Both aresometimes referred to as second mortgages, becausethey are secured by your property, just like theoriginal, or primary, mortgage. Home equity loansand lines of credit usually are repaid in ashorter period than first mortgages. Mostcommonly, mortgages are set up to be repaid over30 years. Equity loans and lines of credit oftenhave a repayment period of 15 years, although itmight be as short as five and as long as 30 years.
- answered by Keith A
Answer #2
Home Equity Loans (HELOC) are a good idea for debtconsolidation. They are based around the currentequity in your home and your "loan to value"worth. Thus, you will also need an appraisal toprove current market value. There are initial feesinvolved with HELOC's, but many lenders will payfor those out of the loan money. Your best bet isto go to www.bankratemonitor.com to check outcurrent loans and interest rates. Some will behigher with points but less in interest, orvisa-versa so do some homework first for sure.Thegreat advantage to a HELOC is that unlike creditcards, you will be able to deduct the interest inyour tax return for 2007. If you have a creditrating 700+ that would be optional. If not, yourinterest rate will reflect a higher percentagebased on your credit history.You are wise to lookinto it. I currently have one and did the samething-paid my credit cards plus my school loan andsaved quite a bit in interest. My credit ratingis 765 and I was still only able to get 8% on theinterest. The rates just are not as good as theyused to be, but do your homework as I said.Goodluck!
- answered by Singthing
Answer #3
The rate will be somewhere between 7-8% right now.The main benefit is its tax deductibility. You'llbe able to finance high rate credit card debt at amuch lower rate and get a tax deduction. You alsobe able to spread the payments over a longerperiod of time. Home Equity Lines of Creditgenerally only require an interest only paymentwhile a home Equity loan is generally amortizedover 10 years. Just be careful, you're potentiallyspending your home's equity on frivolous items.
- answered by nickfromct
Answer #4
There are never any benefits of giving up what youhave saved, as in the equity or your actualownership portion of the home. While home equityloan is made against that portion or part of it,you may find your bank will offer a consolidationloan without tying up collateral in your home. Itall depends on debt to income ratio. If you havelow debt, bank is a good bet. If you are convincedyou need to follow through with using a part ofthe value of your home as in an equity loan, shoparound and get best interest rates and terms,especially no pre-payment penalty. Also, make sureyour mortgage and equity debt will not be morethan the cost of selling your home. A frankdiscussion with you personal banker will probablyoffer more options for planning and financing.
- answered by Joseph H
Answer #5
Many people use a home equity loan to pay off highinterest credit cards. It is a separate loan(like a second lien on your home). Basically youare taking the cash value out of your home (thedifference between what you owe and what your homeis worth). The benefit is that your home equityloan(HEL) interest rate is lower than your creditcard rate (ie most HEL will run you 7% vs 14-19%for your credit card). The down side is that youwill probably be paying on this loan for a verylong time. I think it is a good idea to use a HELto payoff high interest credit cards but to try topay off the loan as soon as possible. I wouldn'tuse it to buy a car. If you want a newer vehiclesave up the money. Good luck.
- answered by judybug
Answer #6
contact Fidelity Financial Group ask for Ken Stark1-888-892-1858 they have the best rates and can dowhat you want
- answered by Ken 22
Answer #7
i think that the below website will help you tofind the right solution
- answered by jack
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