2 Thoughts on what are the pro and cons for home equity loan?
  1. Reply
    July 31, 2013 at 3:42 am

    Home Equity Loans Pros and Cons

    So what are really the home equity loans pros and cons. The definite number of pros is equated evenly with its cons. But it is more favorable to be aware of all the cons before venturing what home equity loans can do for you.

    Losing your Homes

    The most dreadful circumstance is losing your homes. And losing your home this way is the most dreadful if not embarrassing. Your insurance won’t be triggered this way and some home equity loan plans include all the furnishings on the time of the survey.

    Facts about foreclosure are real. They happen. In fact high foreclosure rates happen on Georgia, Nevada and Colorado. One out of every 422 households is in primary stages of foreclosure in Georgia, 1,795 properties entering foreclosure in Nevada, 3,747 properties in Colorado. This is because of home equity plans gone awry. The most common culprit? Lost jobs.

    Endless Debt Cycle

    It’s easy to spend for everything you need when you have money; or rather when an accessible means is readily available. It could happen in a fixed rate home equity plan, but most victims are line of credit types home equity plans. Why? When you have a ready check available, you tend to dispense it faster than you could count your receipts. The outcome is endless piles of bills, coupled with your mortgage, PLUS your home equity charges. So you draw more amounts from the home equity loan to offset your existing bills, digging yourself deeper into debt.

    In the home equity loans pros and cons, I’d like to point out that the cons should be highlighted always. Learn about the cons before committing something as valuable as your property. If you have mastered the art of cautious spending, the home equity option will be your best friend yet.

  2. Reply
    July 31, 2013 at 3:49 am

    A loan based on the amount of equity a homeowner has in the property. The interest paid on a home equity loan is usually deductible. Unlike a home equity line of credit (HELOC), the home equity loan features a fixed rate, payment and term, usually five to 15 years.

    If you don’t repay the debt, the lender can take your collateral and sell it to get its money back. With a home equity loan or line of credit, you pledge your home as collateral. You can lose the home and be forced to move out if you don’t repay the debt.
    There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are sometimes referred to as second mortgages, because they are secured by your property, just like the original, or primary, mortgage.

    Home equity loans and lines of credit usually are repaid in a shorter period than first mortgages. Most commonly, mortgages are set up to be repaid over 30 years. Equity loans and lines of credit often have a repayment period of 15 years, although it might be as short as five and as long as 30 years
    A home equity line of credit, or HELOC, works more like a credit card because it has a revolving balance. A HELOC allows you to borrow up to a certain amount for the life of the loan — a time limit set by the lender. During that time, you can withdraw money as you need it. As you pay off the principal, you can use the credit again, like a credit card.

    A HELOC gives you more flexibility than a fixed-rate home equity loan. It also is possible to remain in debt with a home equity loan, paying only interest and not paying down principal.

    A line of credit has a variable interest rate that fluctuates over the life of the loan. Payments vary depending on the interest rate, the amount owed and whether the credit line is in the draw period or the repayment period.

    During the equity line’s draw period, you can borrow against it and the minimum monthly payments cover only the interest, although you can elect to pay principal.

    During the repayment period, you can’t add new debt and must repay the balance over the remaining life of the loan.

    The draw period often is five or 10 years, and the repayment period typically is 10 or 15 years. Those are generalizations, and each lender can set its own draw and repayment periods. Lenders have been known to have draw periods of nine years, six months, and repayment periods of 20 years

    With either a home equity loan or a line of credit, you have to pay off the balance when you sell the house

    If you or anyone you know needs advice or quotes on this type of loan please feel free to email me.

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