Many people consider getting a home equity loan, but are not sure if it is beneficial to them to do so. That is why you need to know about the many advantages to getting this type of loan for your home.
First before learning about the advantages you need to understand exactly what this type of loan is. It is basically the amount that your home is worth on today’s market minus the amount that you still owe on your house to the mortgage lender.
In other words if your home is worth $100,000 and the balance that is left on your loan is $50,000 then your equity would be $50,000 which is the part of your home that you are the owner of free and clear.
Now that you know exactly what this type of loan is you need to know the many advantages to getting this loan. Below are the most important advantages you need to be aware of.
One: With this type of loan any interest that is paid is tax deductible just like your first interest is from the original mortgage loan.
Two: The rate for this loan can be lower than with other types of methods for borrowing money such as credit cards. The reason for this is because you are already using the property so there is a higher guarantee that the loan will be repaid on time.
Three: When you get this loan you will be able to get a much bigger source of money for important purchases that may need to be made. Some of the different purchases can include:
– College education
– Home improvement
– Medical emergency
– Other types of emergencies that may happen
Four: Improve finances – You have the option of consolidating your debts into one monthly payment when you get this type of loan. So you can get your finances back on track this lets you get rid of all the debts that have high interest rates.
One of the disadvantages you need to be aware of before getting this type of loan is that if you don’t make the monthly payments on this new loan you can very easily lose your home. So always be sure that making the payment is not a problem before getting this loan.
Now that you know the advantages of a home equity loan you can take time to decide if this type of loan is worth getting or not. Just don’t rush your decision because this is a huge decision to make. Instead do your homework and talk to your mortgage broker before making your final decision.