Arbor Financial Group Marketing Engines, Inc.

I Need Cash From My Home

Are you tapped out? Looking for a source of cash? A home equity loan, which is also called a second mortgage, can allow you to borrow money against the value of your home. Typically, you can borrow up to a hundred thousand dollars, and even decut the interest on our tax return.

There are two types of home equity loans - fixed rate, and lines of credit. Both range from 5-15 years. If you sell the home, though, you have to repay the loan in full.

Fixed-rate Loans

A fixed-rate loan gives you a lump sum payment, which you'll repay over a specified length of time, at an approved rate of interest. The interest rate and the payment will be fixed over the life of the loan.

Lines of Credit

A line of credit is a variable-rate loan. It works a lot like a credit card, in that you get pre-approved to a certain amount of money that you can spend, and you can take out money against that line of credit. The term is fixed, and when the term comes to an end, you must repay the loan in full.

Benefits

A home equity loan gives you easy cash. The interest rate is higher than it is on your mortgage, but lower than it would be on a credit card or other type of loan. Often, people take out home equity loans to pay off credit card debt. A home equity loan gives you easy cash. The interest rate is higher than it is on your mortgage, but lower than it would be on a credit card or other type of loan. Often, people take out home equity loans or second mortgage to pay off credit card debt.

Home equity loans also work for lenders - they earn interest on the borrower's initial mortgage, and then they earn even more in fees and interest. In the event that the borrower should default, the lender keeps anything that was earned on the equity loan, and the interest loan, and also gets to repossess the property, thereby beginning the cycle all over again with the next borrower. Hard to beat that.

How Can a Home Equity Loan Work for You?

If you're a responsible borrower with a good source of income and a high likelihood of repaying the loan, then you benefit from a low rate of interest, and tax benefits. You can use a home equity loan or a second mortgage to cover repairs on your home, education, or almost anything. However, there are pitfalls - a home equity loan can seem like an easy way out if you've fallen into a pattern of excessive spending. The trouble is that you can reload - keep on taking out loan after loan to indemnify yourself against really bad spending habits. Maybe you should consider credit counseling?

If you're thinking about taking out a second mortgage that could result in you owing more than your home is worth, you really should consider whether you're just living beyond your means. Fixing up your home is one thing. But you don't want to use it to splurge. Think about your financial situation before you borrow against your home equity, and make sure that you can make the payments without compromising other financial obligations.