Financing With A Home Equity Loan (PDF download)

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					Title:
Financing With A Home Equity Loan


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421


Summary:
If you have good credit, a homeowner, your mortgage is paid on time every month and you are thinking
about borrowing money, the home equity route may be the way to go.



Keywords:
Loan, Equity Loans, Finance, Credit, Mortgage, Secured Loan, Debts, Personal Loans



Article Body:
If you have good credit, a homeowner, your mortgage is paid on time every month and you are thinking
about borrowing money, the home equity route may be the way to go. What this allows is suppose your
home is worth substantially more than your current mortgage, for example, your mortgage is for £100,000
but your home is worth £200,000, you will have an equity of £100,000 in the value of your home that you
can borrow against.


<b>A home equity loan can be used for many purposes:</b>


<li>Paying off other debts;
<li>Taking a holiday;
<li>Paying for university;


The loan is secured over your home, and therefore, the interest rate will generally be lower than for other
types of credit that may be available. This makes them a good option for paying off higher interest debts, so
long as you don’t rack them up again, or taking on a larger project such as a house extension. It is often a
good idea to use a home equity loan to renovate your house, as the house value increases as a result, and
often by more than what you pay to renovate it. You can also receive a tax credit on the interest paid on the
loan.


However, it must be remembered that such loans are not appropriate for everybody in every situation. They
should generally only be used for large projects of long term needs. For smaller loans, it may be better to
look at other options such as personal loans. The rate and terms, as with all loans, will vary depending on
your payment history and the amount and length of the loan.


The loan can be offered as a lump sum or as a credit line. The lump sum gives you the whole amount of the
loan all at once and interest is payable on it immediately. With a credit line, you only use the money as
needed, up to an agreed maximum, and interest only accrues on the amount you use.


You should always carefully <b>review your finances</b> before taking on more debt, especially if it is to
be secured on your home. Using your home as security means that if repayments aren’t made on the loan,
you could lose your house. It is therefore important that you are comfortable with the amount you are
borrowing. You should also look at the differences in costs between a lump sum and a line of credit and
decide carefully which one better suits your needs.




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