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Why Should We Max Out Our Home's Equity

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					A 100% home equity loan can free up your cash at a low interest rate.
While favorable rates and tax benefits make this option look good,
consider your own financial situation first. Asking yourself the
following questions will give you a better idea of how much a 100% home
equity loan can help you.

How Cheap Is Your Loan?

Is the APR on your prospective home equity loan better than what you can
find for a personal loan or a credit card? Chances are that home equity
loan rates are better. If you don’t know, take the time to research rates
now. Lenders will post their APR online or you can receive an emailed
quote in minutes.

When you take out more than 80% of your home’s value, you can’t qualify
for the lowest rate. This can still be cheaper than other types of
financing though. Another factor in your loan’s cost in the tax
advantage, which you don’t receive with credit cards or personal loans.

How Will You Financially Benefit From Your Loan?

Are you planning to pay off high interest debt or go furniture shopping?
Tapping into all of your home equity makes sense if you see immediate
financial improvement. For purchases that don’t appreciate, save up for
the purchase.

Using all of your equity takes away a financial cushion that you can use
in an emergency. If you have no other cash reserves, it is best to use
another type of credit or only part your equity.

When Do You Plan To Move?

Another factor to consider is when you plan to move. By drawing on all of
your home equity now, you won’t receive much from selling your home in a
year or two. After a couple of years of paying back your principal and of
your home appreciating with the market, you will have enough equity built
up to receive something when you sell.

Maxing out your home equity is best for cases where you can see immediate
financial gain. Otherwise, keep at least a part of your home’s value for
future financial needs. And always check with several lenders to be sure
you are getting the best deal, no matter what type of loan you choose.

				
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posted:7/22/2011
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