Maximize Your Home Equity – Part II: Home Equity Loan
In our last article we discussed the advantages of home equity lines of credit. This week we will discuss home equity loans.
As explained in Part I, home equity is established as principle payments are applied to the home’s first mortgage. Using home equity is one of the least expensive ways to borrow money and may even be tax deductible (check with your tax advisor for eligibility). You can use equity to pay for things like home improvement, major purchases, college tuition, unexpected health expenses, or debt consolidation.
What is a Fixed-Rate Home Equity Loan?
Fixed-Rate Home Equity Loans consists of a lump sum disbursement at closing. These loans require a fixed monthly principal and interest payment set for a predetermined time period also known as the term. These loans feature low fixed rates and offer multiple repayment terms. The amount you are allowed to borrow is similar to a home equity line which is determined by a number of factors. Those factors being, your income, outstanding debt, home value, credit history, and home mortgage balance.
Advantages of the Fixed-Rate Home Equity Loan
A fixed-rate home equity loan is perfect for a large one-time purchase or to consolidate a debt. Here are a few advantages to using equity this way:
- Fixed, low interest rate
- Payment predictability knowing that your payment is fixed for the entire term of the loan.
It’s important to choose the right option for your situation. Start by getting your home appraised or use your Real Estate Tax Assessed Value. For advice from a local community based expert, contact us at Saver’s Bank. We would love to help you through the process and answer any questions you might have.