Home Equity Loans - Information and Advice

"Get the best home equity loans and save on interest expenses."

Home Equity Loans - Are They For You?

Home equity loans are often a better financial approach to accessing your capital than a straight mortgage refinance. They are simpler to obtain, require a lot less paperwork, and often have lower borrowing costs and fewer fees than refinancing your home loan.

In addition, the tax treatment of a home equity loan is very similar to your mortgage interest deduction.

The most common uses of the home equity loan are to pay for college tuition, consolidate your bills in to one convenient payment, do major home construction, purchase a car, boat or RV, or make investments.

Use your home equity loan for furnishing/remodeling your home, business, or get cash out for other purpose.
 

Cash Out Plans - Refinance vs Home Equity Loan

When you decide whether to do the cash out refinancing option, keep in mind that:

• You have to pay closing costs when you refinance your loan
• You don't have to pay closing costs for a home equity loan
• Closing costs can amount to hundreds, even thousands of dollars

If your current mortgage is at a lower interest rate than you could get now by refinancing, it's obviously better to get a home equity loan.

Private Mortgage Insurance

You'll have to pay private mortgage insurance if you end up borrowing more than 80 percent of your home's value. It might be cheaper to take out a home equity loan since that won't be counted against the 80% PMI threshold.

Paying off high-interest credit card debt

Paying a lower interest rate and taking a tax deduction is smart, but lengthening the time it would take to pay off the credit card debt may not be.

Why take 30 years to pay off credit card debt? You could wipe it out in five or 10 years using a shorter-term home equity loan.

Home equity loans programs may consist of minimum withdrawal requirements when you open your account or maximum withdrawal requirements after your account is opened. Gaining access to your credit line with checks, credit cards, or both may be possible with certain plans.

Many home equity plans set a fixed time of draw when you can make withdrawals from your account. You may be able to renew your credit line once the draw period expires.

Tax Advantage

Interest paid on your account may be tax deductible on the first $100,000 of home equity indebtedness and up to 100% of your home's value.

Always consult with a tax advisor regarding your particular situation.

Rate Comparison

It pays to check with several lenders for the lowest rate. Compare the annual percentage rate (APR), which indicates the cost of credit on a yearly basis.

Be aware that the advertised APR for home equity credit lines is based on interest alone.

For a true comparison of credit costs, compare other charges, such as points and closing costs, which will add to the cost of your refinancing a mortgage, but not necessarily to your home equity loan.

For more detailed information on all types of home equity loans, check out the E-Loan website.

Related Pages

Home Equity Loan Tax Advantages - Information about the tax advantages of home equity loans versus refinancing your mortgage. Tips on home equity line of credit borrowing.

Second Mortgages - Advice on second mortgages - Comparisons of three types of second mortgage loans - Tips about mortgages plus resources for mortgage rates and online applications.

Home Equity Line Of Credit - Discover the best ways to save big with a home equity line of credit, even with bad credit.

Home Improvement Loans - Save big with home improvement loans that are tax deductible - Use a home equity line of credit, home equity loan, or cash-out refinancing.
 

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