Many people own homes and never consider the possibilities of using equity to add value to their life in other areas. The fear of taking on new debt always looms large in the minds of anyone who is struggling with the uncertainty of today’s economy. However, using equity in the form of a fixed rate second mortgage on your home doesn’t have to be the risk it is perceived to be.
- A second mortgage is also referred to as a home equity loan or line of credit. Just like your first mortgage, your second mortgage is also tied to your home, so if you don’t pay it back the lender can take your home.
- Second mortgages are popular right now because interest rates are low while home values are rising. Using equity is also tax deductible unlike other loans.
- The biggest advantage of using equity is that it might provide you with a lot of money to use however you choose.
- The main disadvantage of fixed rate second mortgages is that they are tied to your home, and you might have to make a significant down payment, which are between 3-6% of the entire loan. If your credit score isn’t good the interest rates won’t be either.
Money To Use As You Please
If you have been paying off a mortgage for a number of years you have built up quite a bit of equity. This money is technically yours to do with as you please provided you secure it to a second mortgage. Many people use this money to reinvest in their home or for home repairs. One good idea is to make “green” improvements, which can add value to your home and also reduce your yearly taxes. Some people send themselves or their children to college or higher education. Deciding what you will do with the money has everything to do with what type of loan you wish to have.
Home Equity Line Of Credit?
By paying a fixed rate mortgage throughout your child’s development you have built up about a decade or two worth of equity. A home equity line of credit could be the perfect type of loan to help boost your income and pay for those yearly tuition payments. Perhaps you have expensive medical procedures or medication coming up over the next few months or years. Credit Equity can do the same for you here too. A heloc loan is a tax-deductible line of credit that works like a credit card. You take out money whenever you need it for a set period of time and pay it back with interest.
A Lump Sum Of Money?
A home equity loan is basically borrowing a lump sum of money at one time, which will be paid back at a certain date as negotiated with your lender. These are typically used to help fund a home improvement project or any time you might need a chunk of cash for an emergency. It is not recommended to use equity to fund frivolous things such as a vacation or fancy boat because it is tied to your home and you could stand to lose it all.
If you have been paying fixed rate mortgages your whole life and have a need for some cash that is tax deductible you should really consider using your homes equity. If you are smart with the money it can be an excellent investment opportunity. Visit www.real-estate-yogi.com to learn more about home equity credit and loans. Call them to speak with a representative at 1-800-987-1397.