Home equity loans remain a preferred source of consumer credit. Home equity loans can give you a lump sum of cash at relatively low interest rates, along with certain tax advantages not available with other kinds of borrowing.
Some home equity loans come with low introductory rates and variable interest; others come with fixed rates. Some loans have balloon payments at the end of the term as a way to keep the monthly payments lower.
The Right Time For A Home Equity Loan A home equity loan makes financial sense when,
- You can pay off high-interest debts like credit cards, car loans or medical expenses with home equity refinancing that’s not subject to rising interest rates.
- There is enough equity built up in your house so you can borrow less than 80% of the home’s value. This means you won’t have to pay Private Mortgage Insurance.
- You won’t be moving anytime in the next few years. That way the loan expenses—closing costs, loan fees, discount points—on the new mortgage will be paid back cost-effectively.
- Interest rates are a percentage point or more below what you are currently paying on your mortgage.
you want the convenience of consolidating your bills into a single monthly payment with a fixed repayment term.
Anytime you get a loan using your principal residence to guarantee repayment, federal credit law gives you three days to reconsider a signed credit agreement and cancel the deal without penalty. This "right to rescind" is guaranteed by the Truth In Lending Act. You have until midnight of the third business day to cancel the credit transaction.
Published: 7/21/2007
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