Total Equity Article

When You Need Funds, Don’t Forget about the Equity in Your Home

No matter how hard we work, and how much money we try to squirrel away for a rainy day, sooner or later we may end up facing a bad financial situation, often through no fault of our own. You could own your own home, and have a bright financial future, and then face losing it all thanks to divorce, illness, job loss, etc. When this happens, you have to act fast, or risk losing your credit rating that you have worked so hard to build, and even your home. In these situations, it is easy to overlook one source of money that could be right under your nose, the equity that you have in your home. A home equity loan could be the answer that you have been looking for, and could give you the funds that you need to get back in track.

When you own your own home, it typically appreciates in value on its own, but when you spend money on it over the years, doing repairs and upgrades, you significantly add to its value, building up equity. If you aren’t familiar with home equity, the equity you have is calculated based on the current market value of your home, minus any mortgage amounts that you owe. If you have a good credit rating, it is possible to find a lender who will be willing to lend you the full equity amount, which would allow you to payoff those outstanding debts, and give you the money you need to see you through the rough times. You can use the equity in your home as collateral to get the loan you need with a much better interest rate, a lower monthly payment, and longer repayment terms, which is all the better!

The interest rate on your home equity loan can directly influence your monthly payment amount, so you want to shop around for the lowest possible rate. Your interest rate is based on your credit rating, the amount of your equity versus the loan amount you are asking for, and the policies of the lender you are working with. The nice thing about home equity loans too is that they often have long repayment terms, in some instances up to 25 years, which will also help you get more affordable monthly payments.

It is important that you don’t take a home equity loan for frivolous spending, since you are risking your home for the money. Don’t use the money to purchase items that you don’t need, or to make changes to your home that aren’t necessary, and don’t borrow the money unless you are 100% sure you can afford to pay it back. You don’t want to lose your home because of a stupid mistake made on impulse. Make those payments on time religiously every month, and don’t allow anything to make you late on your payment. If you start putting off your home equity loan payments, you are playing a very risky game, one that you may not win!