reasons for home equity loan

home equity loans can be a great way to get much-needed cash at a reasonable interest rate, but they can also get you into trouble if used the wrong way. In fact, misuse of home equity lending was one.

A home equity line will usually have a lower initial rate than a home equity loan, but the HELOC’s payment can fluctuate, whereas the home equity loan payment is fixed. Home equity loans do have formal closings and the associated closing costs, while HELOCs do not have a formal closing, so the initial expenses are lower.

5 Good Reasons to Tap Your Home Equity. Liz Weston.. If repayment would take you five years or more, consider other options including locking in a fixed rate with a home equity loan instead. 2.

A home equity loan is a financial product that allows you to borrow against the value of your home. You’re able to receive in cash a portion of your home’s equity, or the difference between the amount owed on your mortgage and your home’s market value.

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A Home Equity Loan can give you a Pool of Cash for Investing. Investing is an acceptable but less popular reason to apply for a home equity loan. You can borrow against the equity of your home at a low rate and then use that money to invest. Obviously, this is only recommended for those with experience, knowledge and a proven track record.

However, the interest on a home equity loan is just one of the costs involved with taking out a home equity loan. home equity loan fees may be similar or identical to the fees you paid for your original mortgage. You should expect to pay about 2% to 5% of the loan amount in fees and closing costs.

As you figure out how much you need to borrow, one loan program may outweigh the other. If you’re sure about a set amount you need, along with looking for a fixed interest rate, then a home equity.

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Your home is not just a place to live, and it’s not just an investment. It also can be a source of ready cash should you need it through refinancing or a home equity loan. Refinancing pays off.