Just like owning a home is one of the best things you can do to improve and stabilize your long-term finances, drawing on its equity can help you access considerable amounts of money. A home is more than a physical shelter for you and your family: it also provides financial protection.
However, you need to be judicious and careful. Here are some of the pros and cons of taking out a home equity loan or HELOC.
Pro: Low-Interest Rates
Probably nothing reassures lenders more than seeing that the person borrowing money is willing to use their home as collateral. Property is extremely valuable, and if someone is willing to stake a loan against their home, lenders offer preferential rates.
First, an independent assessor from the lending institution will determine your home’s current market value. The higher this is, and the longer you’ve owned the home, the better terms you’ll get.
Pro: Quick Approval
If your basement floods or your roof springs a leak, you can’t just sit there while the water pours, in trying to get approved for a loan to cover the cost of repairs. If you get home equity loans online or a HELOC, it’s probably the fastest way to access significant sums of cash.
Make sure you speak to experienced, award-winning mortgage brokers accredited by the Better Business Bureau. Leading brokers can help anybody, no matter their level of income, credit, or debt.
Pro: Debt Consolidation
Life comes with many different expenses, and sometimes the number of debts, not just the amount owed, can be hard to track. When payments slip through the cracks, they only grow in size.
People take out a second mortgage to tap into their home’s equity to stabilize their finances by consolidating multiple loans into one monthly payment. You can save thousands of dollars annually and rebuild your credit if you leverage your home the right way.
Leading mortgage brokers can walk you through all your options and offer flexible payment structures. Whatever your life and career goals, a mortgage broker can help you find the financial path that leads you forward.
Con: Steep Consequences for Non-Payments
If you take out a HELOC or home equity loan and fail to make repayments, the consequences can be stiff. Tying your home to the loan helps get much better borrowing terms and speeds up the process, but you must meet the payments, or it can backfire, and you can lose your home.
While you’re free to use the money you borrow however, you’d like, experts tend to recommend using them to reinvest in the asset you’re borrowing against. If you buy a new car or take a luxury vacation, you’ll have to pay the borrowing costs and the price of these things.
If you invest the borrowed money back into the asset you’re leveraging, it will rise in value, thereby covering and maybe even exceeding the borrowing costs.
Homeownership comes with major responsibilities and perks. Speak to a mortgage broker near you to get personalized advice that improves your finances.
