Jaroldi Gonzalez from Money.com emailed me and wanted to collaborate this written article with Money.com to be published in our blog. Well written article, although it is from US side of border but good pointers even for my fellow Canadians.
Here is the outline of the full article.
The credit goes ro Money.com and to contact Jaroldi Gonzales, please vist her Linkedin: https://www.linkedin.com/in/jaroldi-gonzalez/
The Lowdown on Home Equity Loans
The most important thing to understand about a home equity loan is that a default on the loan means that you lose your home and will be forced out of it. Here are a few more helpful tips to help you understand home equity loans and if they are right for you.
HOME EQUITY LOANS: WHAT TO EXPECT
The good news is you can tap into your home equity by taking a home equity loan or opening up a home equity line of credit (HELOC). The bad news is you'll pay interest on the loan, and there are risks associated with taking equity out of your house. If you have a pressing financial need, it could make sense to accept those risks -- but be sure you know exactly what you're getting into.
One of the main benefits of taking out a home equity loan is that you can use the funds however you want. Also, since you’re using your home as collateral, interest rates tend to be much lower than those of unsecured debt, like personal loans and credit cards.
Some of the best uses for home equity loans include:
● Consolidate High-Interest Debt
● Home Renovations
● Refinance Another Loan
● Pay for Higher Education Expenses
When you apply for a home equity loan, there are five things lenders usually look at: your combined loan-to-value ratio (CLTV), debt-to-income ratio (DTI), credit score, available equity and proof of income.
And besides checking your CLTV, DTI, available equity and credit score, there are a few other things experts recommend you do, prior to applying for a home equity loan, like:
● Having everything in writing
● Not opening or closing any accounts just before applying for a loan.
Fixed rate home equity loans and lines of credit can be a great way to get much-needed cash at a reasonable interest rate. Your home could be an untapped financial resource that can help you make improvements, pay for large expenses or even just take a vacation.
Our best advice is to make sure you fully research and understand all of your options to determine your best course of action. Contact us to find out more!