Home Equity Line of Credit and Home Equity Loan

Homeownership can feel like a bit of a catch-22 at times. You work hard to pay down your mortgage and build equity in your property, but obtaining ready cash for things like remodeling projects, paying for college tuition or addressing unexpected expenses can be difficult. A home equity loan or a home equity line of credit can offer a more streamlined solution, but tapping that equity must be done carefully to make sure it makes financial sense and fits into your short- and long-term budget plans. More info empréstimo home equity

A traditional home equity loan is disbursed in one lump sum at closing and paid back in equal monthly payments over a fixed term, with principal and interest included. Like a traditional mortgage, the amount borrowed is secured by your home, and not all lenders will allow you to borrow more than the value of your house. If you miss your payments, the lender may take control of your home.

The drawbacks to a home equity loan, however, can be significant. Borrowers must keep in mind that this is additional debt that must be repaid, and it is easy to get into a revolving cycle of borrowing and repaying, with interest charged on the portion of the loan above the value of the home. It is also important to remember that if you move from your home, you will have to pay the loan back.

• Home Equity Loan vs. HELOC: Which Is Right for You?

Home equity loans can be used to address major goals or to pay off higher-interest debt, but it is important to shop around for rates and terms. Compare quotes from several lenders, and don’t forget to factor in closing costs. You may be able to find lenders that waive or reduce those fees or offer lower rates if you have good credit and a low debt-to-income ratio.