There is no debate that the availability of home equity loans is a highly valuable option for home owners in need of extra funds. The fact that a mortgage has been paid consistently for a number of years, and that the market value of the property has increased, means that there is equity available to cash in on.
Turning equity from your home into money that can alleviate financial pressures elsewhere is a logical option, especially when those pressures relate to family health, education and long term security, like paying hospital bills, paying college fees or making another nest egg investment.
The fact is, loans based on home equity are about as safe as anyone can get, with property always considered to be a reliable basis for providing a loan. After all, property appreciates in value, while so many other assets actually depreciates.
However, it is worth keeping in mind that home equity loans are not always the best choice, and if they are chosen, there are factors to be considered, not least the actual form in which the funds are made available.
Home Equity Forms
The first thing to consider is whether or not cashing in on the equity from your home is such a viable idea. There needs to be a clear value between the market value of a home and the balance left on the mortgage.
For example, a home worth USD200,000 with a mortgage balance of USD180,000 will only secure a home equity loan of USD20,000, whereas a balance of USD100,000 will secure a loan of USD100,000. Getting a loan too early will mean a true advantage is missed.
If the latter is the case, then clearly the home owner can gain considerably. However, there are two ways in which the additional fund can be accessed. It is commonly believed that loans based on home equity are available in one lump sum, like a normal loan. However, it is also possible to open a line of credit and to access smaller sums whenever they are needed. This makes it possible to use the equity loan to cover a range of smaller expenses over a prolonged period of time.
The Hidden Charges
When applying for home equity loans, there is a lengthy list of expenses associated with the process that many people are surprised to discover. Just as it is necessary to have property valued and attorneys involved when getting a mortgage, it is necessary to use professional services and face the fees that they charge.
Accessing equity from your home is no cheap process, with administration and lawyer fees to pay, pushing up the cost of getting the loan in the first place.
Get Professional Advice
With all of these factors to contend with, it is advisable to consult experts in home equity loans before signing any loan agreement. Getting loans based on home equity cannot be considered a straightforward transaction, and the value of the money involved means that it should be treated as the major investment that it is.
Without doubt, accessing the equity from your home can provide the financial relief that is truly needed, or can provide the means to invest in the future. Those factors alone can make the decision easy, but it is always worth knowing the facts.