HOW MUCH? - home equity loan

Home equity loans can save tax money.

   
 

A home equity loan is a mortgage.

Home equity loans are essentially second mortgages and even people with low credit scores can be approved for an equity loan.

It is secured by the equity already accumulated in a property. Home equity loans are used to pay for home improvements, like adding additional bedrooms and remodeling kitchens or bathrooms. Equity loans can also be used to finance projects that increase the value of the home, such as building a pool, a guest-house or doing landscaping. Home owners with substantially large equity accumulated in their homes can use those loans to pay off cars, credit card debt or to consolidate different types of high interest debts into one loan. Those who have only some equity in their homes can still get equity loans, assuming that they have no major credit problems.

Home equity loans can save on taxes.

In most states, home equity loan interest is tax deductible, usually up to $100,000. Even paying off low interest debt (student loans for example) with a home equity loan can save a lot of money on taxes over the years.

Borrowing up to 125% of the home value.

In the last few years, home values in many parts of the country have increased dramatically and home equity loans have become a growing and very lucrative business for banks. Both competition between lenders and fast appreciation of real estate values have created conditions allowing most home owners to obtain an equity loan in the amount larger than the market value of the property. However, how big the equity loan can be depends on the following factors:

Home Equity Loan
© iStockphoto.com - MCorto

  • the state where the property is located (in some states loans cannot exceed the home value).
  • credit score.
  • purpose of the loan.

Home equity loans and balloon payments.

A balloon payment is a term describing a substantially larger last payment in relation to monthly payments. Some lenders include a balloon payment in their home equity loans, which should be called a “one lump-sum payment.” It can exceed the periodic payment by 20-30 times or more. It is best to avoid a balloon payment and get a home equity loan with the same payments for the entire life of the loan.

See also: mortgage fees, home buying, home refinancing, equity loans, comparing home loans, home loan shopping, why refinance
homeowner insurance, PMI

Related topics: home equity loan tax savings

 

 

 

Site Map | About Us | Legal Disclaimer & Privacy Policy | Related Links | Contact Us
How Much?
Copyright © 2005-2015 www.HowMuchAnswers.com

Cookies Policy: This site uses cookies from Google to deliver its services, to personalize ads and to analyze traffic. Information about your use of this site is shared with Google. By using this site, you agree to its use of cookies. Learn More