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Home Equity Loans - A Big Benefit Or A Big Mistake?


When the bills are piling up and there doesn't seem to be any way out, a home equity loan can seem like the answer to your prayers. Home equity loans can also be a great way to jumpstart a business or investment portfolio. However it's important to realise that in some circumstances, a home equity loan may in fact make your life a whole lot worse.

A home equity loan is like a second mortgage on your home. If your home is currently worth $130,000, and you have a mortgage against it for $70,000, then you have $60,000 of equity available. Some home equity loans may allow you to borrow up to 80% of your home's value, others may go higher in special circumstances. In this example, you would be able to borrow another $34,000 as a home equity loan and still have only borrowed 80%.

Before making the decision to borrow more, though, it's important to sit down and really think about what you're doing. Firstly, and most importantly, why do you want the money? This is a really crucial part of your decision making. Many people use a home equity loan to fund necessary repairs to their home, or make improvements and so improve their home's value. In that situation, a home equity loan is a great idea, as the extra borrowings will most likely be offset by the increase in your home's value - as long as you can afford the extra repayments.

Borrowing to fund a business may also be a good use of home equity loan funds. It's important, though, not to put your money into a business without any track record, because you may well be throwing it away. Also, never use a home equity loan to try and resurrect a business that's losing money rapidly. You'll just end up with a bigger mortgage payment headache and nothing else. But if you have a business that is thriving and desperately needs some funds to expand, a home equity loan may well be the solution if banks aren't interested in giving you standard business finance.

Investing is another possible use of your home equity loan funds. Again, it's important to think carefully about what you plan to invest in. You could use the home equity loan as a deposit on an investment property. Or you could use it to be good quality shares. You may well regret it, though, if you buy the latest hot tip speculative share! Choose carefully and wisely, and a home equity loan can be a great way to start your investment portfolio.

Debt consolidation is another popular reason for taking out a home equity loan, and can be beneficial, but only if done wisely. There's no point increasing the debt on your home to clear your credit card debt, only to turn around and spend, spend, spend until all your cards are at their limits again. You need to close all of the cards as soon as they're paid off, or only keep one with a small limit for necessary purchases.

There are other reasons for a home equity loan which can make it a useful source of funds, but in these situations it's really important to be sure that you have no other options, and you can afford the repayments. These may include educational expenses, unexpected medical expenses or a family emergency.

There's also one reason that is very rarely a good reason to put your family home in further debt - big ticket items. Maybe it will feel really good to have that long vacation, or buy that expensive television and furniture, but ask yourself if it's really necessary or important. If spending the money on unnecessary things means that somewhere down the track you lose your home, you'll have paid for those things with a lot more than money.

If you think carefully about a home equity loan, and assess your reasons for borrowing more against the family home logically rather than emotionally, then you will be able to make a sensible choice. A final thought - always assess your ability to repay the loan based on reality and perhaps even "worst case scenario" values, rather than optimistic estimates of overtime at work or a promotion. That way you'll be able to make the payments and enjoy your family home for many more years to come.

Copyright Felicity Walker 2005

Investing and finance are two passions of the author. To find out more, check out http://www.homeequityloanzonecentral.com for more information.


MORE RESOURCES:
80% Of 2018 Mortgages Could Save Big With A Refinance, Data Suggests  Forbes

If your mortgage was originated in 2018, then it might be time to consider a refinance. According to new data, 80% of mortgages from last year carry an interest ...


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Have you been paying attention to mortgage rates? They're the lowest in years, and they've fallen so far in a relatively short time that it might make sense to ...


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Before you jump in and start the refinancing process, here are some questions you should plan to ask your mortgage lender. Ana Durrani, provided by.


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Column: Five Reasons To Refinance Your House And Four Reasons Not To  Greenwich Sentinel

By Cheryl MacCluskey. Cheryl MacCluskey. Home loan interest rates appear to be hitting new lows almost daily. As you would expect the question being asked ...


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The Fed meeting of September 18th is crunch day. The Federal Reserve must decide whether to cut bank rates, a decision which can mean lower rates for ...


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You've recently closed on your mortgage. But you see that mortgage interest rates have dropped. You're wondering: How soon can I refinance? Is it worth the ...


How a Mortgage Refinancing Wave Will Impact the Economy  Barron's

U.S. homeowners are among the unexpected beneficiaries of fears of slowing global growth that are contributing to a plunge in mortgage interest rates. A wave ...


As mortgage rates hit the 3s, a record 11.7 million homeowners have become refinance-eligible | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Mortgage rates have dropped to new lows, putting a record number of homeowners "in the money" to refinance and cut their rates by at least 0.75%, says a new ...


Mini refinance boom goes bust, as mortgage rates turn higher  CNBC

It didn't take much to end the party in the refinance market. A small tick higher in mortgage rates caused the sudden surge in refinances to retreat just as quickly.


Refinance your mortgage now or wait in a very, very long line  The Mortgage Reports

Refinance wait times are about to get very long. Lenders weren't prepared. Here's how to refinance without waiting 60 days or more.


3 Reasons Why Now Is The Best Time To Refinance Your Mortgage  Forbes

Right now is as good a time as you may find to refinance your mortgage, whether for your home or a commercial property. In a piece titled “5 Reasons 2019 Is ...


Stumped about refinancing? This refinance calculator makes it a no-brainer  The Mortgage Reports

Is now the time to refinance? One way to anser this question is to use a refinance calculator to see how much you can save.


Refinancing your student loans with SoFi could save you money — and even help you get a better mortgage rate  Business Insider

SoFi can help you refinance your student loans at a lower interest rate. And, since it offers a host of other products, you can better rates on loans.


Nearly 10 million homeowners could save $267 per month by refinancing  The Mortgage Reports

Refinance rates are so low that nearly 10 million people, conservatively, can save hundreds per month. Are you among those who could save?


People who bought homes in the past 2 years could see 'significant' savings by refinancing now  CNBC

The time is still right to refinance your mortgage, especially if you bought your home within the last two years, said Mortgage Bankers Association CEO Robert ...


Mortgage rates increase slightly, pumping the brakes on the refinance boom  MarketWatch

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Optimism about U.S.-China trade discussions sends mortgage rates higher  The Washington Post

After sinking to their lowest levels in nearly three years, mortgage rates popped back up this week. According to the latest data released Thursday by Freddie ...


Trump: 'Get our interest rates down to zero or less.' What that means for mortgage rates - Mortgage Rates & News  The Mortgage Reports

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Is it time to refi? Amid lower rates, lenders say homeowners are jumping to refinance  Allentown Morning Call

Mortgage bankers nationally and locally are reporting a jump in refinance applications as homeowners rush to take advantage of historically low mortgage ...


Mortgage rates today, September 11, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

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Average mortgage rates rose again yesterday, as we predicted. The increase wasn't as sharp as last Thursday's but it was still appreciable. Of course, rates are ...


Mortgage rates today, September 9, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates inched down on Friday, in line with our “unchanged or a little lower” prediction. That was a relief after Thursday's significant rise.


Slight increase in mortgage rates takes refi potential down a peg  National Mortgage News

A mere 7-basis-point increase in interest rates reduced what was a record-high number of borrowers with refinancing incentive by 2 million in a matter of days, ...


30-year mortgage rate falls to its lowest level in nearly three years  Washington Post

Economic uncertainty drove mortgage rates down, according to Freddie Mac data released Thursday, with the popular 30-year reaching its lowest level in nearly ...


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Average mortgage rates unexpectedly held steady yesterday. So you still have to go back to Aug. 13 to find as high a rate. Markets on Wednesday were pulled ...


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TOWN SQUARE | Because of a shorter loan term and a lower interest rate, on a $280000 loan amount, a borrower can save approximately $85000 in interest ...


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Mortgage rates today, August 19, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates inched down on Friday, defying our prediction. Mortgage News Daily explained it best, talking about the “weirdness” that has ...


Mortgage rates today, August 23, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates held steady yesterday, in line with our prediction. So they remain at their highest in more than a week. But they're still attractive, even by ...


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Apple cashes in on boom in debt refinancing. For Americans, especially homeowners, there's a message  CNBC

Blue-chip companies including Apple and Disney issued bonds this week in a $75 billion debt market stampede after big yield declines in August made debt ...


Mortgage rates today, August 26, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates moved lower on Friday, as we predicted. But the drop was only small, certainly compared with the turmoil seen in other markets.


Baton Rouge home mortgage lenders see refinancing surge  The Advocate

Lower interest rates that have the power to reduce house payments are triggering a surge in mortgage refinancing activity and giving real estate agents hope ...


The inverted yield curve is doing something weird to mortgage rates  CNBC

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Mortgage rates today, August 20, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates rose yesterday, as we predicted. But they increased only by the smallest measurable amount. And the rise should have been much ...


Mortgage rates today, August 27, 2019, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

Average mortgage rates held steady yesterday, in line with our prediction. Some lenders were very slightly lower and others higher by an equally insignificant ...


FHA sets limits on cash-out refinancing  Washington Post

TOWN SQUARE | Beginning Sept. 1, FHA borrowers will now be limited to cash-out refinancing a maximum of 80 percent of their home value, down from 85 ...


Opinion Ginnie Mae and the politics of prepayments  National Mortgage News

Since 2008, the U.S. mortgage industry has been buffeted by a great many changes and a lot of volatility and risk in the financial markets. The chief source of risk ...


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While many lenders lately managed their business expecting reduced volume, now they get to capitalize on extremely low mortgage rates. But today's ...


Near-Record Low Rates Trigger Refi Wave Among US Homeowners  pymnts.com

U.S. mortgage refinancing is on the uptick as fears about fluctuating global markets cause a drop in interest rates, the Financial Times reported Sunday (Aug.


Borrowers Should Think About All Options When Refinancing UPMs. - Refinancing Your Underlying Permanent Mortgage Like a Banker  Cooperator

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Are you living paycheck to paycheck? Are you weighed down each month making minimum payments each on credit cards, student loans, car loans or any other ...


Mortgage rates just had their worst week in 3 years CNBC  msnNOW

The average rate on the 30-year fixed is now 13 basis points higher than it was on Monday and 29 basis points higher than its last low on Sept. 4, according to ...


Cubs owners refinance Wrigley Field plaza, hotel  Crain's Chicago Business

The owners of the Chicago Cubs have locked up long-term financing on their massive redevelopment of the area outside Wrigley Field. A venture of the Ricketts ...


Doral Office Complex Secures $16M Refinancing Deal  GlobeSt.com

Berkadia arranged the 10-year refinance loan with full term interest only for the 185000-square-foot office park near Miami International Airport.


U.S. Mortgage-Refinancing Boom Wanes Even as 30-Year Rate Slides to 3-Year Low  TheStreet.com

Swings in global interest rates, partly a result of the U.S. trade tensions in China, appear to be holding back some would-be borrowers, a new report from the ...


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While the critical defect rate for closed mortgage loans fell on a quarter-to-quarter basis, there were increases in income and packaging-related deficiencies, ...


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Mortgage interest rates have been falling since May, especially sharply this month, so borrowers, especially millennials, are rushing to refinance. Refinance ...


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President Donald Trump is pushing the U.S. Federal Reserve to drop interest rates down to nothing—or even go negative—ahead of the Fed's meeting next ...


Personal Loan Calculator for Home Improvements  NerdWallet

Use our home improvement loan calculator to estimate monthly payments and total interest costs for a home improvement loan.


'Refinanceable' population swells to record high  Scotsman Guide News

The “refinanceable” population — the number of borrowers who could likely qualify for a refinance and save at least 75 basis points off their current loan by ...


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Mortgages rates hit a three-year low on Friday, August 2, when the average rate on a 30-year fixed mortgage hit 3.70%, the lowest they've been since November ...


Good time to refinance your mortgage?  Fox Business

The 30-year fixed mortgage rate recently reached its lowest levels since September 2017.


REAL ESTATE MATTERS: Follow the rules in divorce decree, or pay the price  Sarasota Herald-Tribune

Q: I got divorced about four years ago. The deed to the house was, and is, in my name alone, and has been from the time we bought it.During our marriage, we ...


'Now Is The Time To Refinance': Low Mortgage Rates Cause Surge In Refinancing  Forbes

Last week's massive dip in mortgage rates apparently pushed homeowners into action. According to new data from the Mortgage Bankers Association, ...


Mortgage rates haven’t been this low since 2016 — here’s how to decide whether to refinance your home loan  MarketWatch

More people are pursuing refinances as mortgage rates have dropped.


The 10 Best Mortgage Lenders in America (2019)  Wealthy Gorilla

If you're in the market for your first home or you're looking to refinance your existing one, then knowing which are the best mortgage lenders to use would be ...


Refinance mortgage rates: 10 steps to get the best deal | Mortgage Rates, Mortgage News and Strategy  The Mortgage Reports

How do you get the best refinance mortgage rates? Plan ahead and have a strategy. Here's how to do it in today's low-rate mortgage marketplace.


5 Signs It's Time To Refinance Your Mortgage  Forbes

You've probably heard that refinancing your mortgage can save you money. While that's true in many cases, refinancing needs be done at the right time in order ...


As mortgage rates plunge, should you refinance?  Fox Business

Nearly 6 million people can now cut their mortgage payments with refinancing.


If You Ever Want To Retire, Here's The Best Way To Refinance Your Mortgage  Forbes

The usual reasons to refinance are to reduce the monthly payment or to raise cash. The third option, which is under-appreciated, is to shorten the period of ...


Key questions to ask before you refinance your mortgage  Bankrate.com

While refinancing your home mortgage might sound like a good idea in theory, especially with interest rates falling, it may not always be possible for every ...


Refinance mortgage rate slides for Thursday  Bankrate.com

Refinance rates were mixed, but one key rate ticked downward. If you're shopping for a home loan, see what that means for you.


Is It a Good Idea to Refinance a Home?  Demotix.com

There are a few key reasons why someone would refinance a home loan, including:Attempting to get a lower interest rate. The first and most noteworthy motiva.


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WASHINGTON, Sept. 17, 2019 /PRNewswire/ -- As other parts of the economy begin to exhibit weakness, consumer spending – supported by continued worker ...


You could save hundreds of dollars per month by refinancing your home—here's how to do it  CNBC

With mortgage rates falling, borrowers are primed to save hundreds per month by refinancing. Here are six steps to follow to successfully refinance your home.


Refinance mortgage rates mixed for Wednesday  Bankrate.com

Refinance rates were mixed today. See what that means for your chances of getting a better mortgage rate.


Refinance rates ease for Friday  Bankrate.com

Several benchmark refinance rates slid lower today. If you're shopping for a home loan, see how your payments might be affected.


Nearly 6 million people can now cut their mortgage payments with refinancing  Bankrate.com

The recent drop in rates means that 5.9 million people can potentially save money by refinancing their existing home loans and securing a lower rate -- two ...


How to Refinance a Mortgage and When to Do It  TheStreet.com

Your mortgage can cost a lot of money over time. Here's how it might just cost a little less....BAC.


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How much do refinance rates need to drop before I refinance? Is the rule 1%, or should I refinance for just a 0.25% lower rate?


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Mortgage rates are near historic lows, but maybe you've heard that nagging voice, the one which says “wait just a little longer. Rates can drop lower.


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Mortgage rates are the lowest they've been since 2016. Does that mean it's time to refinance your home? Well... maybe.


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Interest rates are near historic lows, and one particular VA loan refinance option that is easy to qualify for can enable homeowners to save thousands on their ...


Refinance mortgage rate falls for Thursday  Bankrate.com

Refinance rates were mixed, but one key rate trended down. If you're shopping for a home loan, see what that means for you.


Mortgage rates are falling—here's how to tell if you could save money by refinancing  CNBC

As mortgage interest rates drop, homeowners could save hundreds per month by refinancing. However, it's not a smart financial decision for everyone.


Hersha Hospitality Refinances $300M Term Loan  Commercial Property Executive

Hersha Hospitality Trust has been taking advantage of the low-interest rate environment to refinance most of its debt, including the refinancing of a $300 million ...


Refinance mortgage rate moves higher for Monday  Bankrate.com

Refinance rates were mixed, but one key rate trended upward. See what that means for your refi.


Refinance mortgage rate eases for Thursday  Bankrate.com

Refinance rates were mixed, but one key rate slid lower. If you're shopping for a mortgage, see how your payments might be affected.


Mortgage refinance boom goes bust as rates shift higher  CNBC

A turnaround in interest rates turned borrowers back on their heels last week, deflating a quick boom in refinance demand.


As rates drop, mortgage refinancing surges but home purchase loans remain tepid  USA TODAY

Homeowners scramble to refinance mortgages as rates hit the lowest level in 17 months. But mortgage applications for home purchase rose just 0.5%.


How to get the best deal on your home mortgage refinance  cleveland.com

Mortgage rates may be rising but there's still room to refinance your home loan. You might have heard much said about the constant rise of interest rates over the ...


Refinance rates fall for Wednesday  Bankrate.com

Multiple benchmark refinance rates fell today. See what that means for your refi.


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