If you want to use the equity in your home to make large ticket item purchases such as home repair, and addition to the home, college tuition, or even debt consolidation then you may want to consider a home equity loan.
These terms can range from 15 to 20 years depending on the financial institution. When you get an equity loan you have predictability because you know that your payments are going to be the same each and every month. So your rates and payments stay the same throughout the entire loan. Once you reach the end of your term, provided you have made all of your payments your loan is paid in full. In most cases you can use at least 80 percent of your homes value.
As far as determining your tax advantages it is always a good idea to speak with a tax advisor to see exactly what is permissible.
Generally the rates are lower than what you normally receive on your credit card therefore using this loan to consolidate can make sense. The rates you receive can depend of several factors such as loan-to-value ratio, loan amount, and closing costs, these terms can vary from bank to bank. Since you are using the equity in your home you do have a three day rescission period which gives you a chance to think it over and change your mind if you chose to do so.
Normally the types of properties you can use are single family residence, townhouse, condominium, vacation home, and investment properties, but this can also vary depending upon the state you live in. There may be some exceptions for the states of Alaska, Arkansas, Texas, West Virginia, Hawaii, and South Carolina.
The terms you receive can range from 5, 10, 15 and 20 years and again can vary with the financial institution.
Whenever you are using the equity in your home to get a loan you are in fact having a lien placed against your property. This lien is the protection the lender has in case you don’t pay or default on your loan. The lender can always start foreclosure proceedings to retrieve the amount of money they have extended to you.
Another thing to note is when you pay off the loan it is a good idea to contact the financial institution that gave you the loan and ask them to have the lien removed from your property. There have been situations where loans have been paid off for years and the lien remained on a customers property This can get complicated a little later if your original company or bank is purchased by another mortgage company, bank or financial institution. Trying to track someone down to release that lien can sometimes be time consuming and this is a situation you may want to avoid especially if you are selling your home and time is of the essence.