How to Decide to Take Out a Home Equity Loan

Home equity loans are any money real estate has accrued over the time you have owned the property. So how do you know when or if you should tap into that money? This will give you some quick and simple direction.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Mortgage statements
• Bank statements
• Income tax statements
• Appraisal
• Pay stub
• Computer
• Credit report

1. Consult your mortgage statements, appraisal, credit report and any tax assessments to determine if you have any equity in your home to borrow against. This will give you an approximate idea of the value of your home.
2. Know that mortgage lenders will offer much more than your actual equity, so consider borrowing less than what you are approved for. Find out what their requirements are ahead of time.
3. Decide what you will use the money for. A home equity loan is to be taken seriously, not a piggy bank for mad money or to add to your disposable income.
4. Look online for the best deals and rates, or shop your local mortgage broker. Try not to pay fees or points. Be sure your credit report is also up to date and in the best possible standing.
5. Home equity loans are paid back in installments. The time frame is anywhere from five to thirty years or more. Find out what your actual payment would be for the term of your choice.
6. These loans are good for home improvements, unforeseen expenses, emergencies, temporary job loss, home emergencies, possible car loans, and even college.
7. If you do not want an actual loan and just want the money to be there in case you need it, consider a home equity line of credit. This is money that you can draw on in the form of checks or a debit card. But be warned, there is often a minimum withdrawal amount such as $500.
8. If you need to improve your home so you can sell it, this is a great way to raise funds to do this.

Tips & Warnings

• Check with your present mortgage lender to see if you can get a special rate
• Consult your financial professionals as needed, as I am not one of those.
• Do not borrow more equity than you have built up, even if the bank allows this. This will cause you to be "upside down" in your mortgage.
• Do not borrow money for unsecured loans (loans and accounts without collateral such as credit cards, medical bills
• Know that taking out a home equity loan or line of credit will decrease your home's value to you.