Home Equity Loan
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1. The two main types of home equity loans are second mortgages and home equity lines of credit. |
True
Second mortgages, or traditional home equity financing, are fixed lump sums of money offered immediately to the requestor. They are repayable over a fixed period of time. A home equity line of credit is a form of revolving credit that is secured by the home with a set maximum credit limit. |
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2. Home equity loans offer significant tax savings. |
True
The interest paid on this type of financing is tax deductible. If a borrower consolidates credit card debt, which is not deductible, into a single home equity loan, the interest paid is transformed into deductible interest. It is best to contact a financial advisor or tax professional to get the most tax benefit available for a home owner borrower. |
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3. To make an educated decision, you should compare several loan opportunities. |
True
Consumers should shop around for the best home equity loan terms. Credit unions, banks, savings and loans, or mortgage companies can assist you with programs that a borrower may qualify for. The Internet is also a great tool to use to research and find a variety of financial lending institutions. |
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4. If you fail to pay your home equity loan, you can lose your home. |
True
Financing secured by a home transfers the unsecured debt to secured debt, so failure to pay can result in the foreclosure and loss of a home. Therefore, such financing is great for those in an emergency or for those having financial problems. |
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5. Decisions about home equity require good judgment which is natural only to some. |
False
While good judgment is required to make home equity decisions, the Bible shows us that we can ask for good judgment in Psalm 119:66 - "Teach me good judgment and knowledge: for I have believed thy commandments." |
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