Home Equity Loan

1. The two main types of home equity loans are second mortgages and home equity lines of credit.

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.

2. Home equity loans offer significant tax savings.

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.

3. To make an educated decision, you should compare several loan opportunities.

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.

4. If you fail to pay your home equity loan, you can lose your home.

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.

5. Decisions about home equity require good judgment which is natural only to some.

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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