Home Equity line of credit loan

Is a Home Equity Loan Right for You?

A home equity loan is something alluring for many people, especially when they have expenses to deal with. Sometimes, taking out a loan can only do worse, as you know that you’ll have to face the challenge of monthly installments. But if you’re a homeowner, you have the chance to take an equity loan, which is very tempting.

Home equity loans are like a second mortgage, and they can work amazingly as long as you’ve built enough equity. But is this really the right option for you? Are you wanting to know how to invest in real estate using a home equity loan?

It Has Lower Rates

One of the reasons why people are put off by other types of loans is represented by the high interest rates. Like it wasn’t already enough that you’ll be in debt for years to come, you’d also have to handle the interest rate.

This is what makes the home equity loan so convenient in this regard. Rates are much lower, so you would be able to afford them. Most times, these rates will be below those of payday loans, credit cards or anything of the sort.

It’s Flexible

The great thing when it comes to a home equity loan is its flexibility. Unlike other loans that are only offered to you for specific purposes, equity loans are different. They can be used for pretty much any purpose, so whether you want to go on a vacation or your house is in desperate need of reparations, the loan can help you out.

You Get Larger Funds

Home equity loans are offered depending on the equity you build. Of course, the market value of the house at that moment is also relevant, but you can help increase the amount if you know how. If you make big down payments, renovate your home or pay off more than you need to, you have great chances of increasing the home equity loan amount in case you’ll need it.

Mortgage refinance calculator pros and cons
Related Article: Mortgage Refinance Calculator | Pros & Cons of Refinancing Your Mortgage

You’ll Have an Additional Debt

Sure, the loan can help you big time, and you’ll be very happy to have some extra money. But the problem with home equity loans is the fact that you’ll have one additional debt to deal with. Although it has favorable interest rates, it doesn’t change the fact that it’s still debt, and it may interfere with your budget in the future.

You May Lose Your Home

If you are unable to pay off the loan, things can get worse. Basically, your house will serve as a collateral guarantee to the loan. This means that if you won’t be able to pay it off when required, or you fail to make a lot of payments, you can be left homeless. This is why you must be sure you’ll be able to handle the responsibility before you take out the loan.

Final Thoughts

Home equity loans can be great for those who really need them for various reasons, and if you’re able to afford it and deal with the payments, it’s not a problem. But if you think the debt will be hard to manage, then a home equity loan may not be right for you, as you’d take a lot of risks.

Mortgage refinance calculator pros and cons

Mortgage Refinance Calculator – Pros & Cons of Refinancing Your Mortgage

Pros & Cons of Refinancing Your Mortgage

Many people with mortgages are taking refinancing into consideration. Whether they’re out of money and need to find ways to decrease their debt, or simply want to get rid of it much earlier, mortgage refinancing is a concept that can make this possible.

Simply put, mortgage refinancing is a new loan that you take in order to replace the already existing one. You hear your neighbors and colleagues at work talking about the advantages it packs, but is it really that perfect, or does it have its flaws as well? There is nothing that is entirely perfect and, as you can imagine, there are downsides to mortgage refinancing as well.

Our Excel Mortgage Calculator can also help you determine if it’s right for you. So, let’s examine the pros and cons of this concept and determine whether you should consider it or not.

Pros of Refinancing Your Mortgage

  • Lower Monthly Payment

By refinancing your mortgage, you’re lengthening the term of your loan. Although this doesn’t sound dreamy, you’ll have more money to save each month, and less money to spend paying off installments. In other words, affordability will increase. It’s better to check a mortgage refinance calculator and see whether this option will work for you.

  • Lower Interest Rate

The interest rate is one of the main reasons why people consider refinancing their mortgage. When the loan repayment is already high enough for you, the last thing you want is to deal with a high interest rate too. Through refinancing, you have chances to lower not only the interest rate but also the actual mortgage payment.

  • You Might Get Cash Back through Equity

If you’re the happy owner of a home with lots of equity, then you are lucky. By refinancing your mortgage, you may even get back some of the money if the equity is enough. Therefore, you have the opportunity to use the money for reparations, improvements or paying other debt.

Cons of Refinancing Your Mortgage

  • Spending Too Much Time

If you want to refinance, you will need a lot of time, which can be difficult if you are someone with a busy schedule. You need to look for reliable lenders, choose a loan and sign closing documents. So, if you’re always busy, this might not work out for you.

  • Refinancing Costs

One of the many things that put people off when they check a mortgage refinance calculator is the cost of the refinancing process. It requires closing costs, which could sometimes be as much as 6% of the amount of the loan. Usually, these can be included in the loan balance, but you may also be required to pay on spot when closing.

  • Longer Term

Sometimes, the loan term may extend, leaving you to deal with the loan for much longer than you initially thought. It may end up being repaid 10 years later, and dealing with a loan for that long can be nerve-wracking.

Final Thoughts

Mortgage refinancing can be very useful for some people, but it also comes with its own set of drawbacks, as you were able to see. It’s better to use a mortgage refinance calculator before you apply, so you can determine if it’s the right course of action.