Home equity loans provide financial flexibility and can help homeowners handle their mortgage better. This video explains what a home equity loan is and how it helps homeowners.
Home equity loans are essentially a second mortgage on a person’s home. For example, say a house is worth $300,000 and an individual owes $200,000 on it. There is $100,000 of equity on that home which someone may want to use on for other ends.
To use this, you need a home equity loan against the property. Home equity loans have higher interest rates because if you don’t make the payments the bank with the mortgage has first rights to your collateral.
There are set loans where you take out a set amount and pay back a fixed amount over a fixed schedule until you reach the end date. There are also home equity lines of credit, where you have access to money, but you only get charged if you use the money.
Some people use home equity loans to consolidate other debt and simplify their financial accounts. However, you are putting your house at risk if you miss payments on the home equity loan.
To learn more about home equity loans, click on the link above.