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Home Equity Loans: Use or Abuse†

In difficult markets it can be quite tempting to tap into what is likely your biggest asset, your home.  Before choosing a home equity loan or a home equity line of credit, you should know your options and consider the possible risks.

Home Equity Loan (HEL)

  • Essentially a second mortgage with a fixed rate of interest

  • Receive a lump sum of money which is paid back in monthly installments, usually over a 10 to 15 year term

  • Usually a good idea for a one-time goal (e.g. paying off your credit card debt or funding a home improvement project)†

Home Equity Line of Credit (HELOC) 

  • Functions similarly to a credit card with an assigned limit∑ Minimum monthly payments on the outstanding balance

  • Offer more repayment flexibility because you control how much you pay back and when

  • Variable interest, which can be risky if interest rates begin to increase

  • Good choice for a multi-year home improvement project†

Know your options

  • Ask yourself if tapping into your home equity is right for you. If you are choosing this option to pay help pay off high interest debt but havenít changed your spending habits, you could put your home at risk

  • Consider a cash-out refinancing. If you have equity in your home you can increase your current mortgage and refinance the rate resulting in lower monthly payments and the difference in mortgage amounts paid to you in a lump sum.

  • You may also consider a no-closing-cost refinancing. The lender pays the closing costs with a slightly higher interest rate. Sometimes this results in lower monthly payments than if you roll closing costs into a lower interest rate loan.

  • Consult your qualified financial advisor to examine all the refinancing possibilities

#   #   #

This information is provided for informational purposes only.  The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor.  The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.

This communication is published in the United States for residents of  North and South Carolina only; and this advisor is licensed only in  the states of North and South Carolina." 
Roy P. Janse 
Financial Advisor 
--------------------------- 
American Express 
Financial Advisors, Inc. 
IDS Life Insurance Company 
1150 Haywood Road 
Greenville, SC 29615 
Phone: (800) 554-0805 x141 
Fax: (864) 234-7139 

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