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
Essentially a second mortgage with a fixed rate of
Receive a lump sum of money which is paid back in monthly installments, usually over a 10 to 15 year
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
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
Consult your qualified financial advisor to examine all the refinancing possibilities
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.
Express Financial Advisors Inc. Member
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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 Advisors, Inc.
IDS Life Insurance Company
1150 Haywood Road
Greenville, SC 29615
Phone: (800) 554-0805 x141
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