What you Need to Know When Considering Equity Lending
Home equity lending is a great option for those times that you need an influx of cash. Maybe you need a new car, you want to pay down debt, or you have some renovations that need to be done. Home equity lending will get you the money that you need without having to pay high interest rates on credit cards or other bank loans. Call BMC Mortgage and Investments today to explore your options.
Once you have paid down about 20% of your mortgage, you can qualify for home equity lending. There are three ways that homeowners can take advantage of using their home as collateral for a loan. First, you can apply for a home equity loan; second, you can apply for a home equity line of credit (HELOC); third, you can apply for a reverse mortgage.
Home Equity Loan
With a home equity loan, you borrow an amount of money from the equity that you have built in your home. This loan will exist alongside your current mortgage and will need to start to be paid after receiving the amount you borrowed. This type of home equity lending will give you the best interest rate.
A HELOC is similar to a credit card issued by a bank but using your home equity as collateral for the credit line. This type of home equity lending is more flexible in that you do not need to take a fixed amount of money out. This is helpful when you are undertaking projects that could range in cost. HELOCs generally have a higher interest rates than a home equity loan.
Reverse mortgages generally require you to be above the age of 55 and have quite a bit of equity in your home. If you use a reverse mortgage, you do not have to pay off the loan until the home is sold, and you don't need to have a pristine credit report. In this case, your mortgage payments are more or less redirected back to you and can help to increase cash flow.
Pro of Using Home Equity Lending
- Lower interest rates than credit cards or other bank loans.
- You can use the money for any reason.
- You can choose your method of home equity lending.
Cons of Using Home Equity Lending
- When you use your house as collateral for a loan, the bank can seize it when you default on payments.
- HELOCs can be halted and called in for payment at any time.
- In a reverse mortgage, your owed interest compounds over the life of the loan.
- Any payments will be in addition to the mortgage you are currently paying.
How Do I Find Out About Home Equity Lending?
Ask BMC Mortgage and Investments! Let us know what you have in mind and discuss what the best options are for your situation. If you have equity in your home and need cash now, home equity lending may be the right choice for you. Call us today to explore your options in using your home’s equity to get the cash you need.