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House equity loan


A property equity loan provides you with a lump total of money, with the maximum amount you can be lent dependant on how much home equity you have. Home collateral loans typically have a fixed rate of interest, according to Casey Fleming, a home loan advisor in the Silicon Valley area and author of “The Loan Guide”. You’ll receive your loan funds in a lump total and can then use the amount of money for whatever you wish. You’ll repay the money over a set period of time, usually varying from 5 to 30 years.

The home equity loan can potentially give the most benefit to borrowers who have fixed costs and a definite goal for their money. If you know you’ll have to have a certain amount to pay for an important expenditure like a do-it-yourself project, a home equity loan could be a wise decision. Neale points away that some of her clients like using home collateral financing because there is a potential for a tax deductions on the interest paid — but only when the money can be used for property improvements.


Pros

  • Set interest rate might provide greater predictability
  • Payments can be relatively low
  • Functions well for set costs
  • Interest might be tax-deductible if used on certified do-it-yourself costs


Downsides

  • If you want more money, you’ll need to apply for another loan (not spinning credit like a HELOC)
  •  Your house is at risk if you miss payments
  • Costs can be above with a HELOC

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