Six Questions to Ask When Selecting a Home Equity Loan

So you need some cash for sudden expenses. The roof took on a leak, the deck rotted through and a new family addition tightened living space. You bought too many Christmas presents on credit now the bills are devastating. Junior got accepted to that Ivy League school. Tapping into your home equity can help ease your monetary burden. Prior to deciding on borrowing ask yourself a few questions first.

1. Do I need a home equity loan or a home equity line of credit?
If interest rates are low, a loan is a smarter choice. You can obtain the full amount at once and get a fixed rate on the whole amount. The advantage allows you to know how much to allow for monthly payments.

On the other hand, a line of credit will let you borrow from a revolving line of credit with changeable interest rates. You access the capital just like a checking account by writing a check for the purchase. Then the money used is paid back. If the rates alter, your payments will too.

2. Are there restrictions on how I use the borrowed resources?

Most loans and lines of credit can be used for a number of things. Whether you want to unify all your debts into one, do some home improvements or pay for college tuition, an equity loan or line of credit can be the answer.

Be sure to ask yourself if you can afford the extra payments. Is your budget variable enough? Will adding another repayment not over-extend a tight budget?

3. How do I find the best interest rate?

Your best bet to determine the variety of interest rates offered by financial services companies is to shop around. Ask questions. Try to find a company you're comfortable doing business with. Look for ones that don't charge application fees. Ask about charging a penalty for early settlement.

4. What is the term of the loan? Is it better to get a 5- 10- or 15 year term?

You'll want to determine what your financial future strategy is when deciding on the term of the loan. If you're planning to retire soon, you may want to ask for a shorter term. The longer your loan terms, the lower your monthly payments.

5. Are there any tax advantages to borrowing with a home equity loan?

There are many good tax advantages to home equity loans and lines of credit. The interest is tax deductible on your federal income tax. Be sure to consult your tax advisor before applying for a loan to be certain of the deductions.

6. Is the loan application lengthy and how long before I get an answer?

More and more lenders are allowing consumers to apply for loans over the phone or on the Internet. It can take as little as 10 minutes for the application process. And many pre-approvals can be delivered in a few hours. Final approval often takes any where from 5 - 10 days while evaluating your house is taking place. Often the entire process can be completed without leaving your home with final documents and checks being sent through the mail.

Tapping into your home equity to ease financial burdens can be a good idea. Do your homework. Shop around. Set up your budget. Use the money for what you need.

Contact Mortgage Brokers Jacksonville to discuss your home loan requirements.