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| Financial Services of America A Direct Lender - ALL 50 States |
MORTGAGE RE-FINANCE QUESTIONS
Lower monthly payments.
Why and when to tap into home equity
Home equity lines of credit
HELOC
Advantages:
Flexibility:
A borrower can access money repeatedly and in varying amounts, as needed.
Low maintenance cost:
Once open, it operates like a credit card in terms of annual fees.
Can carry person through tough times:
After a job loss, a homeowner can still borrow from the home equity line to span the gap until the next job.
Rates:
Generally it carries a lower rate than a home equity loan, and will often have a low introductory rate for a certain period of time.
Some good uses:
A college education:
For a borrower who has children at staggered ages and will need different amounts of tuition money at different times. A homeowner can get cash for the first amount, pay down the balance in time for the next child, then borrow again without having to take out and close on yet another loan.
Unexpected home repairs:
Before a sale, a potential buyer might require that work be completed.
Home equity loans
Advantages:
Fixed payments:
A borrower knows what the monthly payments will be for the life of the loan.
Fixed rate:
Most loans carry a fixed interest rate rather than a variable rate, which is standard for home equity lines.
Some good uses:
Debt consolidation:
Eliminating higher-rate debt, such as that on multiple credit cards. Transferring the balances to a home equity loan can produce huge savings, and a borrower also avoids the temptation that a home equity line presents to keep running up balances.
Home improvements:
If a homeowner knows the exact cost, for example, of adding a room in terms of material and labor, then getting a fixed amount makes sense.
Most common uses
Source: Consumer Bankers Association
HELOC Home equity loan
40% Debt Consolidation 44%
23% Home Improvement 25%
7% Automobile 7%
6% Education 4%
6% Major purchase 2%
3% Investment 2%
2% Household expenditures 2%
2% Business expense 1%
1% Medical 1%
1% Vacation 1%
9% Other/Don't know 11%
Updated Jan. 27, 2004
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