When trying to get out from under overwhelming debt, a lot of people turn to the equity in their home. Taking out a second, or even third, loan against your home’s equity can give you the cash you need to pay off other debt. But, doing so should only be done after careful consideration. Your home is likely your largest asset, and a second loan will encumber it until paid in full. What this means is that until you repay the home equity loan you have not one, but two liens on your home. This can make resale difficult, as it can be hard to fetch a price that covers the amount of multiple loans.
Some important things to remember when considering a home equity loan include:
- The interest paid is tax deductible, provided you itemize your deductions. This can result in a huge savings come tax time, and help to lower your tax liability.
- Failure to repay a home equity loan may result in collection activity, or even foreclosure.
- While relatively easy to apply for and receive, a home equity loan may come at a variable interest rate. If so, your payment will not remain the same, which can present problems when trying to make a budget.
Aside from the tax benefits, perhaps the largest benefit is the possible savings. Even with a variable rate, the rate for a home equity loan is usually lower than that of most credit cards or signature loans. You can save thousands of dollars in interest by taking the equity in your home and using it to pay off higher rate debt. Then, with the money you save in interest, you can start a savings account or even double up on the equity loan payment.
If you have questions about whether a home equity loan is right for you, contact our office for help. We will explain your options, so you understand your choices and can make a decision that meets your needs. Call a Plantation, Florida debt relief attorney today for more information.