Debt Consolidation Connection

Introduction

Home equity loans have grown in popularity in recent years. They are used for what are really called second mortgages because they are secured by your house. Homeowners whose property has grown in value may borrow funds through a home equity loan, or establish a line of credit, borrowing against it as they choose with a home equity line of credit.

When deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges. Remember that the APR on the home equity loan is figured differently than that on a home equity line of credit. The APR on a traditional home equity loan takes into account the interest rate charged plus points and other finance charges, whereas, the APR for a home equity line of credit is based on the periodic interest rate alone and does not include points or other charges.

Home equity loans make a lot of sense right now with rates at rock-bottom levels. Home equity loans, term loans, may be fixed rate or variable. Home equity lines of credit may be more risky. They are tied to the prime lending rates which rise when the Federal Reserve raises the rates.

If you have almost completed payments on your first mortgage and are about to embark on an extensive remodeling project you may want to refinance the loan for more than the balance of your current mortgage. This is especially good if you want to borrow a lot of money for a long time. However, you may want to make sure you still have at least 20% equity in your home (after refinancing) so you can avoid having to buy private mortgage insurance. Most lenders cap the credit line at 80 percent of the appraised value of your home minus the value of your mortgage. You may be responsible to pay for the appraisal and fees of the lender. If you shop around you should be able to find a good deal.

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Unsecured Debt Consolidation Loans