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Using
Your Equity to Pay Debts
A
home equity loan can provide
practical debt relief by
consolidating your high
interest credit cards and
other debts into one lower
payment, which could save
you hundreds of dollars each
month. Compare the payment
for the new loan to your
existing debt payments to
see if it makes sense. Also
consider the break-even
period by dividing the
monthly savings into the
total closing costs.
The interest portion of a
home equity loan may be tax
deductible up to $100,000
loan amount, or up to 100%
of value. The tax savings
can be substantial compared
to non-deductible debts.
A
home equity loan is a fully
amortized, simple interest,
fixed rate second mortgage,
which does not change in the
terms, or the payment of
your existing first
mortgage. You will end up
paying less on a simple
interest loan when compared
to credit cards with daily
compounded interest. It is
estimated that over a long
term, you could pay up to
three times more on credit
cards with compound
interest, than you would on
a fixed rate, simple
interest home equity loan.
You
have the option of using all
or part of your new loan for
debt consolidation, or you
can also choose to use part
of your loan to make home
improvements, or receive
cash for personal use. |
