Saving, Managing Debt, and Budgeting

Home Equity

Why are home equity loans desirable to homeowners?

Home equity loans are desirable because they allow a homeowner the chance to access the equity that he has accrued in his house, rather than waiting until he sells it to realize these gains. Typically these loans carry a much lower interest rate than other types of loans or lines of credit, such as credit cards. If the loan is used to make capital improvements to the secured property, it may actually improve the value of the property. A home equity loan is sometimes used by someone who wishes to consolidate his credit card debt in favor of obtaining a lower-interest-rate home equity loan, and pay off expensive credit card balances without incurring exceptionally high credit card interest rates and other associated fees. The interest on home equity loans may also be deductible against your adjusted gross income, so please check with your tax adviser for the most current rules when filing your tax return. Many lenders offer online calculators to help a user understand how large a loan he can obtain. If you have a steady income, and control over your living expenses, a home equity line may be a good option to help solve a financial need.


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