An Overview of Home Equity Loan Features
In today’s market, there are a wide variety of flexible mortgage products which you can choose from, each with their own particular features.
Most home equity loans, however, are portable. They allow you to simply switch the security that your financier holds for that mortgage from your previous home to your new home.
It’s also quite easy with a Home Equity Loan to switch from principal and interest, to interest only repayments. This may come in handy if you find yourself out of work for a spell, or you experience some other form of unexpected financial difficulty.
Unlike most variable rate mortgages, home equity loans usually allow you to link a debit card to the loan. Better yet, you could apply for a separate 55 day interest free credit card and setup a “sweep” facility with your bank. At the end of the 55 interest free period, the previous month’s card balance is paid in full automatically by direct debiting from your home equity loan. This can save you on interest for the intervening 55 days.
Whilst the flexibility and advantages of a home equity loan are many, there are also pitfalls for the financially undisciplined, or those who do not keep a budget. Typically, a home equity loan has a credit limit set at 80% of the value of the security: your house. Because there is generally no mandatory requirement to pay off any of the principal, one can easily slip into the trap of borrowing against your equity to finance discretionary spending such as a new car, holiday, or household furniture or audio-visual equipment.
Tags: Finances