It seems people everywhere are getting home equity loans or home equity lines of credit. In the fiscal year that ended in June of 2014, these transactions increased more than 25% compared to the previous year. So does that mean everyone should do it? No. What everyone should do is consider these things before making a decision to get a home equity line of credit or a home equity loan.opens IMAGE file

Evaluate Rates

During the recession, more than nine million people got their 30-year fixed mortgages at 4% or lower. These rates are projected to rise as early as Spring of 2015. If a consumer refinances their loan now, it is likely they will have to pay a rate that is at least a percentage point higher for the entire loan. However, if the consumer gets a home equity loan, the loan rate will be higher. But, only for a fraction of the loan balance, not the entire mortgage loan. You can always check today’s interest rates 24/7 on boxhomeloans.com home page without having to surrender any of your personal information.

Home Equity Loans Are Cheaper than Refinancing

Often, home equity loans or home equity lines of credit require no upfront fees. Refinancing usually requires home inspection fees, attorney fees, title search fees, and insurance. It can be cheaper to receive a home equity loan or home equity line of credit.

Loan Restart

With refinancing, the loan clock resets. The loan starts back to 30-years on the loan, effectively starting over at day one even if the consumer has paid for 36 months; it is like the consumer has lost credit for payments already made. With a home equity loan or home equity line of credit, payments are made on the same schedule without a reset back to the beginning.

A Home Equity Loan Makes Sense If the Purpose Is to Add Value

A home equity loan makes sense if the purpose is to add value: this could be an addition to the home to make it more valuable, or a degree that increases family earning power. Conversely, a vacation is a poor reason to go the home equity route.

Taxes

Some home equity loans allow the borrower to deduct mortgage interest, up to $100,000 of interest paid.
For some people, a home equity loan or home equity line of credit make sense. For others, it doesn’t. What does make sense is realizing that everyone’s situation is different and that each consumer should look at the best option for them and their family.