If you need to borrow
money, home equity lines may be one useful source of credit.
Initially at least, they may provide you with large amounts
of cash at relatively low interest rates and they may provide
you with certain tax advantages unavailable with other kinds
of loans. (Check with your tax advisor for details.)
At the same time,
home equity lines of credit require you to use your home
as collateral for the loan. This may put your home at risk
if you are late or cannot make your monthly payments. Those
loans with a large final (balloon) payment may lead you to
borrow more money to pay off this debt, or they may put your
home in jeopardy if you cannot qualify for refinancing. If
you sell your home, most plans require you to pay off your
credit line at that time. In addition, because home equity
loans give you relatively easy access to cash, you might
find you borrow money more freely.
Remember too, there
are other ways to borrow money from a lending institution.
For example, you may want to explore second mortgage installment
loans. Although these plans also place an additional mortgage
on your home, second mortgage money usually is loaned in
a lump sum, rather than in a series of advances made available
by writing checks on an account. Also, second mortgages usually
have fixed interest rates and fixed payment amounts.
You also may want
to explore borrowing from credit lines that do not use your
home as collateral. These are available with your credit
cards or with unsecured credit lines that let you write checks
as you need the money. In addition, you may want to ask about
loans for specific items, such as cars or tuition.
