What is a Home Equity Loan – Its Advantages and Disadvantages

A home equity loan is a loan taken out with your house as a collateral. The value of a home equity is the difference between the current market value of your home and the mortgage amount you owe.

People take home equity loans for various reasons. The most common reason is of course a need to have certain amount of cash on hand for other purposes such as college education or home improvements.

Another common reason people consider to take a loan against the equity of their home is for debt consolidation. So instead of taking out a combination of personal loans, you will only have one single payment monthly. Every month you just need to remember one due date and the amount you need to repay. This can make your financial and budget planning easier.

As mentioned, many people also use home equity loans for repairing or improving their home. Home equity loan offers very good interest rate for home improvement. It also helps improve the value of your home by increasing the equity and writes off interest charges on your tax returns.

Whatever may be the reason, you need to be aware of the negative sides of a home equity loan. The first thing you must remember is that your house is used as collateral and hence failing to refund your loan can result in a foreclosure. In other words, you can lose your home if you fail to repay on timely basis.

Another disadvantage of home equity loans is rising interest rates. Most home loan rates change according to the economy situations. With a variable interest rate, your monthly payments may rise or fall. Make certain you know the cap on the interest rate. The cap is a deciding factor of how high your interest rate can increase each year as well as how much it can increase over the entire loan period. Also, make sure you ask the lenders about all possible fees. Lenders may charge you a variety of fees such as application and withdrawal fees.

The advantages of a home equity loan are low interest rates and the interest is tax deductible. It is also a fast and easy means of acquiring a sizable cash.

Before obtaining a home equity loan, take a good look at the market and economy situations. If the housing prices are falling, it’s not a good idea to opt for this type of loan because your home equity value will be low when the housing market value is falling.

Selling Your Home Can Be a Breeze With a Real Estate Agent

If you are thinking of selling your house, you should look into the matter of hiring a real estate agent. You will gain many benefits from hiring such a professional especially in the buyer’s market borne of the recession.

Just in case you have been living under a rock, even celebrities and millionaires selling their homes have had to significantly lower their homes’ selling prices in an effort to sell these properties as fast as possible and yet nobody seems to be taking the bait. With the right real estate agent, however, you can have greater success where your moderately-priced house is concerned.

Home Assessment

Your real estate agent will start by providing advice on how you can sell the house in a quick manner and even on your own terms. Your house will be inspected from floor to ceiling and then changes will be recommended to make it more salable. You need not worry about spending plenty of money on the recommended home improvements. For the most part, these steps will only focus on minor things like a fresh coat of paint on one part of the house, cleaning up the yard of weeds and junk, fixing up small defects in the plumbing and even removing years of clutter.

Once you have made these minor improvements, your real estate agent can then make an assessment of the house’s value. Factors to consider include comparisons with the property in the neighborhood, current market prices and the value of the home in and of itself, to name a few. From the initial valuation, you and your agent can then discuss the market list price of the property. Keep in mind that keeping to a reasonable and affordable list price is essential in making a fast sale.

Marketing Your Home

Next stop is marketing your home, which is a key responsibility of the real estate agent. Methods applied in said activity include advertisements in the classified ads, posters and, most important, the MSL. Essentially, it is a listing where brokers and agents as well as sellers and buyers share information about available properties for sale. The success of the MSL is proven, too – approximately 80 percent of all home transactions were made with the network as a common factor. You can even secure a better price for your home with said network.

Negotiating the Deal

And of course, your real estate agent will help in deal negotiations for the transaction to push through. The aspects for negotiations will include total price of the house, down payments and final payments, transaction fees and penalties. Basically, your agent should protect your interests first so much so that he can turn down offers that he believes are to your detriment. You still make the final decision but it is a good idea to listen to what the expert in the matter has to say about it.

Before placing your signature on any contract, you are well advised to read it down to the last fine prints. You want to be protected in all aspects so you might also consider talking to an accountant and lawyer for more advice. These professionals are worth their fees if only to ensure that the kinks in the contract are ironed out.