 |
Borrowing
Against Your Home |
When faced with a significant
expense, such as medical costs, a new addition to your house,
or a child's college education, you may find that you don't
have the necessary cash on hand. In such a situation, you
may want to consider a home equity loan or line of credit.
By using the equity in your home, you may qualify for a sizable
amount of credit, available for use when and how you please,
at an interest rate that is relatively low. Furthermore, under
the tax law -- depending on your specific situation -- you
may be allowed to deduct the interest because the debt is
secured by your home.
Before deciding whether to head down this road, you should
carefully weigh the costs against the benefits. Shop for the
credit terms that best meet your borrowing needs without posing
undue financial risk. And, remember, failure to repay could
mean the loss of your home.
There are actually two variations on this home equity theme:
lines of credit and loans. When comparing the two, however,
keep in mind that you cannot simply compare the Annual Percentage
Rate (APR) for a loan with the APR for a home equity line
because the APRs are figured differently. The APR for a loan
takes into account the interest rate charged plus points and
other finance charges. The APR for a home equity line is based
on the periodic interest rate alone. It does not include points
or other charges.
Of course, there are plenty of other factors to keep in mind
when considering either arrangement, as we discuss in other
articles in this section. |
|
|
|
