At some point during our lives, we all get to the point where we need money and we simply do not have it. While it may feel as if there is no hope out there, you may have a very significant asset: your home. If so, then you may be able to refinance it through some of the home equity loans Florida has to offer.
Understanding the Home Equity Loan
A home equity loan essentially allows you to borrow money in line with the value of your home. However, there are limits to this. Generally speaking, you can not lend more than 85% of the value of your home (75% if you have poor credit), and this is after you have subtracted your outstanding mortgage. Additionally, there are specific terms associated with home equity loans. This includes:
- How long you can draw from the line of credit.
- What the interest rates are.
- The maximum and minimum you can draw each time.
- How you have to pay the loan back.
This is what makes the home equity loan very different from the second mortgage. In this case, you get the full amount that you have borrowed in one go.
Finding a Home Equity Loan
It is very important that you shop around when you are looking for a home equity loan, just as with any other financial product. The most important thing to take into consideration is the interest rate. Do also make sure you understand all the other terms and conditions, however.
You also have to take a number of different costs into consideration, including:
- The application fee.
- The appraisal fee.
- The up front charges.
- The closing costs.
- The interest rates.
- The account fees.
A lot of people are tempted to pick the loan that has the lowest interest rate. However, these loans usually make up the difference by increasing all the other fees, so you need to properly calculate what actually offers you the best value.
Last but not least, make sure that you use your new line of credit in a way that works for you. Remember that you have just borrowed against you biggest asset, and you have to make sure that you don’t risk that. Yes, a home equity loan is an easy way to get hold of some cash, but that doesn’t mean you should also just spend it without thinking. Every bit you spend will be money that you owe, at the end of the day.
Some lenders will only allow you to use your home equity line of credit for very specific things, which can be beneficial if you’re worried about overspending. Others, however, have no such restrictions. If you think you will just spend on things you enjoy, rather than on things you actually need, then you may want to consider taking out a credit card instead, as this limits you a bit more in terms of how much you can actually spend.