Home Equity Smarts
Before you sign, read the loan closing papers carefully. If the loan isn’t what you expected or wanted, don’t sign the loan. Either negotiate changes or walk away. You also generally have the right to cancel the deal for any reason — and without penalty — within three days after signing the loan papers. The lender must return any money you’ve paid to date.
Here are some guidelines if you’re thinking about tapping into your home’s value:
Don’t squander the cash. Most experts agree home-loan proceeds should be used for home improvements and other investments expected to pay off over time, rather than routine or frivolous expenditures. While it can make sense to finance a car or consolidate credit-card debt, be aware you’re attaching a new lien on the property, moving foreclosure risk one step closer.
Don’t assume more debt than you can handle. Some firms will lend 100 percent or more of a home’s value, but that much leverage boosts your risk. You also can expect to pay higher interest rates on such loans.
Common reasons people refinance their homes:
Interests rates dropped so a new mortgage is taken out to replace the older one, which was at a higher rate.
Borrow against the equity in the house to pay off credit cards and other debt.
Home equity line of credit to make repairs and home improvements.
Ask for your credit score. Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences – like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts – is collected from your credit application and your credit report.
Creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points – your credit score – helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when they’re due.
A home equity loan can be used for many purposes:
-Paying off other debts;
-Taking a holiday;
-Paying for university;
