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We know debt is bad. We know it could take us forever to pay
off interest. But we make quick purchases to keep up with the
Joneses, anyway. We go on a shopping spree because something
looked good on TV, or simply to reward ourselves for getting
through the workweek. We buy cars, home stereo systems, and
self-twirling spaghetti forks we certainly could live without.
By the time we find ourselves staring at a hefty bill less than
30 days later, we rue our impulsive decision to buy, buy, buy.
Some things, however, are worth getting into debt for. If
you’re a wage earner, nothing spells security just as much as
land or a house does. You need never fear being homeless again,
and secured home equity loans make it possible.
The Basics
A home equity loan gives you the opportunity to use your home’s
equity as collateral, in order to borrow money. Collateral is
property that guarantees you will pay back a debt. To get your
home’s equity value, you subtract how much you still owe on
your mortgage from your home’s value. A home equity loan
qualifies as a secured loan, as it is secured against a major
asset. In this case, the asset is a home, although it may also
include other properties.
The Second Mortgage
A secured home equity loan is also referred to as a second
mortgage. Like the first mortgage, your property secures a home
equity loan. In a nutshell, this loan transforms equity into
cash, which people use for a variety of purposes. Home
improvements, a popular choice, add equity to your home. Other
common reasons for taking out a secured home equity loan
include paying for your children’s college education, medical
expenses, family emergencies, and huge purchases; or
consolidating your debt.
The Terms
Before you take out a secured home equity loan, you should be
aware of the terms. You receive the loan in one lump sum at one
time. Also, once you take out the loan, you cannot borrow again
from the loan. In addition, it is possible to take out more
than one loan on the mortgage of your home. But if you do that,
make sure to notify your lenders.
The Payback
The benefit of taking out a secured home equity loan is that
you can make investments that will last a lifetime. The
drawback is that you have to pay the money back. The payments
remain the same every month. While first mortgages must be
repaid in about 30 years, second mortgages must typically be
paid back in half that time. Nonetheless, that figure is not
carved in stone, and the repayment period can range from five
to 30 years.
The Risks
If you take out a secured home equity loan, you naturally have
every intention of paying it back. After all, you know that if
you default on payments, you could lose your land or your
house. Thankfully, lenders of secured home equity loans often
understand when borrowers have short-term problems with their
payments. Conventional wisdom says that if you are willing to
put your house on the line, then you are willing to give your
heart and soul to make payments.
Though debt has become a dirty word in society, repayment need
not be a nightmare. Secured home equity loan can help give you
a fresh start in life.
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