Home Equity Loan Risks
Home equity loans give individuals a tool to extend their existing credit line by securing debt on the equity value of their existing homes. This access to easy and cheap money can
lure the borrower into securing a debt for reasons which otherwise could have been funded through wise money management.
Following are some home equity loans risks:
Risk of losing one's home:
The biggest risk involved in home equity loans is that of the borrower being rendered homeless. In the case of the borrower being unable to make timely payments of the interest and the
principal, the lender can claim the existing house of the borrower. Thus a default in payment can lead to the loss of the home, which is used as collateral for the loan.
Hidden loan conditions:
Consumers who do not pay careful heed to the fine print may fall prey to the intrinsic conditions of the home equity loan, particularly those pertaining to principal and interest payments.
For example, a balloon payment of the principal may add to the debt burden of the borrower and the inability to make the payment may result in foreclosure and thus loss of the borrower's house.
The lender may also impose legal and procedural fees later on in the term of the loan, which may affect the actual amount payable by the consumer.
Higher interest payments:
If the equity loan is financed at a floating or variable rate, then it is subject to changes depending on the interest rate scenario in the economy. This may be because the interest payments fluctuate out of the bounds of the borrower's reach.
Besides these major risks, the home on which the loan is secured cannot be leased during the term of the loan. The loan on home equity will also effectively increase the time required to pay off the debt on the existing home.
Many times, the easy availability of an equity loan can tempt a consumer to take the loan for day-to-day expenses, which actually add to his existing debt burden.
The investment made by the money raised through raising an equity loan should be financially more rewarding than the interest paid on the loan.
All these factors should hence be taken into consideration before taking a home equity loan.
Home Equity Loans - Rates, in depth articles and professional second mortgage advice. Find the lowest home equity loans rates and lenders.
MORE RESOURCES updated Sat. March / 23 / 2019
Refinance rates ease for Friday Bankrate.com
Multiple benchmark refinance rates ticked downward today. If you're in the market for a mortgage, see what that means for you.
Refinance rates slide for Tuesday Bankrate.com
Multiple closely watched refinance rates receded today. If you're in the market for a home loan, see what that means for you.
Defying Mortgage Delinquency Trends DSNews.com
While mortgage delinquencies continue to drop, February appears to have been an outlier. What made February's delinquencies climb?
Clark Tower foreclosure sale delayed The Daily Memphian
The scheduled foreclosure sale of Clark Tower Friday was postponed until noon on April 26, two days after the office skyscraper's owner and trustee for lenders ...
Banking outlook 2019 FXStreet
Faster economic growth, interest rate hikes and a lower corporate tax rate proved very favorable for commercial banks in 2018. Loan growth was stable.
Refinance rates retreat for Monday Bankrate.com
Multiple benchmark refinance rates tapered off today. If you're in the market for a mortgage, see how your payments might be affected.
Should You Refinance Your Mortgage? Forbes
Evidently many mortgage borrowers fail to understand that mortgage refinances have a variety of possible purposes, and their success depends on a variety of ...
Refinance rates advance for Saturday Bankrate.com
Multiple closely watched refinance rates notched higher today. If you're shopping for a refi, see how your finances could be affected.
Refinance rates dip for Wednesday Bankrate.com
Multiple key refinance rates slid lower today. If you're shopping for a home loan, see how your payments might be affected.
Refinance rates tick higher for Monday Bankrate.com
Multiple closely watched refinance rates moved higher today. If you're in the market for a home loan, see how your payments might be affected.
Refinance rates slide for Saturday Bankrate.com
Multiple closely watched refinance rates were down today. If you're in the market for a refinance, see how that could affect you.
Refinance rates move up for Thursday Bankrate.com
Several closely watched refinance rates advanced today. If you're in the market for a mortgage, see how your payments might be affected.