Home Equity Popularity
These types of loans and credit have grown in popularity over the years and since the 80s have increased in value. There has been a marked increase in home equity lines of credit as well. There has been a soar in property values and many homeowners have now learned about the management of debt. This property value surge has been influenced mainly by factors such as attractive interest rates and tax deductibility.
The fact that home equity loans and lines of credit are secured by the property of the borrower this means that lenders will think of them as almost secure as primary mortgage. The fact remains that the home equity rates are higher than the typical primary mortgage but they are indeed lower than other means of borrowing. A credit card has a higher interest rate as well as some types of loans especially car loans. This makes them appealing to many persons also as they provide a means to attaining funding that will cost less overall than the typical loan.
Another factor that contributes to the popularity of home equity loans is the fact that they are tax deductible. There was a time that consumer debt was tax deductible but this is no longer so as the government was losing a lot. They needed to find a way to alleviate the budget deficits without raising taxes. Thus, they decided to yank the tax deduction for consumer interest. This was done with the exception of mortgage debt. This means that home equity still falls under this category and you are still able to claim on your taxes for this.
Another connected way to get cash is something called cash out refinancing. This is related to home equity but in order for this to be used there must be some points. These are that the mortgage rates should have dropped and the value of the property should have risen. In the early years this was the market and cash out refinancing was also popular in the early 21st century.
They were able to refinance their primary mortgages for a value greater than the outstanding balance. The process simply means that once the value of the property has increased you are able to refinance your present mortgage up to that amount and pay off the old mortgage. This means off course that you must be capable of paying a mortgage for the higher balance. These installments may be higher than your present installments and you will have to be prepared to meet this to qualify.
It is important even though these financing options are popular to consider carefully which the best option for you to opt for is. There are many that will advise that home equity is better and others that think home equity lines of credit are the way to go. When you are faced with these decisions look carefully at all the options and weigh which is best based on sound financial advice. You will never willing put your home at risk and therefore make sure you are capable of meeting the payments that are planned.