The Power of a Home
Equity Loan
to Pay Down Debt
by
Jakob Jelling
Households
across the country are finding themselves in a
similar situation. They lack the financial funds to
make the necessary changes to their home and need to
find a way to fund upgrades and eliminate debt. A
popular way of financing these changes without
killing themselves is by taking a home equity loan to
pay down their debt.
The Home
Equity Loan has become a fast-track way of paying
down large credit card debt, financing college
education and even taking a vacation. Since the stock
market has lost quite a bit of appreciation, people
have been purchasing homes as a means of investment,
thus sending housing prices through the roof. With
higher prices comes a great deal of appreciation in
the home. People who have found themselves in 20
– 30 thousand dollars in debt can pay it down by
taking a home equity loan. Home Equity Loans have
been a source of relief and flexibility to get the
homeowner out of debt and moving forward in life.
The
home equity tax shelter
The greatest
benefit from taking a Home Equity Loan is being able
to crush debt, but also reduce the amount you owe the
government every year. Most loans by design do not
provide any tax relief, whereas a Home Equity Loan
provides a direct line item to reduce your debt. To
figure out your home equity value you can hire a
professional appraiser to come out and tell you how
much it is worth to a bank or financial institution.
Once you have that figure you can easily find out how
much equity you have in your home. For example,
should your home appraise for $150,000 and you owe $
60,000 you have $90,000 in equity. This equity will
not become a taxable event should you buy a bigger
home and spend more money. Should you step down in
your home, you can be penalized for the difference,
provided that you have not already taken the one-time
exemption allowed by the government.
Debt
relief
Once you have
found out how much your home is now worth, it is time
to apply for the loan. During the loan process you
can bring your credit card statements as well as any
other debts you may owe to the table. Explain to the
loan officer your situation and ask that these debts
also be included in the Home Equity Loan. If your
home has at least 40% equity in your property you
should have no problem getting them dissolved into
the loan. There are many reputable lenders who will
help you find the right loan for you. The Home Equity
Loan will restart the 15 or 30-year clock from day
one. Your payment may increase or decrease depending
on how much debt you add or cash you take out of the
property.
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About The Author
Jakob Jelling is the
founder of Cashbazar.com. Visit his website for the
latest on personal finance, debt elimination,
budgeting, credit cards and real estate.
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