A home equity loan is oftentimes referred to as a second mortgage, it allows homeowner to leverage the equity in their homes in order to borrow money.
In 1996, home equity loans exploded into popularity as it was a way in which consumers were sort of able to circumvent the tax changes that took place that year, this eliminated interest deductions on most purchases made by consumers.
With the use of a home equity loan, most homeowners are able to borrow as much as one hundred thousand dollars and still, when filing their tax returns, deduct all of the interest.
The befit for a homeowner who is provided with a home equity loan is that it is an easy source of cash.
Even though the interest rate on a home equity loan will be higher than that of the initial mortgage, it is a rate that is much lower than other consumer loans such as credit cards.
That being said, according to bankrate.com, paying off credit card balances is the number one reason for homeowners to borrow against their homes values with a home equity loan that offers a fixed rate. So, as mentioned above, any interest which is paid on a home equity loan is in fact deductible, so by using a home equity loan to consolidate debt, homeowner as provided with an interest rate that is much lower, a single payment as well as valuable tax benefits.
The basic necessities of life are food, clothing and shelter, only one of those things can really be leveraged for cash and that is shelter.
Although there is a risk involved, splurging on expensive luxuries with a home equity loan is easy to be tempted with, dont! It is very important to carefully review your financial situation before you borrow against your home as well as make sure that you understand all of the terms and conditions that are involved.