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Three Ways Home Equity Loans Can Save Homeowners Some Serious Cash

[Apr 14, 2009.]

 

1. Consolidate Debts Through a Home Equity Loan
One of the best ways to take advantage of home equity loans is to consolidate existing debts with high rates of interest. For most individuals, this automatically includes any credit card debt, automobile loans, and other personal loans. Even homeowners with bad credit or less than excellent credit will often still qualify for attractive mortgage rates. As credit card interest rates can easily top double digits, homeowners can potentially save hundreds of dollars in monthly interest payments by consolidating. In short, one of the main benefits of having equity in your home means having access to a relatively cheap loan.

2. Qualify for Tax Deductions With A Home Equity Loan
Home equity loans are a different breed of mortgages, but homeowners can still take advantage of its many tax deductions. Specifically, homeowners can deduct up to the first $100,000 of interest of a home equity loan if used to consolidate debt, fund a business investment, or pay off another loan. Although there are limitations in place, can you imagine deducting the interest paid on your credit card debts? But before cashing in on such deductions, homeowners should first consult with a tax consultant or financial advisor. In case you missed our previous post, click this link to view our article on more home equity loan tax benefits.

3. Avoid Additional High Interest Accounts With a Home Equity Line of Credit
While traditional home equity loans act more as second-lien mortgages, home equity lines of credit operate quite differently and carry many other benefits. In particular, HELOCs perform much like a credit card account, as homeowners are given a line of credit based on their home's equity. In many cases, homeowners can have as little as few thousand to as much as a few hundred thousand dollars in available credit. By taking out a home equity line of credit, homeowners will essentially have access to a line of credit that is significantly cheaper compared to other debt loans. Although interest rates on HELOCs are typically adjustable, they are still significantly less than the average interest rates on credit cards and personal loans. At a moments notice, homeowners can now tap into their home's equity without needing to take out additional loans with higher rates of interest.

Home equity loans are one of the many tools homeowners can enjoy and often use to save money. For more detailed information on home equity loans, contact a mortgage lender in your area by using our site's resource directory here.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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