Home Equity Loans

Home equity is the value of your house minus any mortgage balance. In a home equity loan the equity of your home is used as collateral. In other words the value of your home goes down depending on the size of your loan until you pay it off. Interest rates apply and the amount you can take out depends on your credit rating and the amount of equity in your home.

A home equity loan is different then a home equity line of credit. A home equity line of credit has revolving credit and an adjustable interest rate. This means you can choose when you want to borrow and how often. Home Equity Loans have fixed amounts with fixed interest rates. A home equity line of credit may give more freedom, but you also may not need it. It just depends on your needs. Both give generally lower interest rates then credit cards and regular loans. It is also important to note that both of these loan types are considered second mortgages.

Speaking of needs, home equity loans are great help with expensive necessities like repairs, college funds, and safety nets when taking financial risks. It also helps to have your debt all in one place. For the entrepreneur loans are a necessity, (unless of course rich parents are involved) so the entrepreneur with good credit should definitely look into a home equity loan.

If you are not going to sell your house any time soon, you might as well put your house’s value to work. Savvy entrepreneurs don’t work for money; they make money work for them. It’s not prudent to have frozen money sitting around doing nothing when you have a business to run. Home equity loans and home equity lines of credit help you get more of your money working for you. Your home can be a better investment if it provides more then a roof over your head. Remember, though, when you use your house as collateral you risk losing it if you fail to pay the bank. Don’t get greedy.

Getting the loan may involve some fees. Getting your house appraised, for instance, usually costs money. There are ways around a professional appraiser, but you may be able to get more out of the deal by knowing what your house is worth and what you can do to make it worth more. Professional tax consulting may also prove useful. Naturally, if you receive any professional consulting or tax help, you will pay more. Professional help shouldn’t be overlooked. Sometimes you can deduct home equity loan interest on your taxes. This makes home equity loans even more useful to the entrepreneur, but you’ll need a certified personal accountant (CPA) on your side to get the full benefits. A CPA may also be able to tell you for sure if a home equity loan is your best option.

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