What are the risk linked to a home equity loan?

What are the risk linked to a home equity loan?
want to take a home equity loan to consolidate debt. What are the possible risk. Will I lose my house, will the financial company be own the title of my house if they finance me? Do you have an experience with home equity loan. Advantages and disadvantages. thanks a lot

In general, a home equity loan is a great way to consolidate debt. The risks are few and the cost is usually much lower than other debts, such as credit cards or bills, but since you asked about risk and advantages, here are a few:

The main risk of a home equity loan is the same as any mortgage: you can only lose your home if you default on the loan (that is, fail to pay it back) and your home goes into foreclosure. But this is always a last resort and never in anyone's best interest.

Also, home equity lines of credit are tied with adjustable rates which can change, depending on what the Fed does (but also depends on when your loan is set to adjust). But they are always usually lower than credit card rates.

Just to clarify -- you can get a fixed rate with a home equity loan for up to 30 years. The main difference between the two is that home equity loans give you your money in a lump sum; home equity lines are like credit cards in that you can draw from the account when you need the money. For a one-time consolidation, a home equity loan might be a better choice; however, that's a decision you should talk over with your mortgage professional.

The main advantage to either is that you most likely can deduct the mortgage interest on a home equity loan from your taxes, whereas you can't do that with credit card interest. Plus, by getting rid of credit card debt, you could raise your credit score which could lead to better loan terms and rates in the future.

Hope this helps!

One of the bid advantages is that you can usually get a low rate, and you can write off the interest on your taxes if you qualify.

The big disadvantage is that people many times pay off credit cards, but then just fill up their credit cards again. Then they lose their home.

The loan itself is not a bad thing it is the person's money management skills which are dangerous.

I have a home equity line of credit on my house. It's there if I should need it although, it has a zero balance at the moment. The advantage is, interest on it is tax deductible. The disadvantage is if you use it to pay off other debt and then run up debt again, you then have two payments to make.

The Home Equity loan has a lien on your house just like your first mortgage does. If you sell the house, your first mortgage gets paid off first, the Home Equity loan gets paid off second. You get what's left over.

Nelson has good solid advice, once you pay off credit debt make sure you tear up those credit cards. A HELOC or Home Equity Line of Credit does put your home at risk because it is used as collateral. When you get approved for the Line of Credit you will be issued a "check book" to write checks up to the allowable amount.

Use it wisely.

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