Although many Americans look to home equity lines of credit to finance a needed repair such as a new roof or tackle other expenses, it is important to see an HELOC for what it is – a second mortgage resulting in a lien against your home.
A home equity line of credit is a home’s market value minus any outstanding loan balance giving homeowners access to cash using their home as collateral. Of course, when homeowners take out an HELOC, they increase the risk of losing their home if they are unable to meet the repayment terms.
Ask any financial advisor, and most will say to budget and save for rainy day expenses, and make sure that you separate needs from wants when it comes to improvements to your home. While a new roof may be essential, a new driveway or landscaping can wait if an HELOC is the part of the plan.
If an HELOC is the only option, homeowners should note that some home equity loans come with variable interest rates, meaning the payments can up or down, which can make paying them back all the more challenging on a fixed budget. It is worthwhile to shop around for the best terms to include a fixed rate, no fees, at a low interest rate.
Millions of homeowner tap into home equity to pay for improvements or repairs to their homes while some even look to borrowing against their home to handle everyday bills putting it all on the line. If you are in a difficult financial situation, it is vitally important to step back and consider all options that may be available to you, which may include bankruptcy protection.
Contact the Peoria bankruptcy law offices of Charles E. Covey at 309-674-8125 to discuss strategies that may be available to you through a chapter 7 or 13 bankruptcy. The first step in developing a financial strategy is getting the information you need when trying to turn a difficult financial situation around.