| |
Understanding
pros and cons of a home equity line of credit
Credit Cards and Home Equity Loans Read the Fine Print
These days, everyones lives are burdened with paperwork. With newspapers, magazines, bills, junk mail, and who-knows-what taking up space in their day, few people have time to look at every piece of paper that comes their way. Unfortunately, its becoming more and more necessary to carefully examine bills and contracts, as various penalties are finding their way into the fine print of credit card bills, home equity loan and mortgage contracts. It truly pays to take the time to read the fine print in these documents.
Up to one third of major credit card issuers now include a universal default clause in their credit card terms. The UDC allows the credit card company to raise the interest rate on the account if the cardholder pays his or her bills late. This can apply even if the credit card bill is paid on time! It is important to find out if your credit card terms include a UDC, as your interest rate could be affected by whether or not you pay your telephone bill on time. This is just one of many ways that credit card companies are increasing their profits, but it isnt one that theyre willing to advertise. When a letter comes in the mail from your credit card company that says change in your credit card terms or something like it, make sure that you read it. Failure to do so could raise the interest rate on your credit card substantially.
Another fine print issue that has been turning up recently is the prepayment penalty that is now being attached to up to half of all mortgages and home equity loans. The volatile nature of interest rates in the lending market has inspired many homeowners to repeatedly refinance their homes in the last few years. Lenders often hold a mortgage for only a few months before the borrower finds a lower rate and refinances, paying off the original loan. In order to protect the profits from lending the money, up to half of all lenders are now requiring a substantial penalty if the loan is paid off prior to a specified date. These fees can amount to several thousand dollars on a primary mortgage and several hundred dollars on a home equity loan. Most borrowers would not be pleased to go through the process of refinancing their home, only to find out at closing that they owed a penalty of five thousand dollars. Instead, be sure to read the fine print in your mortgage or home equity loan documents before you sign them.
As the lending and credit markets become more and more competitive, lenders are doing more and more to increase their profits. They are not necessarily doing so in obvious ways, however, so it is always in your best interests to read any document carefully before you sign. Your failure to do so could cost you quite a bit of money.
About the Author
Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and HomeEquityHelp.com, a site devoted to information regarding home equity loans.
More Useful Resource and Updates on pros and cons of a home equity line of credit
- Web sites help borrowers tap cash (Chicago Tribune)
WASHINGTON -- Steve Lubs was looking to get rid of his $8,000 in credit card debt, but his high interest rate had him bogged down. He tried getting a loan through a bank to pay off the balance but couldn't find one with an interest rate lower than 12%.
- Unlocking your home equity (CNN Money)
The housing rescue package that Congress scrambled to pass in July was aimed primarily at stemming foreclosures and shoring up Fannie Mae and Freddie Mac. But it also contains provisions that make reverse mortgages a better deal for older homeowners who want to turn their equity into cash.
- U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate (Bloomberg.com)
Aug. 25 (Bloomberg) -- Sales of previously owned homes in the U.S. rose in July from a 10-year low as declining prices helped stabilize demand. Resales rose 3.1 percent, more than forecast, to an annual rate of 5 million from 4.85 million in June, the National Association of Realtors said today in Washington.
- Home sweet loan: Using a 401(k) loan for a down payment (Belleville News-Democrat)
Faced with a real estate market that has tightened up lending standards at a time when home values are dropping, more people are borrowing money from their 401(k) retirement plans to help swing a down payment to buy a home.
- Baldwin Township couple, among millions facing foreclosure in U.S., turn to nonprofit aid program (Pittsburgh Post-Gazette)
After 20 years of living in the Baldwin Township home where they raised three children and poured their life's savings, Randy and Cindy Balzer are on the verge of losing everything they've worked ...
- Can this home be saved? (Pittsburgh Post-Gazette)
After 20 years of living in the Baldwin Township home where they raised three children and poured their life's savings, Randy and Cindy Balzer are on the verge of losing everything.
- Freddie, Fannie Mortgage Portfolio Growth Rate Slows (Update1) (Bloomberg.com)
Aug. 26 (Bloomberg) -- Freddie Mac and Fannie Mae bought home loans and mortgage securities at a slower pace last month as a combined $14.9 billion in net losses in the past four quarters depleted their capital.
- Home loans: Mortgage approvals plunge by 65% (Guardian Unlimited)
Situation unlikely to get better until availability of home loans improves and house prices stop falling
- How to get the best loan rates (Bankrate.com via Yahoo! Finance)
Learn about the forces that drive rates on several different types of loans in this tough lending environment.
- Equity capital improvement program (San Diego Daily Transcript via Yahoo! News)
Equity Office, an affiliate of The Blackstone Group (NYSE: BX), announced a $25 million capital improvement program throughout its 11 million-square-foot Southern California portfolio.
- The Pros And Cons Of Tapping Your Equity
"HELOC" for short, home equity lines of credit begin with a quick approval, few ... your line of credit can remain available for the life of the line of credit. ...
- The pros and cons of home equity loans and lines of credits - Nov. 8, 2001
A home equity line of credit, by contrast, functions more like a credit card. ... to take out a home equity loan or line of credit, consider your goals, your ...
- Home Equity Basics, Ch. 2: 5 questions to help choose loan or line of ...
... black and white between a home equity loan and a HELOC (line of credit) ... Pros and cons of debt equity. 5 questions to help choose a loan or line of credit ...
- Home Equity Loans - Pros And Cons
... about the pros and cons of home equity loans and home equity lines of credit. ... The home equity line of credit is typically a checkbook or credit card issued ...
- The Pros and Cons of a Home Equity Loan
On the pro side there is a definite upside to getting a home equity loan. ... Do you need a home equity loan or line of credit? What Is Home Equity Loan? ...
- The pros and cons of keeping your home equity line of credit
The pros and cons of keeping your home equity line of credit. Saturday, January 28, 2006 ... home equity loan and some features of a variable-rate equity ...
- Home Equity Loan - Pros and Cons - Guardian Loan Company
Home Equity Line of Credit (HELOC) Pros and Cons. A Home Equity Line of Credit (HELOC) allows you to draw cash as needed, usually ...
|
|
|
