Home Equity Success Checklist

by Richard Barrington
LoanPage.com Columnist

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Home equity is a precious asset, earned gradually as you pay down your mortgage or your property value increases. Before you use this asset as collateral for a home equity loan you'll want to go through a checklist to make sure you're putting your home equity to its best use. Relevant questions can be separated into two categories: the type of project and budgeting issues.

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Type of Project

  • » Will this project add value to your home? Home improvement projects can be very productive uses for home equity loans because they may increase the value of your home; however, some projects pay off much better than others, so check with your builder or a real estate agent if this is a concern.
  • » Is this project your highest priority? You will most likely be committed to your home equity loan for a period of years, so make sure you consider your lifestyle and financial needs in the future as well as the present.
  • » Will the value of the project or purchase last beyond the term of the loan? As a rule, you should not get into the habit of financing short-term purchases with long-term debt.

Home Equity Loan Budgeting

  • » Have you obtained quotes from a several mortgage companies?
  • » Have you considered alternatives, such as refinancing your current mortgage?
  • » Have you used a mortgage calculator to compare terms from different mortgage companies?
  • » Have you used a mortgage calculator to estimate monthly payments to see how this fits into your monthly budget?

Mortgage calculators and various mortgage information sources are readily available online. Be sure to use these tools to plan your home equity borrowing responsibly.

About the Author:
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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