Mortgage Muscle: Use Your Home Equity Clout

By Richard Barrington Columnist

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You've probably heard the expression "it takes money to make money." This is true in many ways, because your existing assets can often be used to create a further financial advantage. Home equity is an example of such an asset and the ability to borrow at mortgage rates rather than at general consumer interest rates is one way you can use your home equity effectively.


Mortgage Rates: An Advantage You've Earned

For many Americans, home equity represents their single biggest asset. This is an asset home owners earn by paying down their mortgages and of course appreciation in the real estate market can also add to the value of home equity. In general, home equity is an asset which becomes significant over a period of years of home ownership.

Home Equity: Got Collateral?

One of the benefits of having earned this asset is the ability to use home equity as loan collateral. Since mortgage rates are generally lower than other forms of consumer interest rates, people with home equity can borrow more money and pay less to do so. This is not a fluke-- having an asset to put up as collateral makes a significant difference to the lender.

Nurture Your Home Equity

As with any asset, your home equity should be nurtured and protected. Because a home equity loan is a type of mortgage, you should be sure of having carefully budgeted for repayment. That way you don't put your collateral at risk.

Also, while home equity loans can have a variety of purposes, the most productive ones are things such as home improvement projects which reinvest in the value of your home. After all, mortgage rates may be relatively cheap, but they aren't free. There is always a cost to borrowing, but this cost can pay off if invested wisely.

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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