A home equity loan is a type of loan in which the borrower uses the equity built up in the home as collateral. A home equity loan is sometimes used to finance major expenses such as medical bills, home repairs or education expenses. It is sometimes referred to as a second mortgage or borrowing against your home. Learn more on this page about home equity loans and how you can use one.
Pay Off Mortgage With Home Equity Loan
A couple wonders if they should have paid off their mortgage with a home equity loan. They now no longer have a tax deduction. Paying off the mortgage with a home equity loan means they have a lower interest rate, which they can use to build their retirement savings. However, with retirement approaching, they need to evaluate how to pay off the home equity loan and keep saving for retirement. A fee-only financial planner can help evaluate their options.
Home Equity Loan Can Pay Off Other Debt
You may be considering taking out a home equity loan to pay off other debt. A benefit to having a home equity loan is that you can deduct the interest on your taxes. The downside to taking out a home equity loan is if you don't keep up with payments the lender can repossess your home.