Home Equity Loans

To pay for repairs or additions to your home - or some other costly project - you may consider a home equity loan or line of credit. It allows you to borrow against the equity in your home.

For example, if the value of your house is $50,000 and your mortgage is $35,000, you could arrange for a home equity line of credit as high as $15,000.

The major disadvantage of home equity financing is your home is at risk if you can't make payments. Before taking out a home equity loan, be sure to ask:

• how large is the credit line?
• how long is the term of the loan?
• what's the minimum and maximum monthly payment?
• what's the interest rate?
• what's the annual percentage rate? (it shouldn't be much higher than the stated interest rate.)
• are there any annual fees, transaction fees, or origination fees?
• is there a complete list of all closing costs?

Source: "When Your Home is on the Line," Federal Reserve Bank, 1994.

Consumer Information Center Online - www.pueblo.gas.gov

 

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