The equity in your home is the difference between the current market value of the property and the total amount of the mortgage secured against it. Most house owners don’t think about how this money which could be quite significant can be used in better ways. This money can be used far more efficiently in most case and indeed, should be!

One of the most common ways of using this equity is to take out a 2nd mortgage  against the equity and consolidate other higher interest debts such as credit card debts. Also using your equity can help to finance some of life’s bigger or even unexpected expenses.

A loan against the equity of your property or a second mortgage can help to cope with some of the financial obligations we have to meet now and again which aren’t so easy to deal with, such as a college education for our children, an extension on the house or even just to consolidate those credit cards to make your finances more manageable.

Some advantages in this situation are:

Ridding yourself of that high interest credit card debt that seems to choke your finances by consolidating them into a lower interest loan, possibly over a longer period.

Wouldn’t it be nice to just have one monthly payment to make. All the credit card bills are gone, any other higher interest loans also for instance medical bills, car loans etc. Having consolidated all these bills into a much lower interest loan the actual total that has to be paid every month is like to be significantly lower.

But the real plus to this is the lessening of the stress we all feel when we’re juggling all our individual debts every month. You will feel much better all round by just having the one payment to think about and don’t forget it’s also going to be less money to find!

Who wants to pay higher interest rates on those major purchases?

We don’t like to think about these things but you or your partner finds out they have cancer. Wouldn’t it be worth every penny if you could just get your hands on enough money so you can have instant first class treatment at the nearest Bupa hospital? Your equity can also with with more pleasant but equally stressful things like a daughter’s wedding for instance.

The Convenience Benefit

In the current mortgage market there are lots of options so be sure to choose the type of loan repayment plan you are most happy with. Some people love the idea of a fixed rate mortgage. They always know what their monthly commitment will be. If you think the market is going to get worse or your adviser thinks this is the case then this could be the way to go.

On the other side of the coin is the option of a variable rate mortgage. Should interest rates be currently quite high and your adviser thinks there is a good chance of interest rates coming down in the next couple of years then this would be the better option. Initial rates are often very low for the first couple of years with this type of home loan but after that they usually follow the current Bank of England base rate plus 2 or 3 percent.

SOURCE: Mortgages

Custom Search