With the help home equity loans from institutions such as Palmetto Citizens Federal Credit Union, Lexington SC homeowners can get a grip on their finances and improve their lives. Sometimes the weight of mortgage payments can place a huge strain on your finances and make it hard to accomplish other important goals.
For instance, you might not have enough money left over to remodel a home, further your education, or even payoff other debts. Taking a second mortgage on the house can help you out of this bind buy you need to be smart about it to get the best results.
Start over with a clean slate
While the second mortgage carries a higher interest than the first one, these rates are lower than what you’ll get on any consumer loan. It’s the fact that they are even lower than the rates on the credit cards that make them quite attractive.
See, if you’re carrying a large credit card debt, you can borrow against the home and clear off the debt. Doing so enables you to escape on the hefty interest rates on the cards, which amounts to considerable savings.
You can, therefore, use this opportunity to start over with a clean slate and escape the debt trap. However, you would need to polish your money habits to reap the benefits of making such a financial move.
Almost interest-free money
With a home equity loan, you can borrow up to $100,000 against your home and claim all the interest paid on it as a tax deductible. With the proper itemized deduction when filing your tax returns, you can end up with free money.
However, the size of the loan is primarily based on the combined loan-to-value ratio of between 80 and 90 percent of the appraised home value. The lender uses your credit history as well as credit score to set the loan amount and interest rates.
Owning a home comes with one distinct advantage, you get an asset that you can leverage to whip up your finances into shape. You can take advantage of the friendly terms of the second mortgage and eliminate expensive debts.