Getting a Home Equity Loan: Make a Budget

GET THE BEST HOME EQUITY LOAN! Not all home equity loans are equal. There are deals, but you have to know what to look for and how to look. This site will help you find a home equity loan that you can afford, one that won't break your budget.

• Be wary of taking out a home equity loan. These loans reduce or eliminate the equity that you have. Your home may be the single biggest form of savings you have.
• Consider a home equity loan if you will be gaining an asset. When you tap into your equity, you should make sure that you will be gaining an asset or a necessity such as education, a home improvement, or medical bills. Don't use your equity for something frivolous, such as a vacation, that results in a net loss of value. Before seeking a loan, use a free loan calculator to determine the actual cost of your loan.
• Comparison shop for home equity loans offered by different banks. Consider all fees associated with the loan, including the interest rate on the loan, annual percentage rate (APR), origination fees, discount points, and possible mortgage insurance. Some banks may offer loans that appear to be great, usually in the form of a low APR, but then require massive loan fees. Do your research first, and don’t be fooled by these tactics. One good starting point is MortgageLoan.com.

• Talk to loan brokers, and consider other types of lenders, not just banks. Home loans are available from different types of lenders such as, banks, mortgage companies, and credit unions. Different lenders will likely quote different prices, so you should contact several lenders to make sure you’re getting the best deal. You should also consult a broker to get the best deal on a home loan. Brokers arrange transactions rather than lending money. They find a lender for you. Brokers have access to several lenders, and this usually means a much wider selection of loans and terms from which you can choose. Brokers usually contact lenders about your application, but they do not necessarily find the best deal for you. Believe it or not, you have to make sure that your contract stipulates that the broker is obligated to find the best deal for you. If you don't, it's likely you will not be getting the best loan available. Because of this and the fact that brokers deal with a limited number of loan institutions, you should consider contacting more than one broker.

• Before getting a loan, you need to know what fees are going to be charged. Ask questions, and read the loan documents. Errors aren't common, but they do occur. A bigger problem lies with hidden or surprise fees. Question any figures you aren't sure about, and remember that you are paying the broker to answer these questions.
  

Unfortunately, people often seek a line of credit, because they are having financial difficulties.  When necessary, it can be a good way to make sure you are able to pay bills, but it is ultimately a bad idea.  Tapping your home equity reduces the value of what is probably your best or largest investment, your home.  Consequently, I always encourage people to review their finances to see if they can cut spending and save money before looking at getting a loan.  In addition to all of the links provided on this site, I encourage you to look at these free budget worksheets:

Debt Reduction Spreadsheet

Household Budget Template 

Family Budget Planner

Personal Budgeting Spreadsheet

Personal Budget Monthly Spreadsheet

Wedding Budget Template