Tuesday, January 26, 2010

Home equity smarts

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Just keep in mind, when you use it, you lose it. A home equity loan, by it's very nature, is an equity-depleting loan. You don't have an unlimited amount of equity to bank on.

by Broderick Perkins
© 2010 DeadlineNews.Com

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Deadline Newsroom - Safe home equity use can stimulate your financial outlook.

However, excessive spending against the unencumbered value of your home could leave you in, well, financially transmitted distress.

Home equity is the difference between your mortgage balance and the value of your home. When you buy a home with a down payment of, say 20 percent, you have a 20 percent equity stake in your home. Over time, mortgage payments and appreciation can give you a larger equity stake. Likewise, depreciation can reduce your stake.

Lenders allow you to borrow money against some -- but rarely all of your home equity these days -- provided you qualify with good credit and adequate income.

Just keep in mind, when you use it, you lose it. A home equity loan, by it's very nature, is an equity-depleting loan. You don't have an unlimited amount of equity to bank on.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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