The equity you have built up can be used for many purposes on your advantage. Many people will use this equity to draw out cash by refinancing their house; the cash may be use to finance other major purchases such as second mortgage, making major improvement to your property or to fund their children educational expenses.

If you are in bad debt situation, your equity can be the hero in saving you from bankruptcy. You can pledge your equity to apply for a home equity loan which will allow you to borrow a relatively large amount of money to consolidate your debts. As compare to other personal or unsecured loan, a home equity loan is easier to get approve even you are in a bad debts situation; lenders may be more liberal because they view home equity loan as relatively safe. You can't disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the collateral.

Besides using your equity for bad debt consolidation, you may use it for other high-interest rates debt consolidation. One of the advantages of home equity loans are they typically have lower interest. And you could you this advantage to consolidate all your high-interest monthly payments into a single loan which had a considerably lower interest rate.

Typically you are allowed to refinance up to 75%, (sometimes 80%), of the value of the property on conforming loans whereas on jumbo loans you are limited to 70% of the property's value. For example, if your home is now valued at $150,000 and your loan balance is $70,000, you might be able to get a new $150,000 x 75% = 112,500 mortgage. That would allow you to repay the existing $70,000 balance and use the $42,500 for your financial needs.

Another possibility to use the equity to your advantage is home equity lines. Many lenders offers home equity lines for homeowners and allow them to draw cash advances with their credit card or write checks up to certain credit limit.

Before using a home equity loan or home equity credit line for any purpose, you should be aware of the pitfalls of these loans. The main thing is that you can lose your home if you fail to meet the payment schedule required by the loan. Therefore you need to consider it carefully before do a cash-out with your equity.

Posted by David Humes on February 14, 2010 at 11:33 PM

About David Humes
Want to know what is selling in your neighborhood and what has sold in the last 90 days, then get your FREE Market Snapshot (http://dwhumes.topproducerwebsite.com/free-market-report.asp) at HumesRealty.com. Brief Bio: Licensed real estate agent since 1993 ePRO ABR (Accredited Buyer's Representative) CREN (Certified Real Estate Negotiator) PIC (Property Image Consultant) Graduate Real Estate Institute (GRI) designation since 1994 SFR (Short Sales and Foreclosure Resource) Member of Lexington Bluegrass Association of Realtors Member Kentucky Association of Realtors Member of National Association of Realtors Member of SMC (Sales and Marketing Council) of the Lexington Homebuilders Association Member of Commercial Investment Council of Lexington Bluegrass Association of Realtors Licensed CPA since 1978 Past President of Blue Grass Trust for Historic Preservation Past City Councilman of Midway City Council Past member of Woodford County Planning & Zoning Commission Thoroughbred Horse Farm experience with Ashford Stud and Payson Stud Inc Member of the Equine Financial Group




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