Home Equity Debt
When should I consider tapping into a "home equity line"?
Be very careful and cautious about tapping into your home equity line because in fact this is the roof over your head. One perfect example of a time you might want to tap into your home equity line is if you want to improve the value of the property. You want to do a big remodeling project. So, you're really actually improving the value of the property. That would be a good time for taking out a home equity loan. Also, suppose you need the money in an emergency. That's a really good time to think about tapping your home equity loan. You should not tap your home equity for any kind of asset that's going to depreciate. That's definitely something you don't want to do. Money that you're going to spend immediately. Sometimes you don't even want to tap it to consolidate your credit card debt for example because then your house is on the line to pay off your credit card debt. It would really be better if you could find a different way of paying off that debt.
How much should I borrow on a home equity line?
You're probably going to be limited, as far as how much you can borrow on a home equity line, by how much a lender will lend you. There are standards. They don't like to lend more than, say, seventy-five to eighty percent of the value of your home; and that would include the first mortgage. So if you still have outstanding mortgage debt, that amount of money would go in there as well. If there's any wiggle room between what you owe on your first mortgage and seventy-five to eighty percent of the value of your house, then that's the amount you could borrow as home equity. But again, your house is on the line if you're borrowing this money, so you don't want to borrow frivolously. You don't want to borrow any more money than you feel comfortable with.
