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Lenders will not only want to know how much equity you have in the home and your ability to repay the loan, they want to know what you plan to do with the money.Home equity loans have traditionally been used to add to the value of the house, paying for such things as kitchen remodeling or a new roof.The lender will assess your creditworthiness and the local real estate market to decide how large a credit line it will offer and at what interest rate.The amount can be substantially less than your home equity.Lenders won’t give you an equity loan or an equity line of credit unless you meet underwriting standards.Even if you have enough equity in your house to cover what you want to borrow, lenders don’t want to have to foreclose to get their money back.If you can’t make the payments, you could lose your home.
Requiring borrowers to meet lender standards is common practice for all loans.
Using a home equity loan for credit card debt works for some people but could lead to disaster, especially for those with trouble managing consumer debt.
The biggest potential problem is that you convert a consumer debt, which doesn’t require collateral, into a home loan that does require collateral.
Home equity loans almost always come with lower interest rates.
Instead of a 20% APR, your annual interest might be as low as 5% in the summer of 2018.
You’ve made mortgage payments for the past 15 years, your home has soared in value and you now have access to a pool of cash using a home equity loan or line of credit.