The Florida real estate market has been very strong for the past decade or so. In fact, in cities like Clearwater, Fort Lauderdale, Sarasota, Orlando, Tampa, and Miami, house values have been on the rise significantly, even doubling in some area. For homeowners, this gives them a number of really good benefits, one of which is the availability of better Florida home equity loans. These loans now come with far better interest rates, so if you own a property and have some financial need, you could tap into the reserves of your sunshine home.
What Are Home Equity Loans?
It is a type of loan whereby you can borrow against the surplus money that is in your property. For instance, if your home is worth $200,000, but the outstanding balance on your mortgage is juts $100,000, then you have $100,000 in equity, which lenders can borrow against. It is, in effect, a second mortgage.
You need to see your home as a financial asset, there to help you if you have financial difficulties. There are all sorts of emergencies in which you may require a home equity loan. Perhaps you need a lump sum of money to pay for your child’s college fees. Maybe you have debt and want to consolidate them, thereby increasing your disposable income. Perhaps you only need a little bit of money to perform an essential repair.
There are two main types of second mortgages:
- The fixed rate loan.
- The adjustable rate loan.
It is important to understand, however, that you are taking out a loan, and this always comes with its own pros and cons to weight up. Some of the pros include:
- That it is very easy to apply for these loans as a homeowner.
- That they are available for those with bad credit, as it is secured against your property.
- That you can borrow higher amounts than what you could from a bank, so long as you have the equity.
- That you can finally enjoy the financial reward of investing in a property.
- That the interest rate may be tax-deductible.
While this all sounds fantastic, there are some disadvantages to be aware of as well. Some of those include:
- That the value of your home may drop significantly after a natural disaster such as a hurricane, which is quite common in Florida.
- That, should you not meet the repayments, your home may be repossessed.
- That the repayment period over these loans is much shorter than a mortgage, which means your monthly payment will be higher.
A home equity loan may be just what you need to get you out of financial dire straits. At the same time, it could make things much worse, as the loan is not appropriate for everybody. That’s why you must consider the pros and cons, and discuss those with a financial expert before you decide whether to apply. Overall, however, the home equity loan is an opportunity for you to come out of the shadow of your sunshine home.