Home equity loans can be a wonderful source of credit. However, when it comes to home equity loans, you can’t afford to make a mistake—your house is the collateral. Below are the three the most common, and the most expensive, home equity loan mistakes.
Mistake One: Choosing the Wrong Home Equity Lender
The competition between home equity lenders is fierce. They are currently offering the lowest interest rates that have been seen in years. Before choosing a home equity lender, there are a few things that you should consider, such as interest rates, closing costs, lending fees, and loan terms and conditions. Don’t be afraid to shop around. Choosing the wrong lender could be one of the biggest home equity loan mistakes that you can make.
Mistake Two: Borrowing Too Much
Borrowing too much money is a common home equity loan mistake. No matter how much money you borrow, you will have to pay it back. Consider this carefully before deciding on the size of your home equity loan. Remember, if you get a large loan and cannot make the large payments, you could be putting your home at risk.
Mistake Three: Missing Payments
Taking out a home equity loan is serious business, and should be treated as such. If you take out a home equity loan, the worst mistake that you can make is missing payments. Once you get behind, it can be very hard to catch up. If you miss too many payments, the bank can seize your house. Before taking out a home equity loan, make sure that you carefully review the terms and conditions. Ask your lender what will happen if you fall behind or miss a payment. You may also want to ask about grace periods, skipping a payment, loan insurance, and refinancing
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