Homeowners who need a large lump sum of cash are always free to dip into their equity with a home equity loan. While this type of financing is easy to get, homeowners should beware. There are certain risks associated with home equity loans.
Falling Home Prices
In some areas of Massachusetts, home values are rising. Cities like Boston and Nantucket have seen an average price increase of over 10 percent in the last year. Other parts of the state haven't been so lucky. Average home values have fallen in several areas of Massachusetts.
This has proven to be a serious problem for some of the people who borrowed from their equity. Anytime home prices fall, you run the risk of owing more on your home than it is actually worth. For people who borrowed 100 percent of their equity or more, the situation is quite a predicament. They stand no chance of selling and getting enough money to pay off their loans, let alone make a profit.
The other major risk with home equity loans involves a borrower's ability to pay back the loan. Nowadays, it is so easy to borrow money now and worry about paying it back later. This is a dangerous philosophy when it comes to home equity loans because the loan is tied to your house. If you get behind a few payments or default on the loan altogether, you risk losing your home.
Before applying for a Massachusetts home equity loan, you should seriously consider your ability to repay the money you have borrowed. Think about what will happen if you lose your job or become disabled and unable to work. Do you have insurance? Will you still be able to make your payments? All of these things should be carefully considered before you extract any equity.
Visit Massachusetts Lending Center to see our Top 3 Home Equity Lenders in Massachusetts , whether you are looking for home purchase, refinance or a home equity loan.