Definition
A one-time loan where you borrow against the equity in your home. You receive a lump sum and repay it over time with fixed payments.
What to consider
- Know the fixed payment schedule before borrowing.
- Plan your budget to comfortably cover the monthly cost.
- Understand that missing payments can risk your home.
Real world scenarios
- To consolidate high-interest credit card debts, Bella secures a home equity loan, locking in a fixed monthly payment.
- Paul invests home equity loan proceeds in finishing his basement, potentially boosting his property’s value.
- Sticking to his repayment plan ensures Leo doesn’t risk foreclosure by missing payments on his home equity loan.
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