Skip to main content.
Menu
Home Equity Loans - A Powerful Financial Tool
05/29/2015

Home Equity Loans - A Powerful Financial Tool

The equity in your home (home value minus your existing mortgage) can serve as collateral for additional borrowing. 



While there are risks and costs with this strategy, home equity loans usually offer attractive rates, convenience and often tax benefits.


How does a home equity loan work?

The amount an institution will lend depends on the equity in your home and your other credit characteristics. Often they will lend up to an amount so the total debt against your home (including first mortgage and other loans with your home as collateral) is less than 80% of the current value of your home.

Interest rate are usually variable and tied to a published index, like the prime rate. Be aware of institutions that offer low initial "teaser" rates that will increase later. To view North Shore Bank's current rates and learn more, visit our website.

Usually, you repay the loan in regular installments and with minimum repayments required. With some home equity loans, the minimum payments may only be the interest on the loan and you may be required to repay the loan at a certain date. You need to read the details carefully.

Lenders may provide special checks for you to access the loan proceeds. There are usually forms to sign and an approval process that is not too difficult. There may be some form of commitment fee.


Attractions of Home Equity Loans

Convenience - Usually it is easy to apply and the approval processes are fast. Once you are approved, their commitment can act like a line of credit. You do not have to borrow it all at once.

Interest rates - Interest rates on home equity loans are usually greater than those on first mortgages but less than those on credit cards. Using the proceeds of a home equity loan to pay off credit card debt will usually save you money.

Flexible uses – Even though you are borrowing against your house, there is no requirement to use the money on your house.  A home equity loan can be used for college costs or even to buy a car.

Tax benefits - For individuals that itemize their tax deductions, the interest paid on home equity loans can help to save some income tax. Consult with your tax advisor for more details.


Beware of the risks

Borrowing against the equity in your home should be considered carefully. Even though there are benefits, these types of loans are like other loans - you pay interest and they must be paid off. Read and understand all the details before signing. Loan documents can be confusing and the easy process of getting this type of loan can mask the costs and risks. 

More blog posts

Still have questions?  Email Us  |  Visit your neighborhood branch.  |  877.672.2265
Online Banking Login
  Locate a North Shore Bank branch in your neighborhood. Locations
& ATMs
Contact North Shore Bank. Contact
Us
  Interest Rates Rates Open your account or apply for a loan. Open
Accounts
  Ask Us A Question FAQs Learn more about our Video Teller system. 70 Hours,
7 Days a
Week
Top Frequently Asked Questions
Subscribe to our business newsletter.
Learn more about North Shore Bank's products and services.
Mobile Banking - Safe & Secure
Sign up for eStatements.
Learn more about chip-enabled debit cards.


Routing Number: 275071356    Customer Service: 877.672.2265
Routing Number: 275071356 | Customer Service: 877.672.2265 | Member FDIC | Copyright North Shore Bank