Home Equity Loan

Use a home equity loan for debt consolidation
If you are overwhelmed by debt, using your home equity line of credit for debt consolidation can be the the answer.

To estimate how much home equity you have in your home, simply subtract the remaining balance on your home mortgage loan from the total value of your home. If your home is valued at market price RM600,000 and your outstanding mortgage owed is RM300,000, your home equity is RM300,000. If you were to sell your house, that is the difference you will get. Home equity loan allows home owners to tap into their home equity (without selling the house) by borrowing against it.

How can home equity help to consolidate debt?
Using a home equity loan can actually save you money. Using a home to get a loan is one of the cheapest ways to borrow money. Unsecured debts like credit card debt, car debt, etc typically carry high interest rates. That means, you can spend a considerable amount of money each month on interest payments and still be doing nothing to reduce your debt load. By consolidating your debt using your home equity, you will be saving on the interest. Besides saving a significant amount in interest payments, and also have the convenience of your debt consolidation i.e. debts being wrapped up into one payment.

Important point to remember
Your debt is now in your second mortgage, so it is secured with your home. If you default on the loan, you can lose your home. Therefore, it is very important to make sure you can make your monthly payment. If you have poor financial discipline, cash out refinancing may lead you to rake up more debts. Try to restrict the use of your home equity financing to the following uses:

• Debt consolidation because it can help you save money
• Emergency repairs and replacements of fittings, roofs, tiles, flooring etc
• Renovation and landscaping projects that can enhance the value of your home
• Childrens’ education

Together with our network of personal finance advisors, our mortgage consultants can help you with refinancing and applying for home equity loans. Just feel free to contact us if you have any enquiries. Our consultants are more than willing to help.