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Home Equity Loans. Life Line or Anchor?

Many of the people that I consult with are deep in debt and are without sufficient income to pay the debt off regardless of how much they sacrifice or attempt to cut expenditures. While we could probably all do with a little less here and there, many expenses are genuinely necessary to maintaining home, health, and job security. First and foremost of those expenses for homeowners is the monthly mortgage payment. Fall behind in your mortgage and you will face hefty late fees and penalties. Fall far enough behind and you will be in forclosure and facing the loss of your home and any equity that you have worked for.
One of the worst missteps that many people in financial distress make is to take out a home equity loan to pay off unsecured credit card debts, signature loans, medical debt, or other general unsecured debts. While a home equity loan at a fair rate of interest can be a sound financial management tool, these loans should be approached with great caution and critical analysis. The title "home equity loan" sounds friendly enough. What it is, however, is simply a mortgage. If you already have a mortgage, it is a second mortgage. Like any mortgage, if you are unable to make the payments as they come due, the lender may forclose and take your home away from you.
Before you take a home equity loan be sure that your future income is rock solid and you have carefully analyzed your budget to determine that you can pay your current mortgage, all other necessary expenses, and the home equity payments without creating a financial hardship. Be sure to also add in the expenses that are not regular in nature, but crop up regularly in everyone's life. These include but are not limited to necessary car and home repairs, expenses of illness for family members, deductible payments for insurance claims, etc.
Finally, remember that in the State of Florida you cannot lose your home because of delinquent credit card, medical debt, auto repo deficiencies, or unsecured signature loans. These types of debts can also generally be eliminated in bankruptcy. Once you convert these types of debts into a home equity loan (mortgage), however, you can lose you home if you are unable to pay the debt back.

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Robert J. Warren, P.A., Attorney at Law - Gainesville Bankruptcy Attorney
Located at 703 N. Main St., Suite C, Gainesville, FL 32601.
Phone: (352) 377-6600.
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