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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