Borrowing for Your Small Business
Tapping the Equity in Your Home
Convenience can make tapping the equity in your home rather appealing. Just be careful that you don't take a casual view about draining the equity in your home—it could jeopardize your most important asset.
CAUTION: If you fail to make the loan payments, you could ultimately lose your home in a foreclosure.
There are generally two types of such loans: home equity loans and home equity lines of credit.
Home equity loans, sometimes referred to as second mortgages, involve borrowing money and making principal and interest periods over a specified period of time. Here are some features of home equity loans:
Another way to tap the equity in your home is with a home equity line of credit. Instead of borrowing a fixed amount of money at one time, you can establish a line of credit against the equity in your home and draw on the money as you need it. The lender will set a limit on the total amount you can borrow and will issue you checks. It is almost like a checking account, except you have to pay back the money and you must pay interest on the balance due. Following are some features of a home equity credit line.
CAUTION: If you get a variable rate loan, be prepared for the fact that rates may rise—can you handle the resulting increase in monthly payments?
Rule of thumb: Your mortgage payments, property taxes, and homeowner's insurance should not be more than 28% of your gross income; and those costs plus any other debts you have should not be more than 36% of your gross income.
With this type of loan you only borrow when you need the money and you are not required to fill out additional loan applications—just the initial one.
Investments and Insurance products:
|NOT FDIC INSURED||NOT BANK GUARANTEED||MAY LOSE VALUE|
|NOT A BANK DEPOSIT||NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY|
Securities and advisory services are offered through Santander Investment Services, a division of Santander Securities LLC. Santander Securities LLC is a registered broker/dealer, Member FINRA and SIPC and a registered investment advisor. Insurance is offered through Santander Securities LLC or its affiliates.