In most cases, borrowers can
deduct the interest on loans up to $100,000
on their taxes.
•
The loans carry lower interest
rates than credit cards and unsecured personal
loans.
•
They can be used for lots of
things: debt consolidation, home improvements,
tuition, medical costs, emergencies and big-ticket
items.
Cons
•
If you default, you could lose
your home, your biggest asset.
•
Such loans can be a risky spending
tool for younger homeowners who are not established
in their careers and have less experience owning
a home and managing money.
•
The loans can be risky for
older homeowners who would be tapping their
nest egg close to retirement.
•
Credit lines have
variable interest rates, so monthly payments can
rise, even if your income doesn't.
•
If your home's
value drops, you can end up owing more than the
house is worth -- a bad situation if you need
to sell the house.
•
Using an equity
loan to pay off debt might make monthly payments
cheaper but could cost you more in the long haul,
because you're taking much more time to pay off
the debt.
•
You might not be
able to lease your home during the term of your
loan.
