Using Home Equity as a Supplement for Income
A home equity loan or line of credit can provide some security when facing the possibility of losing a source of income, such as a job layoff, or a business slump. The best time to apply for a home equity loan of course, is before the situation creates late payments, or a problem in qualifying.
Credit is mostly available when you don't need it, and harder to get when you do need it. If you can't show the lender a stable source of income to repay the loan, then you will either be declined, or have to settle for higher rates and fees to compensate. The same goes for having recent late payments on your credit, so when possible, take action before the situation arises.
There are two ways to use your home equity without selling or refinancing. One is a home equity loan, which is paid in a lump sum, with fixed rate payments over a specified period. The other is a home equity line of credit, which has a variable rate and is like a credit card with a revolving balance. You draw against the line of credit when you want, like using a credit card, and as you repay the balance, the credit becomes available again.
You may feel uneasy about getting deeper into debt during a period of unemployment or when less money is coming in, but a home equity loan or a line of credit can be a sound way of meeting your financial obligations and provide for living expenses. |
