Downing Frye Realty Inc.
Molly Eovino, Downing Frye Realty Inc.Phone: (239) 537-5100
Email: [email protected]

Advantages and Disadvantages of Borrowing Against Your Home

by Molly Eovino 11/10/2019

Borrowing against your home is called home equity. Home equity is the value of your property after deducting your remaining mortgage balance and is one of the sources of income for homeowners. After ultimately paying off your mortgage, it’s possible that the value of your property increases – which also increase your equity amount. 

If you live in a neighborhood that improved in quality over time, the value of your home may get appraised at a higher value than the initial cost of purchase. Borrowing against your home means using your home equity as collateral to take out a loan. Using your home equity to lend serves as a guarantee to the lender that you will pay the  loan back. If you default in repaying the amount borrowed at the stipulated time, the financial institution may evict you out of your home and put it up for auction. Borrowing against your home is a risky decision to make and one that requires due caution. After paying off your mortgage of about thirty years, it would be regrettable to lose your property to a home equity loan. 

There are various reasons why homeowners seek to borrow against their homes - if properly used, it could be a sizeable benefit to the owner. The equity loan debt repayment is usually for five to fifteen years. There are two options for granting equity loans; the large lump sum of cash or the equity line of credit. 

Using the large lump sum of cash method allows you to take a considerable amount up front which you repay overtime in fixed monthly installments with a fixed interest rate.  The equity line of credit has a more flexible plan, and you might get approved for a maximum amount available. Out of the amount agreed, you can borrow the amount you require and also borrow multiple times from the amount approved. The disadvantage to this option is that lender can freeze your line of credit unexpectedly even before you get the chance to use the money. 

The advantages of borrowing against your home include:

  • It comes with a fixed interest rate that’s usually lower than other forms of loans
  • It’s a more accessible alternative to get a considerable amount of money in a short time. 
  • It’s secured on your house value.
  • You get cash when you apply for an equity loan.
  • You can remain in your home while repaying the loan

Disadvantages of borrowing against your home:

  • You have to make monthly payments.
  • Failure on your part to repay the loan would lead to giving up your property. 
  • The cost involved in getting an equity loan might push a borrower into more debt.
  • After acquiring the equity loan, you still have to pay your regular property taxes, maintenance cost, and your home insurance bill. 

Be careful when deciding to borrow against your property. Be sure you have all the information you need and a solid financial plan.

About the Author
Author

Molly Eovino

Except for a short time, I was a permanent resident in Cedar Rapids, Iowa. The heart of the Midwest!  I visited Naples for 30 years, as my parents lived here, watching the community grow from a fishing village to a destination in SW Florida. When my last college bound child hit the University of Iowa in 2001, I hit the road!

I brought with me over a decade of experience in Real Estate, excellent education, and a broad range of interests to jump into the Naples scene with gusto! I "speak" golf and tennis, theater and location/mapping!

In Naples, you will find that nearly everyone is from somewhere else! As a result, your friendships will span the nation and globe, with immediate contacts in England, Germany, France, the East Coast, and the Midwest! Once visitors have experienced Naples, they want to call it home, and then "visit" where they originate from! I am no different, and have tried to learn as much about the town and all it´s history and activities to feel like a native!

I promise you a city tour to help you fall in love with the flavor of Southwest Florida, from the lure of the beaches, morning and sunset, to the different types of golf (equity or bundled). May I interest you in the gourmet flavors that abound, from food to entertainment?

As an active community volunteer in Iowa, I worked on Junior League fundraising events, the Cancer Crusade, March of Dimes, and Kidney foundation drives, and was extremely active in the school committees involving sports (football,basketball, track); cheerleading; and 4 years of show choir productions, Concert Choir, and Madrigal Singers!

Naples has already found a nitch for me in the Naples Players Theater, where I volunteer as a backstage dresser to advance their enthusiastic cause!  I just haven´t gotten on stage...  Growing up in a musical environment,Broadway shows in Naples keep me humming.

The Naples Children & Education Foundation draws my heartfelt attention& volunteer hours  from summer months to the annual Naples Winter Wine Festival in late January.  Their mission statement "supports effective, disciplined charitable programs that significantly improve the physical, emotional and educational lives of underprivileged and at-riskchildren in Collier County, Florida".  As a non-profit organization,the wine festival raised nearly $12 million during the 2019 event! From helping with mailings, to what I call the "quilting table of many hands" for events, I've met many like-minded friends, who believe it's all about the kids!

My educational background spans a multitude of areas, but now they all concentrate on improving my real estate performance. It includes:
BA degrees in Psychology & Vocational Rehabilitation from the University of Northern Colorado.
Mediation Seminars for the Iowa Farmer-Creditor Mediation Services.
Real Estate License in Iowa, REALTOR® 1988
Graduate of the Realtor´s Institute (GRI) 1992
Certified Residential Specialist (CRS) 1994
Accredited Buyer Representative (ABR) 1999-2018
Licensed Broker-Associate, Florida, 2001
Certified Distressed Property Expert (CDPE) 2009
Certified Investor Agent Specialist (CIAS) 2012
Resort & Second Home Property Specialist (RSPS) 2016

As you can tell by my "personal resume", we will become friends as well as business associates. I enjoy teaching my customers Real Estate-ese so that you can make an educated decision regarding your first or second home, or your new rental property. The market in Naples is excellent, and truly is a beautiful Paradise! With year-round tropical temperatures and deep blue skies, I hope that you will agree that I provide

"Midwest warmth in the Naples sunshine"!