How Risky Are Home Equity Line Loans?

Home equity line loans do present the risk of foreclosure if you default. Many people think they cannot suffer foreclosure as long as their mortgage is in good standing. However, a home equity lender can buy your mortgage and then force you into foreclosure. As such, home equity loans are among the riskiest on the market for borrowers.

When to Take a Home Equity Loan

Overall, going into too much debt presents unique risks if you do experience an emergency. As a home owner, you have a mortgage and likely other expenses. Adding a home equity bill can be a threat to your financial security. Further, building equity in your home is the fastest route to financial freedom. Going further into debt instead of allowing your equity to grow can be detrimental. That being said, there are some times when a home equity loan is practical:

  • Your mortgage is paid off or nearly paid off, so you have very little other debts
  • The amount is minimal, making no real impact to your monthly bills
  • You will be using the funds to build further equity in your home by improving your property
  • It is financially necessary for you to take the loan due to an emergency such as a medical procedure