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Making the Most of Home Equity

By Karen Lawson
Local Lender Columnist
Nov 7, 2007
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Headlines about diminishing home values can be disturbing, but if you own a home in the greater LA area, you may have a significant amount of home equity. Maintaining a cushion of home equity is important, but if you have goals such as starting a business, remodeling your home, or consolidating high interest rate debt, your home equity can be a valuable financial resource.

Home Equity Financing Expands Possibilities

Prudent use of home equity financing can help you get your finances in order and help you meet long term financial goals. Popular methods of accessing home equity include refinancing your mortgage or taking out a home equity line of credit (HELOC). Many Los Angeles homeowners refinance their mortgage loans to eliminate adjustable rates or features such as negative amortization. Depending on how much home equity you have, it may be possible to borrow an additional amount for paying off credit card and consumer loans. Typically, consumer debt carries much higher interest rates and costs than home mortgage financing.

Home Equity and Home Improvement

Accessing home equity for updating and/or remodeling your home can ultimately add value to your home while enhancing your quality of life. Talk with real estate professionals to determine what types of improvements add value in your area. Updating kitchens and baths, and installing outdoor kitchens, spas, and entertainment areas are examples of popular home improvements in the LA area. Home equity can also provide funding for purposes such as starting a business or returning to school. It's always a good idea to consider the big picture of such decisions, including potential short and long term implications. Consulting a financial advisor can help you decide the best course for using your home equity.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.