In the country’s current economic climate, using your home’s equity to post collateral for a loan can be pretty risky, The New York Times reports.
For many homeowners, their property is the largest asset they have and taking loans against its equity can easier to obtain than other more-conventional loans. According to the Times, this trend was popular among small business owners between 2001 and 2006, but betting their homes to keep their companies afloat comes with a much greater risk now.
The decline in home prices during recent years means that fewer homeowners have this option. In addition, small business revenue has decreased between 10 and 70 percent, leading to an increase in the demand for this loan option.
In addition, small business owners who bet their house on a loan can make it especially uncomfortable for their spouses and families. Instead of putting your home up as collateral, refinancing your home to take out equity as cash can sometimes be a more viable option depending on your personal economic condition. According to Freddie Mac, mortgage loan rates continue to hover hear 4 percent which makes refinancing your home loan more affordable than years past.
Latest posts by ChuckM (see all)
- A Millennial Guide to Buying Your First Home - January 4, 2017
- Getting to the Truth: Top Mortgage Misconceptions and Facts - December 28, 2016
- What Are the Most Common Reasons Why People Get Turned Down for Loans? - December 14, 2016