A national housing bubble has caused home values to drop in many areas of the country. Fortunately, this hasn’t been much of a problem for Kansas homeowners. Home values in this state have held steady for the most part. Cities like Topeka, Wichita, and Kansas City have even seen increases. If you are thinking about taking out a Kansas home equity loan, now may be the best time to do it. However, there are a few things you will want to watch out for.
Gambling with Your Home
Kansas home equity loans can be an excellent source of financing when you need money for home improvements, education costs, or other expenditures. At the same time, borrowing from your equity can also be a little dangerous. Home equity loans are secured debt. If you find yourself in trouble financially and miss a few payments, you could lose your home.
Borrowing Too Much
When getting a Kansas home equity loan, it can be very difficult to determine how much you should borrow. If you borrow too much, you run the risk of burning through all of your equity. You may also find that making the monthly loan payment can be difficult. On the other hand, if you borrow too little, you’re stuck, because you won’t be able to get more money out of the loan without refinancing.
Nowadays, it is very common for lenders to require that a borrower carry private mortgage insurance (PMI). This is especially true if you have less than 20 percent equity built up in your home. PMI premiums can add anywhere from $20 to $150 to your mortgage payment each month. The only way that you can avoid paying PMI is too make sure that your loans- both your current mortgage and your home equity loan- don’t add up to more than 80 percent of the value of your home.