Home equity loans are a form of financing that is used for large-scale projects and that require us to put our homes as collateral to be able to hire them. While putting up a home as collateral carries the risk of losing it if we default, this will allow us to obtain large amounts of mortgage-like financing for various projects. Of course, before hiring them it is essential to be completely sure of being able to face the payment of the monthly installments. For what purposes can we allocate the financing of this type of credit?
Financing for companies and entrepreneurs
Especially in these months of economic uncertainty and with many businesses affected by the state of alarm, obtaining bank financing for companies (despite ICO credits from the Government) to start a business or keep ours afloat is more complicated than usual.
If we own premises or a home, we can use it to obtain up to 40% of the value of the property and obtain the credit we are looking for. In addition, in most cases, they usually grant an initial grace period of up to five years and do not require income to apply.
This purpose is the best known of this type of PHH mortgage loan and is that it allows people with several credits of large amounts to be able to unify all the loans into one and pay a lower monthly payment to the sum of the installments they currently pay to rebalance. your finances.
By having terms of up to 20 years, similar to those of a mortgage, they allow you to choose a much lower installment according to the financial situation of each one. Although lowering the fee will mean lengthening the term and, consequently, generating more interest, it will be an alternative to defaulting or not being able to make all the payments.
Of course, we must always keep in mind that it will only be a viable alternative as long as we are able to face the monthly payment, otherwise, we will be in the same situation as before reunifying the credits. In general, entities usually set the maximum indebtedness of 35% of the monthly income of each individual to avoid over-indebtedness and to use it responsibly.
acceptance of an inheritance
Accepting an inheritance can be expensive. In fact, the cost of Inheritance Tax can be several thousand euros or even more than 100,000 euros depending on the Autonomous Community, and makes many heirs choose to reject their legacy for not being able to pay the Tax.
One of the characteristics of home equity loans is that they also allow us to put the property we inherit as collateral, so we can accept the inheritance and pay its cost with the home equity loan month by month instead of all at once.
In addition to these purposes, they can also be used for many others such as a comprehensive home reform. In short, the purpose of home equity loans is to allow us to obtain large amounts of financing with the guarantee of our homeownership. As long as we use them responsibly and are completely sure of being able to pay the installments, just like when we request any type of financing.