During the last year, property values have declined in some areas of Indiana. This can make it a little difficult to dip into your equity and get the cash you need to pay off debts, college tuition, and home improvement costs. However, it is possible; zero equity home equity loans are available. There are a few catches, which is why you will want to do your homework before applying. Here are a few things you can expect when it comes to zero equity home equity loans:

Private Mortgage Insurance

If you get a new mortgage and finance more than 80 percent of the value, you will be required to pay private mortgage insurance (PMI). The same rule applies with zero equity home equity loans. The premiums for your PMI will vary depending on your lender and the amount that you borrow, but you can expect to add anywhere from $20 to $150 to your payment each month. You will be required to carry this insurance until you have built up 20 percent equity in your home.

Higher Interest Rates

Indiana home equity loan rates currently average 7.64 percent. If you will be getting a zero equity home equity loan, you will be paying a rate that is at least 2 to 6 percent higher. As with any loan, your rate will depend on your credit history, the amount you borrow, the lender you choose, and other various circumstances.

More Risk

Zero equity home equity loans aren’t right for everyone. Before applying, you will want to assess the risk factor, as well as the amount of time you plan to keep the home. If you find yourself in financial trouble, you will be hard pressed to get any more money out of your property. You may also find it difficult to recoup the money on your loans if you decide to sell.

By: Jane A. Hale