Looking to purchase a home but don’t have the funds to save up for a down payment? If so, you might be interested in taking out an equity builder loan.
This is a loan that enables you to build home equity at no cost. However, there are some catches.
Wondering what these are? Then keep reading. Here are the pros and cons of an equity builder loan.
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The Pros of Home Equity Builder Loans
There are a number of advantages to getting a home equity builder loan. These include the following:
Instant Equity
If you’re interested in building equity in a home, a home equity builder loan will serve you well. These loans are essentially free money. They serve as down payments for home purchases and thus provide instant home equity for those who are low on funds.
The Ability to Purchase a Home
In many cases, in order to obtain a mortgage, a home buyer must initiate a down payment. Unfortunately, obtaining the down payment required isn’t always easy.
Fortunately, home equity builder loans operate as down payments. So, even if you have no down payment of your own, you can use a home equity builder loan to help you obtain a mortgage.
Forgivable
While home equity loans are referred to as loans, they’re essentially free money. This is because, if you stay in your home past the initiation period of the loan, it’s entirely forgiven. In other words, you don’t have to pay any of it back.
That said, if you leave your home before the initiation period ends, you will be forced to pay the loan back. Note, though, that these loans generally don’t accumulate any interest.
The Cons of Home Equity Builder Loans
While home equity builder loans are certainly advantageous, they do have some downsides. These include:
You Could Potentially Be Required to Pay the Loan Back
Home equity builder loans have the potential to serve as free money. However, if you sell your home within the initiation period of the loan, you’ll have to pay the loan back in its entirety.
That said, there is no interest accumulated on a home equity builder loan. So, you won’t really be losing any money either.
Not Everyone Is Eligible
Generally speaking, home equity builder loans are only available to low-income individuals. They’re also typically only available to first-time homebuyers. That said, eligibility varies based on the specifics of the loan.
Wondering how to build equity in your home without a home equity builder loan? Click that link!
An Equity Builder Loan Could Be Your Key to Home Ownership
If your goal is to own a home, an equity builder loan could be just what you need. Provided you stay in your home for the initiation period, you won’t have to repay a cent of your loan. You’ll, in essence, receive free money, and a lot of it as well.
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