With this type of loan agreement, your lender can grant you additional funds as your home value increases without demanding to refinance your mortgage. It’s a good alternative assuming you will require another loan in the future. However, if you default on your monthly payments, the lender possesses the power to increase your interest rate by as much as ten percent.

Furthermore, it is not transferable to another lender, even at the end of the term as it may include conditions which another bank is not aware of, or deem undesirable.

Keep in mind that some banks only propose collateral mortgages, therefore be sure to examine the fine print.