If you are a homeowner and are in need of some extra cash, you may want to consider getting a home equity loan. Equity is the amount of value you have paid off on your property. For instance, if your home mortgage is worth $150,000 and you have paid off $50,000 of your mortgage, you have $50,000 in equity on your home. With this equity you have in your home, you can take out a home equity loan on this money.
There are two types of home equity loans available; Standard Home Equity Loans and Home Equity Lines of credit. With a Standard Home Equity Loan, your loan is assured by the amount of equity you have in your home. This is the type of loan option you should choose if you are in need of a very large loan. A Home Equity Line of Credit is akin to a credit card. With this option, you can withdraw money from an equity account that has been set up with your equity amount. This is a better option for you if you are not needing a large amount of money.
A Standard Home Equity loan generally is a little more difficult to obtain, only because it has a more complex process. These loans generally have a fixed term to them, meaning you will have a pre-determined number of payments over a set period of time. They generally will also have a fixed interest rate and fixed monthly payment. The amount of the loan you receive will be provided to you in one lump sum.
With a Home Equity Line of Credit, an account is set up for the money to be placed into. You can then make withdraws on the money as you need it, and then make payments back into the account. These types of loans generally have a fluctuating rate of interest, however you will only have to pay this interest if you have a balance on your account from the money you have borrowed.
There are many reasons why a person may choose to take out a Home Equity Loan. Many people take out these kinds of loans if their home is in need of repair or reconstruction. If there are large changes they want to make, such as a new heating and cooling unit or new windows, they will take out a home equity loan to pay for them. Others will use a home equity loan as a means to get out of other debts. They will use their Home Equity loan as a form of debt consolidation, to pay off some of their other debts and only have to make one monthly payment. And still others may take out a loan to pay for a new car, or even a large family vacation.
There are countless reasons why a person may choose a home equity loan. Once you get the money, it’s up to you what you choose to do with it. Just keep in mind that this is a loan you will have to pay back, and if you fail to do so, it could very well cost you your home and all of your equity.
By: Andrew Obidowsk
Posts Tagged ‘Home Equity Lines Of Credit’
Reasons to Consider a Home Equity Loan
December 15th, 2009Secured Home Equity Loans Give Manure Financial Growth
December 10th, 2009A benefit of a home equity line of credit is that the approval process is less stringent than a home equity loan. However, a lender will still look at your creditworthiness and the market value of your home. A home equity line of credit often allows for a higher percentage of the appraised value to determine the maximum amount of the credit line. Also, closing costs are usually lower than a home equity loan. In fact, there is so much competition that many lenders offer home equity lines of credit with no closing costs. Beware that these loans may have a higher initial interest rate, so compare the APR carefully.
Followings are some smart ways to spend Secured Home Equity Loans:
• Take control of your debt.
Tired of paying high-interest monthly payments to credit card companies? Pay off all those debts at once and enjoy one low monthly payment.
• Remodel your home.
In addition to the obvious short-term benefits, home improvement can be a great investment. Adding a bedroom or updating bathrooms is a great way to increase the value of your home.
• Finance an education.
A Home Equity of Credit may be just the thing for covering tuition bills and other expenses as they come due.
• Buy your dream car.
If your car is on its last legs or you’re ready for an upgrade, your home’s equity can help put you in a new set of wheels.
Once you have decided upon the home that you are going to buy, you can quickly apply for secured home equity loans. Your old house can serve as collateral. Home equity loans offer you the following benefits:
• Larger loan amount
• Flexible terms
• Bigger repayment term
• Nominal interest rates
Besides knowing advantages of secured home equity loans, you should also get acquainted with some things that you should be careful about. First, you need to completely aware of your own requirement. Secured equity home loans offer bigger amount does not mean that there is no limit. You should go for a limit, which is affirmation with your financial status and need.
Bad Credit Home Equity Loans: Solves All Big Problems
November 25th, 2009The home equity loans are good for one time large monetary plans. The borrower in these loans can use the equity of their home as collateral for getting the required money. Not only the good credit holders, a special type of loan has been made for the bad credit holders too and these are known as the bad credit home equity loans.
Large monetary requirements like buying a car, repairing your house, paying large debts off or paying huge medical bills can be handled with these loans. It offers an amount ranging from £5,000 to £125,000 with a repayment term of 5 to 15 years. For getting this loan amount you must place the equity of your home as collateral. The value of the collateral decides the loan amount in it. So, you may find some lenders that are willing to offer 100 percent of the home’s value.
This equity is decided by finding out the difference between the market value of a home and the value to be repaid. This can be explained with an example- suppose; you have bought a home for £ 100,000 two years ago and have repaid £25,000 to the lender till now. If the market price of that house has now risen to £150,000 then the home equity will be the difference between the money left to pay the lender and the present market price, i.e., £75,000. This home equity, you have to keep as collateral for getting these loans.
These are also said to be the second mortgage as the collateral offered here is the equity of a property. The repayment term too is shorter than the first loan.
Home equity lines of credit are certain kind of loan that holds the greatest advantage of lower interest rates. Tax benefit is another reason for which people mostly prefers to go for these. Thus, the bad credit home equity loans are of good help and use to the borrowers with bad history. CCJs, arrears, late payment, defaults and bankruptcy are allowed here.
By: Johns Tiel
