Home Equity Loans – Basics

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Your home is one of the most important assets you could ever have but putting it up for loan can be a risky decision since lenders can just confiscate the house if you fail to pay your monthly amortization. However, there are schemes such as home equity loan that you can apply to increase your home’s market value and at the same time protect it from getting liquidated.What Is Home Equity LoanHome equity loan is essentially the additional amount of money you can avail from the bank where you mortgaged your house. When you file for a mortgage loan, your payment plan would be determined by the net worth of your collateral, which is your home.Before the lenders release the amount being loaned, they will calculate the Annual Percentage Rate (APR), withhold a certain amount and pay the loan applicant a sum lower than the actual worth of the house being mortgaged. A mortgaged house cannot be subjected to another mortgaged unless you have covered all the payments.However, you can subject it to this loan if the property has increased its market value. As the property appreciates over time, it gets extra potential and can be obtained from the loan provider by applying for a Home Equity Line of Credit (HELOC).How to Apply for Home Equity LoanThe amount of your loan is determined by looking at the difference between the current worth of your home minus your standing payable amount to the bank. So if based on your recent appraisal your home is currently worth $100,000 and your standing overall payable amount is $75,000, the loan that you can apply for is $25,000.However, it is noteworthy that the amount for your loan would still be subjected to the APR chosen by the lender and banks or loan providers usually give out only 75%-80% of the total amount of the appraisal difference.Your payment history and FICO score will also matter in determining the amount of loan granted to you. Just make sure you know everything about it.The Difference of HEL and HELOCWith home equity loan, your payments can be averaged while HELOC has to be paid within a specific period. If you have a poor credit rating, get a credit repair program then apply for this line of credit.