A house is the single biggest asset that most people have and for the majority of Americans their homes represent over 75% of their total assets. Many people see their home as a sign that they have made it financially.As you pay down your mortgage and as real estate price increase in your area, you increase your home’s equity. This is basically the amount of the house that you own free and clear without any encumbrances. This equity can be used as collateral to secure a monetary loan, called a home equity line of credit. This can be a great way to secure a loan for a low interest rate since the lender with have the assurance of a claim on your home if you do not repay the loan.A good way to increase the value of your home is to use your equity to take out a home improvement loan. This is a no lose situation. The money you take out in the form of a loan will go right back into the house, increasing the home’s value and thus your equity. The most lucrative improvements in a home are those made to the bathroom and the kitchen, but other improvements are also worth the investment. Check with an appraiser to find out what improvements will do the most to increase the value of your home.The amount of money you can take out in the form of a home equity loan is determined by a pretty standard formula. The lender will take a percentage of the homes appraised value. To determine the loan amount, they will subtract that percentage from the amount you still owe on your mortgage. If you have owned you home for a few years and have enjoyed a bit of appreciation, the loan amount can be quite substantial.The loan is not totally based on you equity and the home’s value. Factors such as your credit history, credit score and current employment status also play a part. Though you’ll still need a solid credit rating to get the best interest rate, your credit is not as important as it was when you initially secured the mortgage.These loans usually have a much shorter repayment period than your original mortgage. The most common repayment period is ten years. Once the period is up, you can often renew the line of credit for another period, depending on the current value of the home. If you were consistent in repaying the loan, your credit rating will have risen and a new line of credit can be secured for a lower rate.If your home needs a few improvements and you can afford to finance them yourself, you can slowly increase the value of the home. Once you have done all the little things you can do to improve the house, you can then take out the home equity loan to make bigger improvements. At this point you should have increased the home’s value and will be able to take out a larger line of credit.
Applications for home equity loans and second mortgages recently hit a 15 year high. According to Freddie Mac, “88% of homeowners who refinance their homes in the 1st quarter got a mortgage at least 5% larger than their first loan.” Since this was the largest increase since 1990, and the Fed continues to increase key interest rates, it is my contention that the demand for cash and the ability to finance quickly is the greatest it has been since World War II.”The reality is that some people still believe the interest rate are under 6%,”said John Allen from Laguna Beach, California. John continued, “If I need cash for home improvements..Why wouldn’t I just take out home equity loan since my first mortgage rate is under 5%.” John’s mentality mirrors many of my borrowers’ frames of mind of late. Consumers are much more educated than they used to be about financing and taking out second mortgages. First time homebuyers don’t hesitate to get subordinate financing to help them accomplish their goals. Some people like John just want to finance the construction for pool and spa, but most of my borrowers are focused on consolidating credit card debt so they can cut their expenses and have access to more money at the end of the month.Some interesting home equity products have rolled out recently. Companies like BD Nationwide Mortgage and Ditech are offering larger 125% loans, and convertible equity credit lines. They are called convertible, because they start out as variable rate credit lines, but at any point you can convert portions of the line to a fixed rate loan, and still keep the unused portions of the line of credit open for revolving credit. These hybrid home equity loans are changing the face of second mortgage products and they offer powerful features that meet the needs of a typical family as well as the savvy real estate investor.
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.
There are many people who confuse the differences between a refinance loan and home equity loan. They both can provide a way to get access to the equity you have built up in your home but they are two distinctly different kinds of mortgage products. Refinancing a home loan essentially eliminates the original mortgage loan while creating a new mortgage to take its place. People may choose to refinance a loan in order to lower a loans interest rate or decrease the monthly payment on the mortgage. Others look to refinancing a mortgage so they can get cash to cover a short term expense like a family vacation or kitchen remodel.A home equity loan works somewhat differently than a refinance mortgage does. This type of loan is essentially a second mortgage used to pull out cash using the equity in your home. An example of this would be if your home was worth $250,000 and the outstanding balance on your mortgage was $150,000, you would have $100,000 in equity. You may be able to secure a home equity loan in an amount up to the $100,000 in equity you have.Deciding between Refinance and Home Equity LoansMaking a determination on whether to obtain a refinance or home equity loan can at times seem complicated and confusing. It is important to take some time to research each option as well as lenders and compare the options and their costs to determine which type of loan works best for your current financial situation. Remember, not all loans or lenders are the same. Lenders often have different rates, terms and fees and costs can very greatly from lender to lender.There is no need to rely solely on your local banker for your mortgage needs any longer. The internet has taken the power away from the banker and given it to the consumer. Within minutes you will be able to obtain rates and terms from multiple lenders giving you the information you need to make an informed decision as to who has the best deal for you. So remember, there are a lot of different mortgage options available to you today so take a few minutes and make sure you are getting the right loan at the best price.
Saving up for your dream home may prove to be a real financial challenge. Make use of your wisely earned savings by taking advantage of your equity in your newly acquired property. Get a home equity credit loan and enjoy the rights early enough from your property investment.A home equity credit loan may prove to be the wisest move during this tough economic season. Loosen up from financial woes and belt tightening and make use of funds made available through home equity loans.An emergency financial need should not place you and your family in a compromising situation. A home equity loan is the most reliable solution to inevitable bills such as medical necessities or school tuition fees.It takes a lot of discipline though to earn the full benefit of this type of loan. Although the fund is easily accessible whenever you need it for whatever kind of purpose, it is important to be responsible in keeping up with the payments. A home equity credit loan holds your house as a collateral and failing to pay this debt will cause you to lose your home.Nevertheless, a home loan is far more preferable over using credit cards or unsecured credit lines. This loan offers lower interest rates and falling under consumer credits, these interests can be tax deductible. Payment terms can also be more flexible and less of a stress as the fixed rate lets you anticipate the fixed monthly payments you need to meet.Take an equity loan against your home and discover how it can help you move around your budget planning with more freedom.
If you are looking for an equity line of credit it can be easy to find once you talk to your bank. Many people have lost a lot of equity in their house since prices have recently fallen. If you’re one of the lucky ones and you still have an equity it is not hard to get approved for an equity loan or line of credit. Their many advantages when getting this type of loan and one of the best is that you can always get the lowest rate of interest. If you’re wanting to do some improvements on your house this is probably the best way to do them.It is important that when looking for an equity line of credit you shop around and find the lowest interest rate you can. First you want to check with your current bank and see what race they can offer you. Search online and compare your banks rates with other rates you can find online. you should also consider getting an inequity loan if you’re trying to pay off some old debt because in most cases you can get a lower rate of interest then you can by obtaining a debt consolidation loan. Once you find the rate you are comfortable with it is easy to fill out the application in most cases you can and be approved the same day.Remember that it can be easy to find a home equity loan or line of credit. It is important that you shop around and compare interest rates so that you can find the lowest available one. You should always start with your bank and see if they will match any lower rates that you possibly find online. If you’re trying to reduce your debt or maybe improve your home this is one of the best ways you can get a loan to accomplish either thing.
In its simplest definition, home equity loan means using your house equity as collateral in order to borrow money. Collateral means your house will act as a guarantee. In the case if you cannot pay the loan or defaulted too long on payment, the lender has the right to sell the house to get back the loan.The word equity simply means how much the house is worth minus the mortgage you currently owe.There are two types of equity loan1) Home Equity LoanA home equity loan is a one off lump sum of money when you take up a loan. Usually, the loan period is between 5 to 30 years and the interest rates are fixed. The payment amount per month is fixed as well.2) Home Equity Line Of CreditA home equity line of credit allows you to borrow a fixed amount of money for the life of the loan. You do not need to take a lump sum loan at once since you can withdraw any amount of the loan when you need it. In a sense, it works like a credit card.The interest rate for a home equity line of credit is variable and will rise and fall during the loan period. Payment per month depends on the total sum loaned, the interest rate and whether your credit is in the payment or draw period.
During equity draw period, you can decide whether to pay the principal loan amount or the minimum payments to cover the interest.For equity line of credit, the loan period is usually shorter than home equity loan. Usually, it is between 5 to 15 years. During this loan period, you will not be able to increase the loan or repay the balance left in the loan. Do note, there is usually a minimum amount whether you decide to withdraw some money from the loan.As you see, an equity loan line of credit has greater flexibility compared to home equity loan. However in both cases, if you decide to sell the house before the loan is fully paid, you are required to pay the balance immediately.
Before applying for a personal loan to pay for home repairs, wedding
expenses, or college tuition, carefully weigh the advantages and
disadvantages of a home equity loan. Home equity loans provide a lump sum of
quick cash for large purchases. Moreover, because your property secures
the loan, most second mortgage applications are approved.Advantages of a Fixed Rate Home Equity LoanHome equity loans are beneficial because they generally have a lower
interest rate. Using a credit card for home repairs, emergencies, etc is
very costly. Because of high finance charges, paying the balance on
credit cards is almost impossible. On the other hand, a home equity loan
has a low fixed rate, which allows you to pay off the balance within a
few years.Furthermore, home equity loans are available for individuals with poor
credit. Most bank loans and credit card companies will not loan money
or grant credit to individuals with a low credit score. In some cases,
it is possible to obtain a loan with adequate collateral or a co-signer.
If a bad credit applicant does not secure the loan with a piece of
property or have a co-debtor, lenders will not approve the application.Home Equity Loan DangersWhile low rate home equity loans have several advantages, there is one
major pitfall of getting a second mortgage. The loan approval is based
on your home’s equity. Hence, you take out a second loan against your
home. If you are unable to repay the home equity loan, the lender will
foreclose on your house. This is true even if you continue to pay your
first mortgage. Because the home has two liens, either lender has the
right to foreclose.Finding Low Rate Home Equity LoansGetting the best deal on a home equity loan requires work. To begin,
shop around for quotes from a mixture of lenders. These may include
banks, mortgage companies, brokers, credit unions, etc. Mortgage brokers
are extremely helpful. Moreover, contact your present mortgage lender for
a quote. Before applying for a second mortgage, review your credit.
Resolve credit errors, and improve credit blemishes. This will help you
get the best rate.
If you have a bad credit rating and if you are still in need of financial assistance then you can go for bad credit home equity loan. This scheme offers you loan at lower interest rates as compare to normal home loans.Shelter is one of the most important needs of a man and therefore everybody looks out for some kind of option where they can have their own home and have their own shelter rather than staying on rent which can sap up a lot of personal income. However, buying an apartment in the current scenario can also require a lot of money. For people who have good credit ratings can definitely approach the bank and other financial institutions from where they can get their home loans and other schemes. However, it becomes harder for the people who have a poor credit score because no financial institution or bank is willing to help them.Poor credit ratings can virtually cripple all your plans when you are in need of some urgent financial assistance which is why people would always like to keep their credit score intact and pay all their bills and loans on time. However, there can be situations where people do not have money to repay and even though they are willing to repay their loans they are unable to do so and finally they label themselves as people with bad credit ratings.However, there are some money lenders and financial institutions that now realize that they can still make some profit out of this risk and therefore they provide bad credit home equity loan for those who have a bad credit history. These banks and financial institutions are connected with other financial agencies and therefore they have good information about the people who are borrowing money from them. To make things better they provide lower interest rates so that the borrowers can repay their loans on time. Hence, they not only allow them to get their loans, but also provide them with the opportunity to prove that they can improve their credit rating history in the course of time.As a borrower you need to make sure that you don’t borrow a large amount of money that you cannot repay in the limited time that they have provided. Hence, smaller amounts are the best deal that you should go for if you are going for bad credit home equity loan. On the other hand, you should do a thorough research about the financial institution that is offering you financial assistance. Different money lenders and financial institutions have different kinds of fee structure and payment methods. Hence, you need to ensure that you are aware of that even before you go for the loan.In some cases, the fees that you need to pay is fixed, while in some cases the fee structure if flexible depending on the market economy and the amount of time you have asked for to repay the loan. Hence, always read all the terms and conditions because all money lenders have different terms that they set as per the profit they want to earn from this transaction. The best thing to do is read more about all the money lenders and their terms and conditions on their website and then approach the best money lender that you think is right for you.
The amount difference of the appraised value of your house and the amounts payable to your loan provider is what you call equity. If you want to access money from your loan provider using your home equity as the collateral, you would call this type of mortgage as home equity loan.This loan or second mortgage is type of loan that gives you fixed amount to be paid within a specific time period. Compared to other mortgages, the approval of this loan is easier but the loan provider will still consider your payment records and the total market value of your property before it grants the amount you applied for.This loan usually grants increased percentage of the appraised value to know the maximum allowable amount of the mortgage. Closing costs are most often lesser than a mortgage so a lot of lenders offer home equity with practically no closing costs.As a mortgage applicant, you should be wary for such tempting offers because lenders normally obtain their profits by posting an increased initial interest rate. To be sure, check out the Annual Percentage Rate of a loan provider or bank before you file for your loan.The interest rates of this loan type are usually fixed. However, the lender can also provide variable rates programs. The terms of home equity mortgage vary but it usually ranges within 5 to 25 years and the processing is more like the first mortgage.The bases of the lender in granting your second loan are your assets and liabilities, your creditworthiness and the appraisal of your home. When you want to access money from your loan provider using your home equity as the collateral, you would call this type of mortgage as home equity loan.For you to be able to be allowed to get a such a loan, you should offer any of your properties as collateral of the amount being borrowed. This way, you will get you share of risks together with the loan provider and the latter will give you lower interest rates in return.The rationale behind getting a collateral from you is to ensure that the loan provider or bank will get the amount of money lent to you should you fail to place your payment for your loan. But remember, to pay your loan regularly.