Home Equity Loans – second mortgage

Lee Van asked:




The home equity loan was devised by the banks for a way for home owners to access cash to renovate their homes. They are in fact borrowing the equity of their homes and this loan is secured against their homes. There is however, no restriction on what the money can be spent on.

The bank will check the applicant’s credit record. If the borrower’s credit record is bad the lenders will impose a higher rate of interest on the loan to compensate themselves in case he or she did not pay off the loan in full. This loan is secured against the home so the risk is not very high for the lender to lose money in any event.

There is always something that has to be done on a home to keep up the current value. Homes have to be painted inside and outside, gardens need to be landscaped or a swimming pool built. All these projects cost money and they can be done with this loan.

What I find amazing is that a lot of people out there will actually feel it is worth the expense of the loan to use the money to go on a dream holiday. There is seldom enough money in the family budget for pleasure. The family might be dreaming of visiting a certain place and the only way to make the dream come true would be to take a loan to pay for it. But try to remember what you are paying in the long run for such a small and short pleasure.

Edward

jafang123 asked:

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Peggy

Carrie Reeder asked:




Home equity loans are beneficial for numerous reasons. If you own a
home, and need extra cash, obtaining a home equity loan will put cash in
your pocket. The money received can be used for any purpose. Because
home equity loans are dispersed as a lump sum, homeowners usually apply
for these loans to pay for a huge expense.

No-Equity Home Equity Loan Basics

For the most part, the amount received for a home equity loan is
according to your home’s equity. Lenders are reluctant to approve homeowner
for loans that exceed the equity value. However, you may find a lender
willing to offer a no-equity home loan. Also referred to as 125% home
equity loans, these loans are both secured and unsecured. Lenders that
offer these loans will grant you a home equity loan up to 25% more than
your home’s value.

Why Get a No-Equity Home Loan?

125% home equity loans were extremely popular in the 1990′s. In more
recent years, the amount of people applying for these loans has dwindled.
Those who apply for these sorts of loans generally require a large sum
of money, and do not have sufficient equity in their homes. However,
because of rising home values, few people are taking advantage of
no-equity home equity loans.

Dangers of No-Equity Home Equity Loans

While obtaining more than your home’s value may appear to be a solution
to extreme money woes, no equity home loans are very dangerous. Today,
the housing market is strong. Most cities throughout the country show a
22% increase in home values annually.

However, if the housing market was to slow down, and home values began
to fall, those who obtain a 125% home equity loan would likely be
unable to sell their homes. For example, if your first and 125% second
mortgage amounts to $200,000, and you can only sell your home for $150,000,
you are responsible for paying the lender the addition $50,000.

Furthermore, some homeowners are unable to afford the extra monthly
payment of a high second mortgage. If you default on a home equity loan
for three consecutive months, the lender may foreclose. While these loans
are ideal for paying off bills and debt consolidation, some homeowners
fail to close paid off accounts, which results in acquiring more credit
card debt after the accounts are paid.

Dennis

Bill Stone asked:




There are several ways to obtain low cost home equity loans. One way is to look for a no closing cost home equity loan. With a no closing cost home equity loan, you pay no upfront fees. By reading the fine print, you can find out whether a particular loan you are interested in has the closing costs included in the loan.

Another option is to request, from the start that you do not wish to pay closing costs. Online lenders typically have a box that you may check for no closing costs. Often, there are also comment lines to leave a note about what exactly you are looking for. With low cost home equity loans that have no closing costs, interest rates are usually 1 point or more higher than other equity loans.

If you are looking to spread out your payments on low cost home equity loans, you can also look for a low interest rate home equity loan. With a low interest rate home equity loan, you will save money in the long term, as opposed to right up front. This type of loan would typically save you the most money on loans lasting longer than a couple of years.

By calculating the short and long term costs of each type of loan, you can better decide which low cost home equity loans are right for your budget. Many online lenders have equity loan calculators on their websites, which can assist with calculating the short and long term costs of different home equity loans.

Finding Low Cost Loans

Finding low cost home equity loans can be done on your computer or in person. There are many online lenders who specialize in home equity loans. You can start by running a search in most tool bars for what you are specifically looking for. Because you are able to submit all your information online, online lenders can verify all of your information electronically. This can yield you decisions faster, often in just minutes.

Taking advantage of pre-qualification forms online can also help you narrow down your search to only those lenders who can help your situation. Due to the major increase in online competition, you may also get lower quotes, which can save you money in the short or long term.

Other options for finding low cost home equity loans are in person, at local mortgage companies, banks or credit unions. Your personal mortgage broker can often get you lower rates, comparable to those of your existing mortgage. By using your home as collateral, you can often negotiate lower rates as well.

Banks and credit unions can sometimes get you lower rates, too. If you have accounts in good standing, you can often apply for low cost home equity loans through your own bank or credit union. This can also be an option for those with less than perfect credit trying to obtain home equity loans. Accounts in good standing with banks and credit unions can often be used as a good credit reference, in those instances.

Katie