Home Equity Loans – second mortgage

Jim Aldridge asked:




What are the typical considerations when purchasing a real estate property? When a home for sale catches your attention, what do you have in mind? Is it the price of the house? Is it the money in your bank? Or will it be the money that you can make each month? Location, number of bedrooms; just exactly what runs in your mind? Well, all of these things are what goes in the mind of a home buyer. If you don’t have the money to pay in cash then you are probably thinking of applying for a mortgage loan.

If you are a typical buyer who don’t have the budget to purchase a real estate property or limited due to a bad credit then you will find home equity loan attractive. It is a type of home mortgage loan that will allow you to borrow even a huge amount of money provided that the house serves as the collateral. It makes it secured for the lender who will not worry about default payments. Thus, it also benefits the borrower for ensuring that the mortgage is the priority when budgeting.

Benefits

There are many reasons why the home loan equity is a smart choice. These include:

1. Good credit score is not a requirement hence qualifying is easier- you don’t need that credibility to avail this loan. After all, you can’t run away with the house.

2. It offers a competitive annual percentage rate- it lets you assess the mortgage loan cost in terms of percentage. Say for instance, the loan rate is 10% and the applied loan cost is $10,000. Your interest rate for the year will be $1,000 which you can then divide by 12.

3. Huge amount of loans is available- as mentioned earlier, this type of loan offers less risk in case of default payments. The lender can easily collect since the house serves as collateral

4. It usually offers mortgage loans that are tax deductible

Apart from the benefits of home equity loan, it can also offer different purposes that are not relevant to real estate property acquisition such as payment for college education, refinancing, consolidation of high-interest debts and it can only be used just for home renovation or remodeling.

Downside

You may find home equity loan very generous and helpful however, it is wise to know its downside. For one, you can be homeless the moment you default in payment. Thus, it is the most common type of loan that some scammers use to take hold of someone else’s valuable property. Make sure that every transaction is documented.

Some tips to remember when availing home equity loans include choosing from variety of sources such as credit unions, banks and brokers; reach out to friends and relatives for connections; and compare rates available. Also, remember that applying for a loan is a huge decision that requires logical analysis and considerations. Your real estate property is at stake. If your purpose of availing a loan is not as important as your house, consider looking around for other types of loans.

Cheryl

Terry Edwards asked:


While home equity loans have been popular in recent years the question is, are they right for you and your situation? The answer really depends on how you plan on using the money.

A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. It is an excellent source of funds as it can free up the equity you’ve built up in your home, and you can get the cash to use for any purpose you desire.

A home equity line of credit or a home equity loan is a second mortgage that many people take advantage of to pay off debts, or do that big home improvement project they’ve been wanting to do. But, it is also a serious transaction, and you should know that you will be putting up your home as collateral to secure the loan. If you default in making payments the lender has the ability to take over the loan and you can lose your home.

Another benefit of a second mortgage or home equity loan is that you can deduct the interest expense on your taxes. It is much better than having a credit card because it has a lower interest rate and it is tax deductible. That’s an important point to keep in mind.

Applying for a mortgage home equity loan online is quick and easy, and very convenient since you can do it right from home any time day or night. If you’re not sure how much you currently owe on your mortgage, talk with your lender and they’ll be able to help you out.

It is also important, as in any credit transaction, to compare the total costs of the loan to other types of credit available to the consumer. When you compare home equity loan offers compare all fees for the loans you consider, not just the interest rate or annual percentage rate.

Poor credit or good credit, a debt consolidation second mortgage or home equity loan is easily obtainable in nearly any situation. Lenders are more willing to loan you the money even with poor credit because your home is used for collateral. If you decide that this is for you, shop around for the best interest rate and lowest closing costs. Used properly, a home equity loan can help you get your household finances in better shape.

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MONROE

Alan Lim asked:


Home equity loan and refinancing are two excellent ways that can help you manage your finances. However, it may prove difficult to choose one from the other and should depend on what your financial goals are. You can opt for the lower payment schemes of cash-out refinancing, or you can choose the great tax benefits offered by a home equity loan. The choice, however, does not prove to be as simple as this. Here is a comparison of these two types of loans to help you see which one is right for you.

Cash-Out Refinance Loan

Cash-out refinance simply means that you are refinancing your existing mortgage in order to lower your monthly payment and/or your current interest rate, and get some additional cash for other pressing reasons such as for home improvement, renovation, and the likes. If you are lucky to choose the right timing, you may be able to get all these with cash-out refinancing. Say, your home is valued at $300,000 and your existing mortgage balance is $200,000, your home equity remains at $100,000. You are free to borrow the remaining equity as you deem necessary.

Home Equity Loan

Home equity loans are usually provided in two kinds: the home equity line of credit and the home equity installment loan. A home equity line of credit line means that you are borrowing against the value of your home; your home is your collateral to the credit. Home equity plans are usually set at a fixed time; say 10 years but with variable loan rates. Your interest rate and the annual percentage rate of your mortgage can move up and down depending on the market trends. During the specified time, you are free to obtain the cash when you need it, and pay only for what you happen to spend. Some mortgages are offered with payment of full outstanding balance, while others allow repayment over a fixed time.

On the other hand, an installment loan is a loan that has a fixed rate that stays the same all throughout the rest of your home equity loan terms. Also called the closed end home equity loan, you amortize your loan for periods lasting up to about 15 years. In this kind of home equity loan, you usually receive a lump sum at closing depending on your home value, and you can not borrow further afterwards.

Which is better?

Remember that interest rates do not usually behave normally, much as you want them to. When this happens, home equity loans may actually prove cheaper than refinancing, although they are potentially riskier. Choosing what is better between the two should depend on individual circumstances. For example, if you plan to pay off your mortgage and do not need as much money, you can go for a home equity loan to get lower rates and shorter terms. On the other side of the fence, with cash-out refinancing, you can get all your money up front and simply pay off interest and principal on a lowered monthly basis as agreed upon, with no frills. Weigh carefully based on what your financial objectives are and choose one which you think will give you a fairer deal.



ISIAH

Dave Badge asked:


Chicago home equity loans are the type of loans where the borrower uses the equity in his Chicago home as collateral. You can lose the home and be forced to move out if you don’t repay the debt. Such loans are often used by families in need of financing help to make major home repairs, pay medical bills or college tuitions. Chicago home equity loans create a lien against the borrower’s house. Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property). Such loans require an excellent credit score and reasonable loan-to-value ratios. An individual can apply for an equity loan, no matter the type of home he has. It can be a condo, house, apartment, or townhouse.

The maximum amount that you can borrow through a home equity loan depends on your credit score, monthly income, and the appraised value of the collateral, among others. It is possible to borrow up to 100% of the appraised value of the home. Chicago home equity loans can be of two types, closed- and open-end. Closed-end home equity loans generally have fixed rates and can be amortized for periods usually up to 15 years. The open-end loans, also known as HELOC (home equity line of credit) loans, are at a variable interest rate, but here the borrower chooses when and how often to borrow against the equity of the property, with the lender setting an initial limit to the credit line.

But when comparing the two, keep in mind that you cannot simply compare the Annual Percentage Rate (APR) for a loan with the APR for a home equity loan because the APRs are figured differently. The APR for a regular loan takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges.

Here are the steps you should follow when considering a home equity loan in Chicago:

1) Check your options – home equity loans are not the only method of financing. Remember, if you decide to get a home equity loan and can’t make the payments, the lender may foreclose and you would lose your home.

2) Do the research – if you are keen on getting such a loan, then talk with several lenders, including at least one bank or credit union in your community. Compare their offers. Comparing loan plans can help you get a better deal. Beware of loan terms and conditions that may mean higher costs for you. Keep in mind the following parameters:

-Can you afford the interest rate and monthly payments?

-The period of the loan, or how long you have to pay it back

-Check the penalties for late or missed payments

3) Double check – think twice before signing the contract. Have an attorney review the loan papers and make sure the terms are the same ones you agreed on.



HANS