Home Equity Loans – second mortgage

Mary Wise asked:




You may have taken out a home equity line of credit to help you cover the expenses of life – anything from adding an additional bedroom to your home to putting your twins through four years of grad school. But if you suddenly received a letter stating that your home equity line of credit has been frozen, you are probably wondering where to turn next.

Most home equity credit lines bear the stipulation that the creditor can freeze your line under situations that are outlined in Regulation Z, under the Federal Reserve Board’s codes. For many home equity lenders, this is interpreted as being able to shut you off from your available line of home equity credit if market conditions in your area make the value of your home decline, or if your income has been reduced to where they feel you are at great risk of defaulting on payment to them for credit already extended.

Get Around Regulation Z

You have several options. You can argue with your lender to attempt to persuade them to reinstate your credit line. You can back up your argument by pointing out your good payment history (if payments have come due under your agreement); or by listing homes in the area that have recently sold at or above market value. Discussing the freeze with customer service for your lender has a small, but not impossible, chance of getting your credit line unfrozen.

Your best option is to vote with your feet by choosing a different lender. True, you may have to pay additional closing costs over what you have already paid for your current, now-useless credit line, but you can switch lenders.

In fact, there are online lenders who deal very effectively with taking on borrowers who have had a frozen credit line. With less strict stipulations regarding market values, these lenders can refinance your current line while making the additional credit you need available to you.

Apply Online For the Credit Line You Need

To apply, you will need to gather all the information pertinent to your current home equity line of credit. Visit the lender’s secure online site where you can begin the application process. You will be asked to verify certain things – like your income, employment, etc. Most of the needed documentation can be either emailed or faxed to the new lender.

As with a your original home equity line of credit, your new credit line will allow you to use your home equity line of credit for up to twenty five years. At the end of that period, you will have the opportunity to renew your credit line, or begin repayment. Oftentimes, you can pay during the time that your home equity line of credit is open; this greatly reduces the amount that you will owe at the end of the term.

If you have had your home equity credit line frozen, voting with your feet by choosing a new lender can not only make a bold statement to the lender that you have other options, but can also save you money by the possibility of getting better rates online.

Franklin

Lee Traupel asked:


It is important to note that there is no real difference between home equity loans and the second mortgage. A home equity loan is commonly referred as a second mortgage financing in most states throughout the United States.

A second mortgage financing package allows you to tap into the equity available in your home. It is done without any refinancing of the first mortgage and hence it is an additional source to get money when needed. If you need cash in a lump sum that too in a lesser time and at a low interest rate then second mortgage will be your automatic choice.

A first mortgage loan and second mortgage loan are two entirely different kinds of loans. The first mortgage is essentially the loan you take to buy a home. The amount applied as first mortgage loan is very high and the interest rates are fixed. After making a bulk payment as down payment you will have to pay the remaining amount in installments – the bank fixes the installments period on the front end of the contract.

A second mortgage is the loan taken against your equity that is secured against the loan. It is usually taken when a certain amount of money is needed in bulk and on an urgent basis. You and your creditor fix the mode of repayment and you may pay it back in installments or as a lump sum in most cases.

The second mortgage is taken when you need a certain amount of money in bulk and for an immediate need. Some of the reasons for applying for home equity loans are:

• For college tuition

• Paying of credit card bills

• For a vacation

• Other debt consolidations

• Emergency needs

All kinds of loans can be consolidated through the process of debt consolidation. The interest rates in the case of first mortgage are lower than the interest rate applied in second mortgage. Since the amount of loan in first mortgage is higher and the payment period is longer, the interest rate is lower – a second mortgage is just the opposite, with higher interest rates and a shorter pay off period in most cases.



ROYAL

Ken Charnly asked:


A home equity line of credit is a loan you take out against the amount of your mortgage that you have paid off.  Home equity lines of credit are relatively easy to get, have low rates, and their interest is deductible. The down side is that if you can’t make your payment, you lose your house.

Your creditor or bank will calculate your equity by subtracting the amount of your mortgage from the current value of the house. This leaves the amount you’ve paid. Take 80 percent of that and you have the loan you will probably be offered by most banks.

If you own a home that is valued at $250,000 and your unpaid mortgage is $150,000, you have $100,000 equity in your home. 80 percent of $100,000 is $80,000 and that’s how much you can usually borrow.

Whether or not you get this home equity line of credit has nothing to do with your income, investments, stock, your liquid capital, how much cash you have in your savings account, credit cards, or credit reference. It has nothing to do with the financial state of your family, your husband or wife, or where you work.

Unfortunately, if you fall into debt or one of your children falls ill and you have no extended family to rely on for finance, you could lose your home. A home equity line of credit is essentially a second mortgage and two mortgages means that you’ve essentially put up your house as collateral.

It is not a good idea to stake your residence and family’s funds on a non-essential purchase like a vacation home or adding on an extra family room or bathroom for when your mother or father come visit. There’s no point in making the homestead more homey if you have nothing more than hope that you will be able to maintain the payments. It’s an extra immediate payment every month that may bleed your assets dry.

If you are sure that your budget can handle it, then build the extra bedroom or bath. Extra rooms raise the value of your estate as well as increase your general household environment. It may be a better idea to keep your home equity line of credit as a last resort safety net instead of gambling on a future that is uncertain.

 



JACK