Home Equity Loans – second mortgage

Hans Sept asked:




Our home is the place where we spend most of our time. It has great sentimental value to us. However, it can also be a great asset. It can take your life time to pay for your home. As you have paid for your home it has continued to increase in value. This equity can be used to obtain a loan or a line of credit that can help you get through financially challenging times. There are many other credit options such as various types of loans, or a credit cards. The disadvantage to these is that they charge huge amounts of interest when compared to using the equity in your home. This line of credit provides an extra amount of money at a much lower interest rate than other types of credit. It may even be be tax-deductible therefore it is growing in popularity; this feature is not available with other types of credit.

A loan using your home as collateral can help you out of a troubling financial situation. There are several different places to apply for a loan. You can go to a financial institution or apply online. Online options is very convenient and usually pretty fast. The home equity loan can be used to consolidate other loans. Since it has a lower interest rate it can save you quite a bit in the long run. This can reduce your payments and also help your credit score.

If you desire to remodel your home or make renovations to your home then taking out this line of credit can be the best way. For instance, many of us want to modify the kitchen or add some features to the bathroom and a loan can provide you with the money to make the needed changes and increase the value of your home. Therefore a home equity loan is equal to making a long term investment.

The cost of higher education is becoming more and more expensive. Your home equity is a valuable asset that you have readily available which can help you obtain funds for educational purposes. You can use the line of credit to pay your for tuition fees or for other educational expenses. This is very effective as it will help you avoid higher interest rates and plan according to your budget.

A home equity loan can be used for anything that is needed. For instance it can be used to pay off medical bills. There are no stipulations to how it can be spent. Therefore the equity in your home is a beneficial asset for you to use for whatever you may need.

Vivian

Isabel asked:


A loan that is guaranteed by your home or secured by the equity in a home is called Home Equity Loan. Home loans are secured loans, which is a lower risk for the lender. This means that you have more chance of getting the loan you want, and you will find far lower rate of interest rates attached to these simply because they are secured.

Home Equity Loan is also considered as a second mortgage or Equity loan. If used wisely, a home equity loan can help people pay off their huge interest rates, non tax-deductible consumer debt or meet other short term needs such as payment on a remodeling project.

Benefits of a home equity loan

• Home Equity loan can be the best option if you need to repair or reconstruct your home for debt consolidation or for medical or educational expenses.

• It can be used for home improvement

• It can be used for investment in other real estate

• It can be used to refinance your other debt

• It can be used for debt consolidation

• It can be used for some major purchases and expenses

• It can be used for auto or boat loans

• It can be used to get rid of credit card debts

• It can be used to pay off your medical debt

• It can be used to meet your educational loans

• It can be used to meet your wedding expenses

• It can also be used to meet your vacation expenses

Types of Home Equity Loans

There are two different types of home equity loans

1. Standard home equity loan

2. Home Equity line of credit

You’ve worked hard to increase your home’s value, and you can put that value to work with a Home Equity Loan or a Home Equity Line of Credit.

Isabella Rodrigues writes for credit-free-score.net,

offering the latest information on credit score, visit them today for more infromation

on credit score..

Visit today: http://www.credit-free-score.net



BASIL

Sachin A asked:


Home equity loans have become one of the most popular fund raising options for individuals.

Home equity loans are the loans taken using your home’s equity as the collateral. Thus they are a type of secured loan.

These loans are based on two facts – first, that you have repaid a certain portion of the home mortgage and thus should be able to reutilize that equity; and second that the value of your home has increased since you first purchased it.

The common reasons for taking an equity loan are home improvements, educational expenses, medical bills, debt consolidation etc. There are usually no restrictions on how the borrowed money is used.

The interest paid on such loans is usually tax deductible. Also the interest rates on them are lower than credit card other type of consumer loans. (They are higher than the first mortgage.)

Let’s understand what “home equity” is.

Home equity is defined as the difference between the market value of your home and how much you owe on the mortgage (or mortgages in case you have more than one.)

The market value of your home will be determined by bank’s appraiser or a licensed appraiser.

Suppose market value of your home is $ 100,000 and you have made a down payment of $ 10,000.

Then your equity

= market value – amount owed

= $ 100,000 – $ 90,000

= $ 10,000

After three years if you have paid back $15,000 more of the debt, you will still have $75,000 of the debt left. However after three years the market value of your home would have increased to $ 150,000.

Thus your equity after three years would be

Market value – amount owed

=$ 150,000 – $ 75,000

=$ 75,000

Besides home equity loans (fixed rate home equity loans), there is another type of home equity debt – home equity line of credit or HELOC.

Both of them are known as “Second Mortgages” as they are secured by your home just like the first mortgage.

“Second Mortgages” are repaid sooner than the first mortgages, which are usually repaid in thirty years. Home equity loans usually have a time frame of five to fifteen years.

Home equity loans are a one time lump sum loans, that are repaid over a time period decided beforehand.

On the other hand, home equity line of credit or HELOC allows you to borrow up to a certain limit for the period of the loan. The time limit of the loan is set by the lender. You can withdraw money any time during the time period and repay it any time. It works the same way like a secured credit card.

A HELOC has a variable interest rate that varies through out the period of the loan. The HELOC interest rate depends on the prime lending rate (prime lending rates are fixed by the federal reserve in the US.) The payments can vary depending on what is the amount that has been borrowed, the interest rates and whether the loan is in the draw period or the repayment period.

The credit rating of the borrower is also a factor in deciding the home equity loan interest rates.

The draw period of the line of credit is the period during which you can borrow any amount up to the limit specified by the lender. Also only the interest has to be paid during this period; however you may choose to repay the principal amount if you wish.

During the repayment period, no new debt can be taken and the existing debt must be paid back.

Usually draw periods are for ten years and repayment periods around fifteen years, but this varies depending on the lender’s policies.

Withdrawals for HELOC can be done by checks, credit cards or EFT. Lenders may have certain terms which make require you to take an initial advance when the HELOC is setup, borrow a minimum amount each time you use it and keep a minimum outstanding balance.

If you decide to sell off your home, you have to pay back full amount of the home equity loan.



LUIS