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

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

Nick Messe asked:




Mortgages loans can be a confusing topic even for the financially literate and the government’s attempts to clarify matters sometimes does more harm than good. One way to start deciphering the code is by enlisting the help of a mortgage professional, but it pays to know something of the basics from the beginning.

The difference between a mortgage home loans and mortgage equity loans is fundamental. First, though, they share the key similarity of being secured loans, which means that both rely on a borrower’s home as collateral for making the loan.

A mortgage loan, however, is the kind of loan that is used to purchase a home. It can be a first mortgage, meaning that there is no other financing on the home, or it can be a second mortgage that is obtained when the home is purchased, meaning that there is also a first mortgage being made at the same time. After purchasing the home, a homeowner can decide to do a home loan refinance, arranging for new financing that replaces the existing mortgage or mortgages. This option can make sense, for example, when interest rates have fallen and the mortgage refinance results in lower monthly payments.

With an equity home loan, there is typically a first mortgage already in place and the homeowner wishes to borrow some additional money, using the equity in the home as collateral. In this case, equity simply means the difference between the market value of the home and the amount of existing mortgage debt against the property.

Mortgage equity loans, then, are by definition second mortgages since they are secured by the home and are not first in line. They differ from other mortgage loans by allowing the borrower to take cash out of the property and to use that cash in any way the borrower chooses.

The borrower has two equity loan options. First, the borrower can take out a home equity loan for a fixed amount that is disbursed in a lump sum to the borrower when the loan closes. After the closing, the borrower starts making payments on the full amount borrowed. Second, the borrower can establish a Home Equity Line of Credit, or HELOC.

With a HELOC, the homeowner establishes a line of credit, based on equity in the home, up to a maximum amount. The homeowner can then use that credit at any time and in any amount up to the maximum, often by simply writing a check. With a HELOC, the homeowner makes payments only on the amount that has actually been drawn against that line of credit.

With both types of mortgage equity loans, it pays to pay close attention to rates and terms, as they vary widely between lenders. Interest rates are often variable and loans frequently must be repaid within relatively short periods. Consulting with a knowledgeable and experienced mortgage expert is perhaps more important when considering equity loans than in other situations given the number of options and the different ways that lenders structure these transactions.

Willie

Max Bellamy asked:




Home equity is the amount of money borrowers have already paid, against the total value of their homes. It can easily be calculated by subtracting the amount of the mortgage balance from the current fair market value of the property. Any amount, by way of liens or second mortgages owed by homeowners, must be subtracted from the appraised value to determine home equity accurately. Home equity allows homeowners to use their own equity to acquire loans. They can get small loans for various purposes, such as for paying tuition fees or any other immediate need. They also offer certain tax benefits to the borrowers. Fast cash home equity loans allow the borrowers to avail of cash quickly, against the equity that they have build on their houses.

Fast home equity lenders usually verify the information provided by the applicants. After they find that everything is in order, they go ahead and deposit the loan amount into the bank account of the borrowers. The borrowers of fast cash home equity loans are usually given thirty days for repayment. However, in some cases, borrowers can provide the company with a post-dated check of the repayment amount. This repayment amount includes the interest charged and any service charge that the lending company might levy.

Fast home equity loans can be availed of through various lending companies that specialize in providing these loans. They can be contacted online or over the phone through the information provided by these companies in various advertisements. Usually, to get a fast cash home equity loan, applicants have to provide proof the equity of the home that is built up. This can be done by providing a current appraisal of the property and a document from the lenders, showing the amount that has already been paid against the loan.

Calvin

Brandon Baarz asked:




There are many advertisements out there regarding home equity credit loans. We are barraged with television ads, billboards, radio spots and direct mail- I received three last week. Many wonder if home equity credit loans are a good idea. There are some things to think about before making this decision.

You can make the necessary payments- as with any loan, financial discipline is very important. This is even more so because a home equity loan acts as a second mortgage. Essentially, you are using your home as collateral, making it vital to make necessary payments. Because the lender has your home to back the loan, this gives you the opportunity to borrow at a much more favorable interest rate. The most attractive aspect of a home equity loan is that you can consolidate higher interest credit lines or loans. This gives you the option to use the extra income for your everyday needs, or pay off debt much faster.

You are making a major purchase or home repairs- we often do not have the money to buy larger items, therefore they need to be financed. A loan using the equity in your home can give you the lowest finance charge, as well as more favorable or flexible terms. Home repairs are part of home ownership, and very few owners have adequate savings to take care of them. Home equity loans are a good way to pay for these expenses, as cheaply as possible.

Do not use a home equity credit loan to supplement day-to-day spending, or on frivolous purchases. If you look at a home equity loan as permanent debt, you will keep digging yourself further into debt, often to the point of bankruptcy. You don’t want to put your home at risk. Also, if you know a major purchase or home repairs are imminent, it is a good idea to save the loan for those purposes. Basically, be smart with the money you borrow. We can get trapped by the low interest rate and feel we will be paying it off quickly and easily. Home equity loans are good tools for financial stability, if you use it wisely!

Benjamin

Joseph Kenny asked:




Those of you who are among the ranks of the self-employed may have already learned that it is more difficult to get a loan – let alone a home equity loan. The good news, though, is that it is possible. Here is some information and tips about how you can get a home equity loan if you are self-employed.

The truth is, first, that you will find it more difficult to get a loan because you are self-employed. The primary thing that the lender will want to see is proof of a profitable income. Some lenders will make it more difficult than others when you try to prove it. You may be asked by one lender to provide statements for two years, and another one may ask for three years worth of proof. This means that you can probably rule out a no doc loan, too.

Another thing that you will need to watch for – concerning your own finances – is how much debt you already have. All lenders look at the debt-to-income ratio when considering giving a home equity loan, and usually require a maximum of 36%, which includes all mortgages and loans. It seems, though, that it may be a good idea to stay as far from this number as possible when you are self-employed.

You will also want to check over your credit report before you apply, to make sure that there are no inaccurate statements on it. Correcting these is not too difficult, once the problem has been resolved, but you will need to wait about two months before the corrections actually show up on your credit score. If you have less than two years of good, solid income, you will most likely have to pay a higher interest rate. A good credit score, though, will help this to stay reasonable.

Right now, self-employment is becoming more popular. Many lenders still do not have ways to provide for the needs of those of you who are in this category. New products are being developed, though, to meet the rising numbers of those who are leaving the commercial workplace. It may take a while, however, before there is some serious competition and a lessening of the stricter requirements.

Home equity loans can be obtained either as an adjustable rate mortgage, or as a fixed rate mortgage. You will have to calculate which one is more advantageous for your situation, and consider the possibility of rising interest rates now.

Something that you will need to especially consider is that a home equity loan adds another monthly payment to your bills. It also is secured by your home, which means it puts your home at risk if you should default on the loan – for any reason. Remember, also, to leave 20% of the value of your home’s equity untouched in order to not have to pay private mortgage insurance.

You may find that one or two lenders will definitely give you a higher interest rate. By looking around, however, and getting several quotes, you can find a lender who will give you the home equity loan you want – with reasonable rates. Compare them carefully, noting things like the interest rate, the fees, and repayment terms. Also watch out for any home equity loan that has a prepayment penalty in it – you don’t need it.

Bobby

Joel Gray asked:




If you are planning on buying your dream home, a second or vacation home, or even planning to relocate with a new home purchase, there are definitely a variety of home loan options to check out.

Many banks, financial institutions and private lenders offer home loans; home equity loans, private loans or equity line of credit loans. All good lending programs will consider this, as it helps you to borrow the money, just by using your home on collateral basis.

What is equity?

In financial jargon, it is said to be the difference between the cost of home and how much you owe on the mortgage or combined mortgages, in the case where you have a second mortgage out on the property. In other words the value of your home is the equity you have built into it.

Home Equity Loan Rates

You can find out what current home equity loan rates are, compare them with several different financial institutions and use handy online calculators at BankRate.com: http://bankrate.com . For example, as per the current statistics of the Bank of America, their home equity loan interest rates are as follows:

1. 30 year with a fixed rate is 5.81 percent on the amount taken as loan.

2. 15 year with a fixed rate is 5.51 percent on the amount taken as loan.

3. 30 year with a fixed jumbo is 6.12 percent on the amount taken as loan.

4. 15 year with a fixed jumbo is 5.78 percent on the amount taken as loan.

The monthly payment of a loan is calculated to be around $400 to $1000.

Home Improvement Loan

If you want to fix up your home, then you will want to search for information on a home improvement loan. These types of loans are designed for the people who want to finance their home repairs, renovation of their homes, room additions to their old homes, etc. without going for equity loans.

The benefits for this kind of loans are:

No or limited requirement of collateral.

Interest rates are competitive and are lower than line of credit loans.

Approval of loans is faster

Information of the loan and the transfer of the balance both are can be done through online banking.

Transfer of funds for the payment of loans can be done through online banking access.

Now that you have been shown the ins and outs of getting a home loan, what do you think that next thing you should do is?

So get a loan and get ready to move into your dream home today!

Ron

Ross Bainbridge asked:




Mobile homes built on fixed foundations are appreciating properties – their values appreciate with the passage of time. Hence, after a few years of timely mortgage payments, the value of the mobile home will be much higher than what it was bought for. This difference is called mobile home equity. Equity on a mobile home is equal to the numerical difference between the appraisal value of the home and the value of the mortgage.

Equity is built up over a period of time, and it is the possession of the owner of the mobile home. Since equity is a financial asset, it can be used as collateral to take a further loan. Such loans are called mobile home equity loans. Mobile home equity loans could be up to 85% to 100% of the value of the built-up equity on the home, depending on the credit score of the borrower and policies of the lender.

The process of taking a mobile home equity loan is much simpler than taking a normal loan. This is because the mobile home itself will be kept as collateral, or to be more specific, the equity on the home will be the collateral. The lenders would first get the property appraised through their appraisal officer or any other licensed professional. Then the value of the mortgage taken earlier is verified, and the difference is calculated to provide the equity. Mobile home equity loans carry lower rates of interest and can be spread over longer periods than ordinary loans.

A mobile home equity loan can be described as a mortgage upon a mortgage. Equity loans become very useful if a person wishes to start a small business enterprise after buying a home. Usually the lenders would not ask any questions about the purpose of the equity loan – it can be used for anything from renovating the home to going on a cruise. Having said that, it is essential to remember that a home equity loan does increase the indebtedness of the person, and it is best to avoid them. No lender would provide a second equity loan, no matter how much equity is built up.

Marcia

eHow asked:

Getting a home equity loan on a house that will be rented out involves having at least 20 percent equity in the home, examining a credit report and applying for the loan through various brokers. Get a home equity loan with advice from an experienced property manager and landlord in this free video on rental property. Expert: Damon Thompson Bio: Damon Thompson owns three rental properties in Detroit, Mich. and has owned up to seven rental properties at once for more than 15 years. Filmmaker: Lynell Doyle

Sarah