Home Equity Loans – second mortgage

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

Anirban Bhattacharya asked:




Home Equity Loans?

By applying for a home equity loan, you use the market value of a home as the collateral. Home equity loans, as of today, are considered the safest option by lenders and hence you get to realize lower interest rates.

How do you benefit from a Home Equity Loan?

Keeping your house as collateral, you qualify for a sizable amount of credit, at an interest rate that is relatively low. Secondly, the lender may allow you to deduct the interest because the debt is secured by your home. However, securing a home equity loan, you should compare the costs of the equity from your home against the benefits. Ideally, you should opt for such credit terms that meet your requirements without inviting financial risk.

Types of Home Equity Loans

Second mortgage- in a second mortgage, you get a fixed amount of money that you can repay in equal monthly installments over an extended period of time. You can consider a second mortgage if you have a definite needs for a specific purpose, usually renovations, making additions, etc.

Reverse mortgage-By applying for a reverse mortgage, you can convert a part of the equity in your property into cash, and most importantly, you do not have to sell your home or incur additional charges.

The three basic types of reverse mortgage:

Single-purpose reverse mortgages: generally have very low costs and can be used for one purpose specified by the government or nonprofit lender.

Home Equity Conversion Mortgages (HECMs): these are usually costlier and up-fronts are generally higher when compared to other types of mortgages. The advantage of home equity conversion mortgages is that these are widely available, have no income or medical requirements, and can be used for any purpose.

Proprietary reverse mortgages: These typically private loans are usually backed by the housing development companies.

Willie

Lesley Lyon asked:


Home equity loans are supposed to be a type of second mortgage loans. Money is borrowed against the value of the house. Even though it carries risk, it is worth taking it.

The common type of home equity loan is called as a “closed end” equity loan which allows a certain amount of money based on the value of the house. More money cannot be borrowed on the same equity loan. However, if more money is needed at a later stage another loan can be obtained. Many people prefer a home equity loan to clear off their debts as the money is borrowed against their houses. They get very low interest rate resulting in lower monthly payments than any other loans. It also helps to consolidate all the debts into one single debt, which can be handled with ease.

The other type being the home equity line of credit, which too works the same way as the home equity loan except for the fact that more money can be borrowed against pledging the house, some times even up to 125 percent of the value of the house. The home equity line of credit is for a person who does not have any idea of how much money is needed to borrow. With this option the person can get more money borrowed against his house very easily.

Home equity line of credit also helps the borrower to postpone the payment of principal for a certain period of time agreed upon by both the lender and the borrower or to get a special discounted interest rate. Some lenders even offer flexible interest rate where the borrower pays both the principal and the interest or avails fixed monthly payment plan. It is up to the borrower to choose from. The home equity line of credit comes with a shorter term payment plan. However the risk of losing the home in case the loan payment is defaulted should be thought about.

It is not a big achievement to get a home equity line of credit, but the key lies in the effective utilization of funds. The house is the biggest asset for any person and the home equity loan helps in take the full advantage of it.

Home equity line of credit can be used for unexpected emergencies such as the medical expenses or even for a funeral expenses. The required money is got quickly without damaging the credit score.

Credit card debts, loans and so on can be effectively managed with the help of home equity line of credit. It is wiser to clear off the debts with higher interest rate like the credit card debts and loans and pay back the home equity loans with a lower interest.

Educational expenses are very expensive these days, even a community college will cost thousands of dollars per semester. Home equity loans can be very invaluable in paying these expenses.

For remodeling the house, the amount got through a home equity line of credit is best utilized. New additions like a bedroom, bathroom or remodeling can be done to increase the value of the house. As an owner, the person enjoys the benefits or updates and at the same time adding more value to his house.



DEVIN

Melissa Kellett asked:


If you have a mortgage loan and you have requested a home equity loan too, you can refinance both loans and get a single loan and a single monthly payment with the same or better terms than the average of both outstanding loans. This can be achieved by applying for a refinance mortgage loan.

Home equity loans, also known as second mortgages, are secured with the same asset as the primary mortgage loan, thus, when refinancing the home loan, you can include your home equity loan. This can provide you with many benefits like getting fewer monthly payments, saving thousands of dollars on interests, getting lower installments and reducing your overall debt exposure.

Refinancing: Concept

As you probably know already, refinancing consists on acquiring a mortgage loan in order to repay an outstanding mortgage. This can be done because the loan contract specifies that the money will be used to cancel the outstanding loan so the new loan will be the primary beneficiary of the security.

The home equity loan is, in this case, also replaced with the new loan and the new loan amount will be determined by adding up the previous mortgage loan amount and the home equity loan amount.

Saving Money? Getting Ease?

By refinancing you can save thousands of dollars on interests. Home equity loans generally come with higher interest rates than mortgage loans and thus, by obtaining a lower rate refinance home loan you will not only be saving money on your mortgage loan but you will also be saving even more money on your home equity loan.

Also, by refinancing you will unify both loans and get a longer repayment program and lower monthly payments. The resulting loan installments will be undoubtedly lower than the combination of mortgage loan payments and the home equity loan payments. Thus, even if you are indebted for a longer period of time you will get a lot of ease on your financial situation and income.

Refinancing Other Debt: Cash-Out Refinance Loans

A cash out refinance loan is a refinance loan with a higher amount than the outstanding mortgage loan and in this particular case than that of the mortgage loan and home equity loan combined. Once both loans are cancelled, the surplus can be used for any purpose you may think of, including reducing your overall debt.

If you have other debt like credit card balances, personal unsecured loans, pay day loans, student loans, car loans or any other loan, you can use this surplus to cancel your debt and thus, you will be saving money due to the lower interest rate that refinance mortgage loans feature.

This will improve your overall credit situation raising your credit rank and improving your credit history. Your debt to income ratio will also be improved just as your debt exposure. Using a cash-out refinance loan in this way is a smart thing and will do a lot to enhance your whole financial situation. Your ability to get finance will also increase since on your credit report, only a single outstanding and affordable loan will show.



RODRIGO

justin narin asked:


The reasons to consider a second mortgage are as varied as the programs available to you once you make the decision to tap into your home equity. Some popular reasons include college tuition, bill consolidation, health expenses, and home repairs. When it comes to borrowing money, these types of loans are favored for a number of

reasons, not the least of which is the tax deductibility of all the interest paid on an equity loan. Before you start shopping around, however, you should decide whether you want a closed-end second mortgage or a home equity line of credit (HELOC).

A closed-end second, also known as a home equity loan, refers to a second mortgage that is structured in a very similar way to your first. To borrow using a home equity loan, or closed-end second, you make a one-time choice on the amount you would like to borrow, close on the loan, and receive a check for the amount you’ve chosen. You will have regular payments structured over a period of years, and upon completion of those payments, your home equity loan will be paid in full. If you decide later that you would like to draw additional funds, you will need to arrange for an additional loan with additional closing costs. However, the closed-end second carries a fixed rate that will never go up and offers a straightforward plan for paying the money back.

A HELOC, on the other hand, is a line of credit from which you can withdraw money again and again. In many ways, a HELOC is just like a credit card, but the interest you pay is tax-deductible. You will close on a HELOC only one time, but if you decide after a few months that you need to withdraw additional money, you will be able to do so up to the value of the loan. That is to say, if you close on a HELOC for $60,000 and over a period of time pay back $13,000 toward the principal, that $13,000 is available to be drawn again at any time. You will continue to make payments toward what you owe just as you would on a closed-end second; however, the full amount of the loan is always available to be drawn on, as long as the amount you owe and the amount you borrow do not exceed the total amount of the original HELOC.

Whether a closed-end second mortgage or a HELOC is right for you is something you, your loan officer, and / or your financial planner must decide. If you are relatively sure that you will need to borrow against your equity only one time in the next several years, a closed-end second offers the fixed rate and regular amortized payment schedule that ensures you know both how much your payment will be and how long it will take you to pay off the loan. This kind of assurance can be particularly useful if you don’t trust yourself to spend wisely, or if you tend to buy impulsively and don’t want the option of drawing out additional funds.

A HELOC can be most useful if you are taking on a project, such as home repair, that has the potential of unforeseen expenses. A HELOC offers you the flexibility to borrow again and again. You may even be able to secure a HELOC that carries a low interest-only payment allowing you to borrow more and still have a manageable payment amount each month. Whichever you choose, drawing against the equity in your home is sure to save you money on the interest you’re paying for your purchase power, and as always, the interest you pay on any type of home mortgage is tax-deductible, offering an additional incentive.

Consult your loan officer or financial planner to decide whether a closed-end second mortgage or a HELOC would best suit your needs. Once you’ve made this first decision, you’ll be well on your way to finding the right equity loan for you.

For more articles on Home Equity Line of Credit, visit: http://www.bills.com/home-equity-line/



GAIL

Stefan Hyross asked:


A home equity can be a great way to to get some money fast. Home equity loans are also sometimes called second mortgage. They allow a homeowner to borrow money from the equity they have in their home. Home equity loans can be for as much as $100,000 allowing homeowner to borrow to do renovations, pay off debt, etc. The interest on a home equity loans is tax deductible which has made this type of loan quite popular in the 1990s. Let’s look at how they work. Home equity loans come in two types. There are fixed rate home equity loans and line of credit home equity loans. In both cases, the terms vary from five to fifteen years. However, in both cases, the loans must be repaid in full in the event that the house is sold. The fixed rate home equity loans option gives the home owner a lump sum payment from the equity. The home owner will then repay the loans over a pre-determined period of time at a fixed interest rate. In most cases, the repayment is made monthly and the interest rate and the monthly payments remain the same over the life of the loan. In the case of the line of credit home equity loan, the principle is much the same as with a credit card. In fact, this type of loan often comes with a credit card. The home owner will be notified of the maximum limit of the line of credit and he or she can spend the money either by using the credit card or the cheques that the lender provided. Just like credit cards, line of credit home equity loans work on a variable rate of interest, which is determined monthly. Repayment of the loan must be made monthly, based on the amount borrowed that month. Once the life of the line of credit is over, the outstanding balance must be repaid in full. Home equity loans are a great source of money for home owner that need access to cash quickly. The money can used for anything at all but most borrowers will use the money to do home improvements, send kids to college, pay off another loan, etc. Home equity loans can be very appealing as their interest rate are almost always lower than other types of loans and certainly lower than credit cards. Someone with a credit card loan would benefit from taking a home equity loan on their home in order to repay the credit card debt. Not only will the home owner reduce his interest rate, the loans will be consolidated into one month bill and the interest rate on the home equity loan is partially tax deductible. Home equity loans are a great financial tool. Particularly for home owners looking to do renovations or with unforeseen expenses. They provide fairly easy access to money at a relatively low interest rate. However, remember that the loan must be repaid and that if you sell your home, the amount that you borrowed will not be profit in your pocket.



MARTIN

Andrew Obidowsk asked:


If you are a homeowner and are in need of some extra cash, you may want to consider getting a home equity loan. Equity is the amount of value you have paid off on your property. For instance, if your home mortgage is worth $150,000 and you have paid off $50,000 of your mortgage, you have $50,000 in equity on your home. With this equity you have in your home, you can take out a home equity loan on this money.

There are two types of home equity loans available; Standard Home Equity Loans and Home Equity Lines of credit. With a Standard Home Equity Loan, your loan is assured by the amount of equity you have in your home. This is the type of loan option you should choose if you are in need of a very large loan. A Home Equity Line of Credit is akin to a credit card. With this option, you can withdraw money from an equity account that has been set up with your equity amount. This is a better option for you if you are not needing a large amount of money.

A Standard Home Equity loan generally is a little more difficult to obtain, only because it has a more complex process. These loans generally have a fixed term to them, meaning you will have a pre-determined number of payments over a set period of time. They generally will also have a fixed interest rate and fixed monthly payment. The amount of the loan you receive will be provided to you in one lump sum.

With a Home Equity Line of Credit, an account is set up for the money to be placed into. You can then make withdraws on the money as you need it, and then make payments back into the account. These types of loans generally have a fluctuating rate of interest, however you will only have to pay this interest if you have a balance on your account from the money you have borrowed.

There are many reasons why a person may choose to take out a Home Equity Loan. Many people take out these kinds of loans if their home is in need of repair or reconstruction. If there are large changes they want to make, such as a new heating and cooling unit or new windows, they will take out a home equity loan to pay for them. Others will use a home equity loan as a means to get out of other debts. They will use their Home Equity loan as a form of debt consolidation, to pay off some of their other debts and only have to make one monthly payment. And still others may take out a loan to pay for a new car, or even a large family vacation.

There are countless reasons why a person may choose a home equity loan. Once you get the money, it’s up to you what you choose to do with it. Just keep in mind that this is a loan you will have to pay back, and if you fail to do so, it could very well cost you your home and all of your equity.



PASQUALE

Ken Charnly asked:


A home equity loan can be ideal if you need money for your education, paying your medical bills, or even for the renovation of your home. It is a loan in which the borrower makes use of the equity in his home as collateral against the money lent to him. There are two types of home equity home loans: the closed end home equity loans and the open end equity loans. 

The closed end home equity loan is more of a traditional loan. You can also call it a “second mortgage”. By virtue of the closed end home equity loan, the borrower receives the full loan amount at the time of the closing of the loan. The loan is then meant to be paid back by the borrower in monthly payments in fixed installments. The loan has to be paid back in full by a certain stipulated period of time, like 10 or 15 years.

The open end home equity loan is considered by people who desire flexibility in paying back the lender. In this type of home equity loan, the borrower gets a line of credit instead of the entire amount. The borrower can choose how much money he can borrow against the equity of his home. The borrower has the flexibility to choose the time in which he can borrow the money. These kinds of loans generally have a variable interest rate.

When you shop for a home equity loan, it is important to do enough research. Be wary of lenders who try to take advantage of you and give you a loan which you may not possibly be able to pay back.  It is better to pick a lender of repute or the one which a knowledgeable person recommends.



SAMUEL