Home Equity Loans – second mortgage

Ken Black asked:


Home equity loans are especially useful for homeowners that want to free up some of their capital tied up in the investment of their homes, and use it to their advantage. Here are the details.

These home refinance loans come in two main types, either of a one lump sum payment, or a line of equity credit that can be drawn on anytime.

Equity is up to 85% of the market value of your home, less what you already owe on it from your mortgage. For those who bought their homes some time ago and their homes have increased in value, this can be quite a considerable amount of money.

So let’s look at some of the advantages of having a home equity loan secured by your home:

1. Free Up Money – with a home equity loan, you can free up money that is tied up in your home, without having to sell it, giving you the opportunity to have things that you normally wouldn’t have the money to fund.

2. Flexibility – a home equity loan can be tailor-made to suit your personal needs, and budget. Some of the choices that you have include having ARM or fixed interest rates, lump sum equity paid to you, or a line of credit allowing you to use the money only when you need it, and pay interest only on what you have borrowed.

You can also negotiate the terms in years for your equity loan. This means that the longer that you take the loan out for, the less your repayments are.

3. Consolidate Debts – by having a home equity loan, you can consolidate all of your debts in the one loan, which means that you will be paying less on interest rates, and charges. Home equity for debt consolidation can also be used to lower monthly repayments on consolidated debt by taking the loan over a longer term.

Many people use home equity loans to consolidate consumer debts such as student loans, credit cards, store cards, and personal loans, which are unsecured credit that attract high interest rates.

4. Repair Credit – home refinance loans are also a great way to repair your credit. If you are unable to get credit because of a bad credit history, chances are, if you are able to afford the monthly repayments, you can still get the funds you need. This is because this kind of financing is secured by your home, making you, as a borrower, less of a risk to lending institutions.

Over time, you can repair your credit history by making regular repayments on time, which will increase the likelihood of being able to get more credit in the future.

5. Investments and Improvements

If you are looking for a way to improve the value of your home by doing some renovations, additions, or get deposit money to invest in other assets, an equity loan can be ideal.

Additionally, if you are planning to sell your home, but need to do some improvements prior to putting it on the market, an equity loan is also a wise choice.

As you can see, a home equity loan can enable you to do the things you want and need to do and make your life better. Look into this today.



AL

Webmaster Home123 asked:


 

Home equity loans or lines of credit allows you to borrow money, using your home’s equity as collateral where equity is the difference between how much the home is worth and how much you owe on the mortgage. A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.

Advantages and Disadvantages of the home equity loans

Advantages: There are many other advantages of home equity loans. The loan payments on these loans are tax deductible. Home buyers can take bigger sum equity loans. These loans also carry a low rate of interest. But it’s best to heck the prevailing interest rates from many lenders and banks before you actually go in for a loan. It’s also important that the borrower check the credentials of the lenders before applying for a loan. They are many scam and con artists who can take away your home in lieu of giving you a home equity loan. The borrower also risks losing the home in case they default on the loan.

The two major advantages of borrowing with a home equity loan are lower interest rates and potential tax savings:

- The interest rate you will pay on the average home equity loan is generally lower than the interest rate you will pay on the average credit card or any other type of non-secured debt.

- For home equity loans, you can generally deduct the interest you pay. The interest you pay on credit cards and other types of personal loans is generally not tax-deductible.

Disadvantages:

Risk of losing home. If you can’t repay or refinance the loan, then you may be forced to sell or lose your home. Your home is the collateral for the loan. Being late or missing loan payments can trigger foreclosure within 60 to 90 days.

Rising interest rates. With a variable interest rate, most home loan rates change when the economy changes. This means your monthly payments can rise and fall. Be sure you know what the cap is on the loan’s interest rate. The cap sets how high your interest rate can increase each year as well as how much it can increase over the whole loan time period.

Fees. Lenders can charge a variety of fees including origination, application, and withdrawal fees. Be sure to ask about all possible fees.

The major disadvantage of a home equity loan is that you are using your house to get approved for the loan. For some people who have flawless credit this might not be a problem, because they can insure themselves that they will do whatever it takes to pay off their loan. However, instances have arisen where individuals have forgotten or were they are not financially able to pay for their loans. So at this point you’re wondering what happens if you cant pay your home equity loan? With all financial decisions come risk and the risk of losing your home wouldn’t be an option, especially if you have a family.

Home equity loans are best used for home improvements that will increase the value of your home. Some improvements, such as swimming pools, don’t usually increase the value upon resale. Others, such as additional bathrooms, living space, renovated or updated kitchens, etc., generally do increase the value of your home.

The bottom line is this: if your home is worth more than you owe on it, a home equity loan can be a great way to take advantage of this, but it can also get you into serious financial trouble, and should be used wisely. Why not use the equity in your home as part of your retirement fund instead of spending it on things that may not last?

Over the life of home loans – sometimes up to thirty years – your financial circumstances can change dramatically. Starting a family, changing jobs, children leaving home and many other factors can alter your financial circumstances over the term of the loan. A home loan that is right for you at the beginning has the potential to become the worse mistake you ever made.

Refinancing can be useful and financially rewarding but it can also carry risks. It takes time and costs money, so before you decide to change to another lender, ask yourself if it is really the right thing for you.

Are you happy with your existing lender? Have they been professional and helpful in all the dealings you’ve had with them? Are you happy with your existing loan? Is the interest rate comparable to other lenders? Could you use some extra features offered with other products?

Has your financial situation changed? Maybe you’ve started a new job or become unemployed.



JOEL

Ray Tolley asked:


In this article, we’ll cover the benefits and disadvantages of home equity loans, home equity lines of credit (HELOCs) and personal loans. Whether you’re looking for funds to finance a major expense or simply pay down consumer debt, this article can help you decide what type of financing is best for you.

Home Equity Loan

* Best for: Major, unexpected expenses or large investments.

* Not for: Ongoing or smaller expenses.

How it works: A home equity loan is like a mortgage – the borrower is given a lump sum of money up front and begins paying interest and principal payments right away to work off the debt. The amount of the loan extended to the borrower is based on how much equity has increased in the home after appreciation and mortgage payments.

* Pro: Home equity loans typically offer a lower, fixed interest rate than HELOCs and personal loans. This benefits the borrower over the term of the loan as well as in the short term.

* Con: Borrowers have to pay interest on the full balance right away.

Home Equity Line of Credit (HELOC)

* Best for: Ongoing expenses like major renovations, college tuition or having a baby.

* Not for: Single, major expenses.

How it works: A home equity line of credit is secured by the equity in your home, and you can draw on it as you would using a credit card or savings account. Typically, the rate is adjustable – meaning it can be changed periodically depending on financial market trends – and you’ll make interest payments on what you borrow until the term of the line of credit is over.

* Pro: You only pay for what you borrow, and these loans are often easier to qualify for and faster to obtain than home equity loans.

* Con: The interest rate is adjustable and often higher than a home equity loan. When shopping for a home equity line of credit, look for a low permanent rate.

Personal Loan

* Best for: Small single expenses like a new car or small business investment.

* Not for: Ongoing living costs, major projects like home renovations.

How it works: A personal loan is a one that is offered by the lending institution and is often secured by the piece of equipment (e.g. a car) or property (e.g. business) that you’re using the loan to purchase. Typically, personal loans are smaller and can often be obtained in the form of a line of credit.

* Pro: Simple application process without sacrificing home equity or risking the home itself.

* Con: Without the security of home equity, the interest rates on a personal loan are often higher, so it is advantageous to pay off the loan as quickly as possible.

In short, whether you obtain a home equity loan, a HELOC or a personal loan will depend on why you need to borrow the funds, the kind of interest rates you can afford and your own current financial situation.

Remember, always shop around for the lowest interest rate! Doing so can save you hundreds – if not thousands – of dollars over the life of the loan.



JAMAR

Julian Lim asked:




 

A home equity loan is that type of home equity mortgage acquired with your home property taken in as collateral. The home equity value is actually the difference between your home’s current market and the amount of mortgage that you owe.

 

People apply for home equity loan for many different reasons. The most common of them is the serious need for some amount of cash money on hand to be used for purposes such as college tuition fees or perhaps home improvements.

 

What Are The Advantages

 

Debt Consolidation

 

Another simple reason that home owners consider when wanting to take a home equity mortgage of their property is to consolidate their debts. Therefore, instead of dealing with a number of personal loans, you will then have to deal with only one payment monthly because of debt consolidation. Thus, one due date needs to be remembered as well as the amount that is needed to be paid. One loan means a much easier planning of your financial and budgetary concerns.

 

Home Improvements

 

As already said, home owners likewise can use home equity loan for the improvement of their home properties. These types of loans do offer great interest rates when it comes to home improvement. They likewise help in improving the value of your property with the increase in equity and the writing off of charges in interests on tax returns.

 

Simply put, the main advantages of home equity loans are low and tax-deductible interests. It is likewise a quick and easy way to acquiring a sizable amount of cash.

 

What Are The Disadvantages

 

Where there is positive side, there must also be negative side. You must remember that your house will be used as the main collateral. Thus, the failure to refund the home equity mortgage loan certainly will result in foreclosure, meaning, you lose your ownership to your property if you fail pay your loan obligations.

 

Increasing interest rates

 

Another bad aspect of home equity loan is the ever increasing interest rates. Most rates of home loan vary according to the current economy condition. With a changing interest rate, your monthly loan payments may either increase or decrease in its amount. Therefore it is a must that you are aware of your interest rate cap.

 

The cap actually decides on how high the interest rates can increase annually and how much it can increase its amount over the entire duration of the loan. Likewise, it is best for you to inquire from your lender about whatever possible fees involved with the home equity mortgage loan.  It is possible that lenders will decide to charge you will simply all possible fees there is. Some of the fees include application fees and withdrawal fees.

 

Before you get a home equity loan, better consider how the overall economy and property market is doing. If the prices of home property are going down, it is advisable to not consider getting such type of loan as the home equity value will be lower.



MARC

Sandra C asked:


Just looking for a way to consolidate my debt without having to go to one of those sketchy 800# places. Looking for some real answers here, I have no idea how any of this financial stuff works. Thanks in advance!

JERROD

Dina Wilson asked:


Do you know the equity of your house? And are you aware of this fact that multiple advantages can be squeezed out by using this equity. The next step after calculating the equity is considering the home equity loans. Home equity loans can arrange a certain percentage of amount on the equity of the home which you can invest it in executing your personal ends.

Home equity loans can be regarded as the most resourceful loan that comes at competitive rates for the homeowners. It is because applicants should be a homeowner and the loans are released against the borrower’s market value of the home. But while pledging home as collateral, the question that haunts the homeowners is the safety of their home. In this loan, a borrower need not have to pledge his home as collateral and therein drop the fear of losing the most valuable possession.

As you are ready to pledge the most worthy possession of yours, so lenders also step no behind and unlock numbers of benefits. Large amount, low and cheap interest rates, easy repayments terms and more are for your convenience. Loan amount usually depends upon the equity of the home that it carries. The approval is fast and quick in home equity loans because lender becomes certain of borrowers repayments. The course of reimbursement is scheduled in a stretched manner elongated from 10-25 years.

Home equity loans are best to cater miscellaneous personal demands. In a single amount, you can execute ends that you longed from a long time. Buying a car, going for holidays, weddings, consolidation of debts, higher education are some that can be executed in a single loan amount of home equity loans. To get the loans without any delay use the online application method by enclosing the details related to credit status. So, take this opportunity and make the best use of your house by applying for home equity loans.



JOHNIE

Brad Pradt asked:


what’s the difference between the two, and which ones are easier/harder to be approved of etc?
My partner is getting one or the other, which I’m strongly urging because he owes me alot of money , due to health problems and house problems I had to help him with, and I personally want him to go with whatever’s more flexible, and has a longer time frame, so it will make it easier on him on payments.

He got accepted left and right when he applied for personal loans last year but turned them all down because he didn’t need them yet, and this year he’s starting again but is going for the home equity, but already got one rejection, because he already has some debt.

I personally don’t know what to tell him, so someone educate me!

thanks.

BASIL

Albert Alexander asked:


Home equity loans are sometimes used for consolidating consumer debt or covering a large expense such as a wedding, college expenses, or home repairs to your existing home. Home equity loans are great in that they use the collateral already invested in your home to secure the loan, allowing you to get a better rate out of the deal and make smaller payments than you would to a credit card or even on a personal loan. Home equity loans are desirable to borrowers because they oftentimes have a lower interest rate, they are easier to qualify for even if you have bad credit and your monthly payments on a home equity loan may be tax deductible.

In the past, home equity loans were more often than not used for home upgrades that would raise the value of your home. Nevertheless, these loans have become a feasible option for large, non-home improvement related purchases or even for consolidating outstanding debts into one monthly payment at an affordable interest rate. Even as home equity loans are a great means to release extra cash which is tied up in your home, borrowers must be fully aware that they are using their home as collateral. If a situation arises and their loan requirements aren’t met, they could lose their house.

Lenders consider several factors such as your credit history, ability to repay the loan, and your homes equity (noted above) when deciding how much money to lend. Although the chances of your approving for an equity loan may increase, you’re not going to get a complete pass on the “process”. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness.

So how much can you get? The amount of your loan is tied to the equity in your home with is simply determined by subtracting the amount owed on the home from the current market value. Equity loans enable homeowners to borrow money against their home’s calculated value. The “equity” merely refers to the cash value that has grown in your house because you have been making your monthly payments over time.

Equity loans, secured by real estate, are normally deemed safer by lenders. Because of this your interest rates are likely lower than credit card rates or even consumer loans. Additionally, regardless of the rate, the interest on debt secured by the mortgage or lien on your personal residence is commonly tax-deductible. Please consult your accountant for more detailed information. Home equity loans are, essentially, fixed rate home loans that enable you to take advantage of the money you’ve already invested in your home to finance larger debts at a lower interest rate than most revolving credit options. Home equity lending, often referred to as a second mortgage or borrowing against your existing home, can open up a lot of avenues as a funding source for a current homeowner..

When all is said and done, home equity loans are a great option if you are confident in your ability to pay them off. Because they normally have a lower interest rate, are less difficult to qualify for (even with poor credit) and the interest may be tax deductible, home equity loans are a great alternative for homeowners. Like anything else however, buyer beware. Less reputable lenders frequently target people in vulnerable circumstances with troubled credit by suggesting what appears to be an easy solution. Hidden fees and confusing rate calculations can make a bad situation get worse.



RUBEN