Home equity loans provide you with low rate credit based on the security of your home?s value. Your home is your collateral, which reduces your loan risk with creditors. Home equity loans also come in a variety of terms, so you can pick what is best for your financial needs.
Home Equity Loan Basics
You can cash out all or part of your home?s equity with a second mortgage or line of credit. Home equity loan rates are typically a couple of points higher than a regular mortgage. In some cases, you can get a better deal by refinancing your original mortgage and cashing out your equity at that time.
Your home equity loan lender does not have to be your original lender. In fact, you should do comparison shopping on rates and fees to be sure you are getting the best deal.
More Options With Home Equity Loans
Besides how your rates are structured, you have several options when it comes to your home equity loan. Loan periods are flexible, and many have refinancing options. You can opt to only pay interest only for a few years, and then roll it over to a structured payment plan.
With a line of credit, you only borrow what you need. So payments are much like a credit card bill, with a minimum amount due. You could also choose a lump sum payment, ideal for remodels or bill consolidation.
Find The Right Loan For You
With so many choices, it can be a bit intimidating to find the right home equity loan for you. Start by selecting the loan terms that meet your needs, whether that?s a large sum payment with a second mortgage or a flexible line of credit.
Next, research lenders based on your ideal loan terms. Ask for loan estimates, but don?t give out your credit information just yet. Only give permission for a lender to look at your credit score if you are serious about applying for the loan. Otherwise your credit score will drop needlessly because of multiple credit inquires.
When comparing offers, look at the APR for the total loan cost. But also read about any annual or miscellaneous fees. They can easily add up to a couple of hundred of dollars a year.
Within a day, you can find a competitive lender and be on your way to a low rate equity loan.
About the author: Go to www.abcloanguide.com/homeequityloan.shtml for an Easy Home Equity Loan. ABC Loan Guide?s lenders are reputable and offer competitive rates.
Source: http://www.isnare.com/?aid=59691&ca=Finances
Frequently Asked Questions
QUESTION:
It is a buyer?s market ? I understand that. Home equity loans, how do they work?
If I purchase a home for 0,000, but it is appraised for 0,000, will I have automatic built-in equity that I can use to consolidate ,000 in school loans and credit card debt? Or, will I still have to pay down some of the P&I in my mortgage before I can use the home equity? That is the situation I find myself in right now. Thank you!QUESTION:
How does a home equity loan work?
I need to know all the details and if it is a good choice. I have payed off my vehicle and credit cards and have none, but I have alot of student loan debt. Our dilema are the student loans. And paying them. I have heard about home equity loans and heard about being tax deductible. How do they work? Do they look bad on your credit? How much can you borrow ? Does it add to the years to pay off your house? We only have eleven years left to pay as it is right now. Just wondering what is a good option. I even thought that after I graduate and am working that my pay checks can go all to my student loans. I am just looking for some good ideas without having to stress out about debt and bills and such. We are trying to pay our bills off and so far have done good. But those student loans are looming in the background.ANSWER:
I?m not sure why you would want to get a home equity loan to pay off student loans. Typically interest rates on student loans are much lower than home equity loans. It is true that you can use interest paid on a home equity loan as a tax deduction, but you can also use interest paid on student loans as a deduction.
QUESTION:
Home equity loans??
How do home equity loans work? I need to know EVERYTHING about them?.Can you suggest any legitimate websites?
ANSWER:
There are 2 types of equity loan. Fixed rates and variable rates. You are always borrowing on the equity in your home. If you sell the deed of trust must be satisfied at close. So you may not get as much on the sale if you have not paid it ALL back. A fixed note is just that fixed for the life of the note so the principal and interest remain constant. The Variable rate is tied to an index. (prime rate, cost of funds London Interbank Offered Rate{ LIBOR} or some other index) These rates change on a monthly basis and go very high over the term of the note. For example notes tied to prime are based on your balance this month and The PRIME RATE as it was published the first business day of the month in the ?Wall Street Journal?. There are cap restrictions on just how high it can go up so you must know the maximum amount it could reach over time. In some states it could be as high as the Prime gets. In other states like in Tennessee where I live and work it is maxes out at 18%. If it is just a small amount and you repay quickly then the variable may be your best bet. If a Large amount the I would recommend a fixed note. Hope this helps you.
I am a mortgage banker in TN & KY
QUESTION:
Would a home equity loan work for me?
Here is my situation:-owe 00 to citifinancial @ 28.9% interest (student loan & personal loan)? min. payment of 7/mo
?owe 900 to finance company @ 18.99% interest (car loan)? min payment of 8 bi-weekly
?owe 0 to HBC credit card @ 28.9% interest (used for wedding attire and wedding necessities)
?owe 6000 to mortgage company @ prime + 8%- originaly purchase price of house was 3,900
Citifinancial has offered us the following home equity loan terms:
?lowered interest to 18.9%
?pay off car loan & credit card debt
?pay off our existing loan with them
?lowered monthly payments to 7/month (we would pay bi-weekly and about 0 bi-weekly, so paying more then minimum payment)
?00 cash upon signing new loan (which we could REALLY use to buy new appliances for our kitchen- dishwasher is dead, and so is our dryer)My husband doesn?t think it is a good idea to take our a home equity loan, while I think it is a good idea because of a lower interest rate, paying off other debt, and NOT financing our needed appliances (at an in-store rate of 28% interest, because we don?t have extra cash right now)? what do you think?
We have had our original citi loan for 13 months, and it was originally 500? we have it down to 00 in a year, so we are good at paying it on time, and paying more on it when we can.
I think it is a good idea to take the loan, because it seems it will help our credit, lower our monthly payment (though as I said, we would continue paying more than the minimum)? and the best thing would be that our other loans are more than 18.9% interest- so wouldn?t it make sense to pay only ONE bill (the new citi loan) than a bunch of small ones at higher interest rates??Help me make sense of this- how can I explain this to my hubby so he sees it the same way I do? HE says he doesn?t want to do it because he wants to pay citi financial off and never deal with them again- he doesn?t see how it can really help us out right now?
ALSO it would prolong our payments to citi for 2 years beyond what we are owing them right now- this new loan would be for 160 payments- 160 months=13 years whereas we owe them for a little under 11 years right now? and our car loan is 4 years ammort.
What makes sense- taking the loan OR paying what we do now on different bills and never getting anywhere?
ANSWER:
A mortgage at prime + 8 holly crap.You should look into a complete refinance with debt consolidation. Pay everything off into one payment would be the best for you considering that you mortgage is 13% right now. You can do a whole lot better than that. Contact your bank and every other bank and see who can give you the best interest rate and the lowest cost to do it.
QUESTION:
How does home equity loan qualification works? ?
How does home equity loan qualification works? My house is worth around 0,000 ? 0,000 and my mortgage balance on it is around 0,000 with payments at roughly 00.
What if I want to qualify for home equity loan or home equity line of credit say for 100.000 grand. How does the whole qualification thing works? What do lenders look at, how they decide?
Would appreciate any help. Helpful links are good too if you know any resources!
Thanks!ANSWER:
First, you will need to get a new appraisal on your house. If your house does appraise in the 0K range, then on that basis, you will qualify for the 0K home equity. Next, the bank will look at your income, employment, etc., just like a regular mortgage. If you are approved, you will go through the same type of closing you went through when you took out your original mortgage. There is really nothing different between a home equity and a first mortgage when it comes to qualifying/applying. The only real difference is on the side of the lender who has to file a secondary lien against the house rather than a primary lien (meaning the home equity lender gets paid second if you default).
Source: http://mysurefinance.com/home-equity-loans-how-do-they-work/
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