Mortgage Information

yoohoo asked:


What is a home equity loan? How do you know how much equity you have in your home? is that the loan you get for home improvements? Anything about equity would be great.

Veronica

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.



Duane

adamea5@sbcglobal.net asked:


I am searching for financing to make home improvement repairs, I submitted a request for a home equity loan through lending tree. The lenders throwing out terms such as 1st mortgage, 2nd mortgage, and home equity loan.

Phillip

Dina Wilson asked:


If you are a homeowner and looking for larger loaned amount at cheaper rates then your home can play a vital role of collateral; as it acts as much resourceful for availing best features of home equity loans.

Home equity loans allow the borrower to consider their heavy weigh expenses in easy and smooth way. Home equity loans support whenever borrower is in need of money. The term home equity means that borrower uses equity in his home as collateral. Simplifying the meaning of equity, it can be said that it is the difference between the market value of borrower’s home after deduction of the debts which are taken on behalf of borrower’s home.

So, Home Equity Loans are secured loans which lower the risk for lender and in respect to that lender offers better terms. Homeowner who is availing home equity loan enjoys interest rate at lower rate and repayment terms with flexibility.

The loaned amount is depended upon the market value of equity; so homeowner must get his equity evaluated from various dealers. The interest rates charged on home equity loans are typically fixed, but borrower can to benefit from variable rate program that are available in the financial market. The term period for home equity loans can vary from 5 to 25 years.

Meeting wedding expenses, major home improvements, consolidating larger amount debts, funding higher education, buying of luxury car, long listed medical bills etc are the most important purchases that borrower can considered for home equity loans.

The home equity loans are secured in nature and lender feels less risky so, borrowers with bad credit history like CCJ’s and IVA, defaults, arrears and bankruptcy can also apply for home equity loans. Borrowers with bad credit too avails easy conditions with the difference in the interest rate i.e. they are offered at slightly higher interest rate.

Borrower can access home equity loans from conventional modes like banks, financial institutions or leading lenders besides that today online mode is ruling the financial market. If the borrower opts for online mode then he can avail ample choice as online mode is flooded away with the online lenders that are ready to offer home equity loans at competitive rates.



Lance

Melissa Kellett asked:


Not many know and understand the concept of home equity. And truth is that home equity loans are probably the cheapest source of finance out there. Many do not know that they can benefit from the equity they have built on their home by getting home equity loans instead of expensive unsecured personal loans, pay day loans or other financial products.

Provided that you know exactly how home equity works and how it guarantees home equity loans and lines of credit. Most of the drawbacks that these loans may have just fade away if you are responsible enough to prepare for unexpected expenses. And then, you can enjoy from inexpensive financing that you would not be able to get other way.

Home Equity

Equity is the remaining value of your property that can be used for further guaranteeing additional loans. If your property has no liens or mortgages, then the equity on your home is exactly 100% of the home value. This figure may be calculated according to the purchase price or, if some time has passed, a revaluation must be done.

However, in most cases, properties have at least mortgage loan attached to them. Thus, the equity on your home is the difference between the home value and the amount of outstanding debt that the property is guaranteeing at the time. This remaining value can be used as collateral for additional loans that have similar loan terms as home loans.

For example: If you own a property worth $100,000 with no liens or mortgages, then, the equity on your home is $100,000, the 100% of the price of the property. However, if you have a mortgage on your home with $60,000 of debt remaining, the equity on your home is $40,000, the 40% of the home value. This number is calculated by subtracting the outstanding debt amount to the purchase price or the valuation price of the property.

Equity Financing And Percentages

There is an additional complexity when it comes to home equity loans. In an Ideal scenario, you could get to finance up to 100% of your home equity or 100% of your home value combining your mortgage loan and any home equity loans. However, few lenders are willing to lend up to 100% of the value of the property (though some lend even more).

Instead, most lenders draw a line at an 85%. Thus, you can only get 85% financing; but 85% of what? And that’s another problem. Some lenders will define the credit limit on the 85% of the remaining equity on your home, but other will define it on the 85% of the home value. Thus, depending on the lender, the amount of money you can get differs.

For example: Say you have a property worth $100,000 and your current mortgage stands in $50,000. If the limit is 85% of the home value, then the amount of money you can get with your home loan and your home equity loan combined is $85,000, thus, you can withdraw up to $35,000 with a home equity loan.

But if the limit is fixed on the 85% of the home equity, then, you can obtain up to 85% of the remaining equity on your home ($50,000). Thus, you could obtain up to $42,500 which is a significantly higher amount. That being said, you should pay attention to the loan terms when requesting loan quotes from different lenders as what you can get out of a home equity loan differs from one lender to another.



Peggy

Mary Wise asked:


However, you may wonder what the differences between home equity loans and home equity lines of credit are.

Home Equity

When you have a mortgage on your home but the value of the property exceeds the amount owed, the difference between the outstanding debt and the property value is referred as Home Equity. This remaining property value can be used to guarantee another loan: A Home Equity Loan or Line of Credit.

Home Equity Loans are secured loans with a fixed or variable interest rate, a fixed loan amount and a fixed, though negotiable, repayment program. A home equity loan is just like any other loan, only it is secured with the equity you have built on your home and thus carries fewer interests.

A Home Equity Line of Credit on the other hand, comes only with a variable interest rate, there is no fixed loan amount, though there is a credit maximum and the repayment is extremely flexible. The home equity line of credit is also secured on the home equity.

Interest Rate

Since both are secured, the interest rate charged is considerably low. Only home equity loans with a fixed rate can have a slightly higher interest. Home equity loans with a variable rate usually carry a somewhat lower interest rate. Home equity lines of credit, on the other hand, carry only a variable interest rate that is usually similar to the home equity loan fixed interest rate.

Loan amount

Home equity loans come with a fixed loan amount that can equal or be a bit higher than the home equity value. Home equity lines of credit are somewhat different: There is no loan amount, a credit maximum amount is set and you can borrow as much money as you need up to that amount. For example: If a $50.000 limit is set you could borrow $10.000 and a month later borrow $20.000 more. And so on till you reach the credit maximum.

Repayment

Home equity loans come with a fixed repayment schedule which has to be followed strictly with some exceptions. Though, there are in some cases grace periods and waivers you could apply for, if you request a home equity loan you will probably have rigid installments or at least a fixed amount plus a variable amount depending on interest rate variations.

Home equity lines of credit let you repay the amount you owe they way you want to do it. You have an open line of credit where you can borrow and repay as much as you want as long as you do not exceed the credit limit. Moreover, as opposed to home equity loans, lines of credit do not require to be renewed as you can always borrow more as long as there is credit left. If your home equity grows either by an increase on your property value or because of a reduction on your mortgage debt, you can ask for your credit maximum to be recalculated.

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Christian

Dina Wilson asked:


If you are a homeowner and want to take a loan at cheap rate of interest then home equity loans should be your preference. Home equity loans are especial loans carved out for providing greater loan amount at very low rate of interest. Clearly the loan is seldom a burden on your repaying limited capacity. Through home equity loans you can renovate your home, buy a brand new car, meet wedding and holiday expenses or you can immediately pay off your high rate debts.

Home equity loans are based on equity in your home. Equity in home is the amount that is equivalent to the current value of home minus the payment the homeowner has still to make for the loan taken for buying the home. The lender would be approving a loan that is equal or less than the equity in home. This way the lender feels more secure and is assured of getting back the loan in case the borrower fails to return the loan. This is one reason that home equity loans carry low rate of interest. Home equity loan is considered as cheapest of all secured loans.

What is more advantageous is that home equity loans can be returned back as suits to the repaying capacity of the borrower. If the borrower wants to reduce monthly monetary outgo for the loan installments, than, he can opt for 25 to 30 years of repayment duration. So this way also home equity loans are easy to repay.

Home equity loans are also approved without any hurdle for bad credit people who could not pay past loans in time or have arrears, payment defaults and county court judgments in their names. Since home equity loans are safe for lender to give, bad credit usually is not a problem. But compare different lenders so that you can find a lender having loan at comparatively lower interest rate for you.



Lydia

“g” asked:


I want to do some improvements in my house and I think a home equity loan will be the best thing for me….Suggestions anyone….

Lisa

eagle asked:


I own a home and want some extra money.I have about 200,000 equity on my home and my loan is for a 100,000.My credit is not the best in the world.I have 2 credit cards total of 1,700 dollars and owe a few doctor bills totaling 730 dollars.My house payments are current and I have no car loan.My salary just barely pays my bills.Maybe I can leave some money in a high interest account to acquire some money from the equity loan too and use some of the money to do a few things to house but not major remodeling just new carpet,paint landscaping etc etc.What is the best way to get some extra cash,I am a single mom and only have my one income coing in and can’t take another job because I have to take care of my other responsiblities as a mom.Please no loan companies respond. Just want to make my quaility of life a little better.Thanks anyone.

Marvin

Dina Wilson asked:


The equity of a house can at times come to the rescue of the owner. Without losing ownership, he can advantage from the equity of his home by taking home equity loan to meet urgent financial requirements.

Home Equity Loans are based on the equity of the home. In these loans the equity of the home is accepted as collateral. So a homeowner is only eligible for home equity loans. The equity of a home is the market value of the home minus the outstanding mortgages against it. So if the market value of a home is £200000 and the outstanding mortgages amount to £70000, then the homeowner has £130000 as the equity to get a loan.

Home owners can get these loans in two forms, as home equity loans and as home equity line of credit popularly known as HELOC. In home equity loans, the entire loan amount is given to the borrower as a lump sum. Interest starts accruing on the loan amount from the day it is disbursed.

However, in HELOC, borrowers can withdraw money according to his needs up to a maximum limit he is entitled to. The scheme acts like a credit card. Here interest is charged only on the amount used and not the entire amount.

In home equity loans, the borrower is generally entitled to get only 80% of the equity of the home. There are, however, borrowers who give loan amounts up to 125% of the equity. With home equity loans one can borrow money in the range of £5000 to £75,000. Repayment terms ranges between 5 to 25 years.

Home equity loans offer cash relatively fast and at low interest rates which control the cost of the loan. Another big advantage of these loans is that the interest is tax deductible.

Before taking a home equity loan the borrower should find out the equity of his home. For getting deals suitable to him, he should do proper research both offline and online. He should not rush in to grab whatever is nearer to his hand.



Dennis