George Kane asked:


 

It really feels great to have a house of your own. It not only gets added up in your assets but can also become an excellent source of credit when you need it the most. In other words, your home can turn out to be a great source of money when you fall in urgent need of funds. This has been made possible with the help of a home equity loan.

 

Home equity is the ownership value tied up in a home or a property which estimates the current market value of the house. This amount does not include any remaining mortgage payments. Thus, home equity is calculated by deducting the unpaid balance of the mortgage and any outstanding debt over the home from the home’s actual market value.

 

The home loans are categorized in two segments- the standard Home Equity Loans and the home equity line of credit. The standard home equity loan offers a debtor with a particular amount of money that has a fixed interest rate and payments. These loans have to be paid in a fixed time period. These loans offer a larger loan amount as its borrowers are allowed to re-borrow the loan amount that they had already paid in the past.

 

A home equity loan is always secured in nature as it requires you to pledge your homes’ equity as collateral. These loans offer low interest rate, help you become debt free, allow you to borrow up to 100% of your home’s value and the loan payments usually come with certain tax advantages.

 

The value of equity can be used for various purposes. These include availing loan and to invest for getting a high interest rate. Borrowers may use this loan amount for making home improvements, for college tuition or for things like investing in business ventures like purchasing additional property. Thus, a home equity loan is an alluring option for all those homeowners who require quick cash for any of their urgent needs.



AUGUSTINE

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.



TRACY

Alan Lim asked:


If you are a homeowner, you surely have heard so much about home equity loan. What is this all about? Owning a home is not only a major turning point in your life, but is actually an investment that will increase in value over time. In time, your home value would increase. This means that your house which originally cost you $150,000 10 years ago can now be sold for $200,000.

Consequently, if you purchase a home and pay for it through home mortgage, you are slowly building on home equity. It is simply the difference between the current value of your home and the value you still owe your lender on the mortgage. You can then expect your home equity to increase in two ways - it increases as you pay your monthly mortgage payments, and as the market value of your home increases in time.

Home equity is actually one of the most important advantages you can get when buying a home. It is a great financial resource and your money stored in the bank. You can borrow against it through a home equity loan in cases when you badly need some extra cash. If you want to take on a home equity loan for college tuition, home renovation or to pay off your debts, you have two types to choose from: a second mortgage (known as the traditional home equity loan) and the home equity line of credit loan. What are these two all about?

A second mortgage loan merits you lump sum money which is based on the equity built on your home. On the other hand, a line of credit loan entitles you to a credit card or a check book with a corresponding maximum credit amount that you can use for purchases. The amount you can spend is again based on your home’s equity.

Whichever type it is, is low interest and tax deductible. Thus, with all else being equal, the choice of which one to choose is entirely up to you. It will depend on your needs for the moment. If you need the lump sum cash to pay for big purchases, then a second mortgage will do. On the other hand, if you need to spend it in small but regular amounts, then you might find a line of credit more suitable.

However, it is still very important for you to bear in mind that when taking out a home equity loan, your lender can repossess your home anytime if you fail to pay the necessary dues. If you fail to pay your monthly payments for a while or if you fail to pay your home equity loan in full as agreed upon, your lender or your bank can take your house away and use its current value to get what you owed them. As in all mortgages, make sure that you assume the responsibility to pay for what you need to, or you stand the risk losing your home.



MALCOLM

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/



ARMANDO