Alan Lim asked:


A home equity loan is an excellent option to go for if you want to find a solution to your mind-blowing financial problems. If you have bought your home and have been paying for your mortgage for a while now, your home will surely have appreciated. This will entitle you to an increase in home equity, which you can use to borrow against. Here are some guidelines to help you in proper decision making when taking on a home equity loan:

What’s the difference between a Home equity loan and Home equity line of credit (HELOC)

A traditional home equity loan involves giving you lump sum cash, while a HELOC simply gives you a credit card or a check book which is set at a maximum amount which you can use for your purchases. Choosing from between the two should be a matter of personal decision, one that is based on your financial needs as of the moment. A traditional one may seem notorious as it tends to get used up more uncontrollably when in the wrong hands. However, if you look at it closely, the same problem can be encountered with a HELOC. Generally speaking, the closing costs for both are the same even if the HELOC involves a lot more workload for your lender. This is due to frequent accounting that needs to be made on your outstanding balance and frequent interest rate changes, which would have translated to higher fees.

Going for a Low Closing Cost Home Equity Loan

The competition in the market for mortgages today is quite heavy. Closing costs today has never been as ideal with excellent offers available. There are low closing cost loans, and there are even some who offer no closing costs. However, you should be vary when pursuing the latter as there are quite a number who do not offer excellent services - you get what you pay for (and not pay for) anyway. Usual closing costs involve appraisal, documentation fees, title examination, and so on. Closing costs from lenders vary greatly. If you want to get the best value, make sure you shop around for a reputable lender which will give you the best offer and a good closing cost.

What are the Costs Involved

The good news is that loaning against your home equity can be done without having to hurt your bank account. As was mentioned, most lenders offer low closing costs these days. The average closing cost today amounts to more or less one to 1.5% of your loan amount. This will surely be within reasonable budget considering the processes involved. Take note that taking on a home equity loan should be a lot cheaper and less complicated than first mortgages. It is just a matter of finding the best deal and negotiating with the right lender.



DOUGLAS

David Evermon asked:


The Internet presents a wealth of information about home equity loans and companies that offer them via online means. Since the Web is now considered a legitimate channel for financial transactions, the information you can obtain online (granted that the site is the real deal) will help save you time and money against having to personally visit the bank or the lender for a loan. As long as you have the right documents, pass all the requirements and have a good credit rating, you can successfully obtain a equity loan online.

You can choose from two kinds of home equity loans. The standard home equity loan works like a traditional loan. You will be given a lump sum based on your home’s (collateral’s) equity, which you will need to pay in installments under a specific and agreed time frame. The interest rate for this type of loan is fixed all throughout the transaction’s duration.

The other kind of equity loans is the home equity line of credit. Most people find this more convenient than the standard home equity loan because though you are allowed a maximum amount to borrow, you may choose not to take out everything all at once.

For instance, if your home has a $50,000 equity, you can borrow just $20,000 now and then follow with the rest later. The interest rates also vary depending on the time you borrowed a particular amount. This will afford you greater freedom in managing your debts.

You should put some time and energy into looking for the right loan for you, and you should try and get as much information about the loan as you possibly can. Of course, you can’t rely on just this article to tell you everything you need to know about home equity loans and what options you have. Here are some of the top home loan providers you can find online.

The internet is a great way of finding your loan sources, it contrary to the past many online businesses have nicer and more flexible deals that companies ever had before. You can do some research for home equity loans providers online. A quick Google or Yahoo search will have you swimming through hundreds and thousands of companies that all guarantee to give the best rates and services. However, you must always be vigilant and careful about what companies you choose to do business with.

Remember, while the Internet is increasing in legitimacy, there still are fly-by-night home loan companies whose only goal is to dupe you into giving them your personal information. Transact only with the mortgage lender that has been in operation for quite a while already and whose reputation is strong and positive. Doing business with the wrong people could not only put you in deeper debt but could also cost you your home.



COLEMAN

Katja M asked:


My mother is running out of money (she is selling her house) and it is coming down to the only money she has is in the equity of her house (@$500,000). She currently has a mortgage at 7% for 50,600. She is considering a home equity loan or a home equity line of credit. I see home equity loans for about 7% and HE Line of Credits for 6.5% (quick searches that I’ve seen). Which is a better choice if she sells her house in the next 6months-1year and should she pay off her mortgage passed on these interest rates on the HEL and HELOC?
Any suggestions is greatly appreciated!
She is 69 years old…I shy away from a reverse mortgage due to the large fees that are involved in setting it up. The house is currently on sale.

ALEX

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.



DELMAR

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.



OWEN

concerned asked:


my fiance has her own house titled in her own name with a 200k mortgage loan owned by the government and a home equity line of credit of 25k totaling 225k debt…The house value in today’s market is probably 140-180K maybe. The mortgage is too high to just keep the house for rent because she’ll probably end up paying for part of the mortgage and taxes paying @ least 5k a year for both. I don’t think its worth the time and effort try and keep tenants in the house and to pay money up front to just get the money back @ tax season.
Selling the house is going to take years unless the bank agrees on a short sale and the bank agrees to take a loss on the mortgage, even so, you’ll be paying a years worth of mortgage payments just to try to sell the house to save your credit before it goes into foreclosure anyways right? why lose 20k in money if the house goes into forclosure anyways???
I say…tell the bank your hardship, make no payments for 12 months and let it go into foreclosure, since were moving to a new house and the bank could possibly give you a few thousand dollars for keeping the house in good condition when you leave it. Your credit will go sour for a few years but why keep paying on something you never wanted in the first place?
I don’t believe the bank will garnish her wages for the mortgage loan or the equity line of credit, they take back there asset, which is the home… what should we do?

CLAY

Alan Lim asked:


You may have heard the term home equity loan but are not really sure whether this type of loan will work for you. The first step is to understand the concept of home equity. Equity is the difference between the current appraised value of your home and the amount that is owed on the home. So, for example; if your home has recently appraised for $200,000 and you only owe $100,000 on it then you have $100,000 in equity in your home.

Many homeowners like the idea of taking out a home equity loan when they need to fund a home improvement or make some other type of purchase because they can often obtain the money they need at an interest rate that is lower than charging it to a credit card. In addition, there are also possible tax advantages as well.

When you take out a home equity loan you are taking out a second mortgage that gives you the ability to convert the equity in your home into cash. You can then spend that cash on any number of expenses including college education, medical expenses, debt consolidation, home improvements and much more.

You will generally need to decide whether you wish to take out a home equity loan or a home equity line of credit. These two terms are different. A home equity loan provides you with a one time lump sum of money that you will then pay off over a specified period of time at an interest rate that is fixed. It is much like your first mortgage.

A home equity line of credit, commonly referred to as HELOC, is more similar to a credit card. Instead of receiving the sum of money at one time, you will then have the ability to borrow up to a specified amount of money for the duration of the loan. That time period is set by the lender. As you pay off the principal amount of the loan, you can once again use the credit. In this regard, a HELOC is much like a credit card.

There are advantages to both a home equity loan as well as a HELOC. Many homeowners prefer the flexibility of a line of credit over a fixed rate equity loan. If they do not need all of the money up front, they are able to maintain control over how much money they draw down from the loan. The disadvantage to a line of credit is that it frequently features an interest rate that is variable. This means that the payment amounts will vary based on the prevailing interest rate.

In most cases, the draw period for a line of credit is between five and ten years while the repayment period ranges between ten and fifteen years. You will usually be able to access the funds of a line of credit with a credit card, check or electronic transfer that can be ordered by phone. Typically, an initial advance is required when the loan is set up.



ELLIOTT

Johan Jeuring asked:


While looking for a loan the initiative thought that comes first in to a homeowners mind is to secure his house from the lenders. Succeeding that, the loan seeker tries to derive maximum benefits. Having scrutinized all such assumptions, lending institutions have calculated and formatted home equity loan. Before applying for equity home loan, it is necessary to know what equity means. Equity defines as the residual market value of the home or in other words, the value of your home from the time it has been purchased.

With the help of home equity loan, the borrower retains the ownership of the house but partially. But once the loan is repaid the borrower will again own the house. In home equity loan, the borrower of the loan or the homeowner need not have to move his house.

Based up on the equity of the house, an applicant can withdraw loan. But under this scheme, applicants can obtain the amount up to £1,00,000 and repayment tenure extends to a maximum of 25 years. The rate of interest in such loan depends upon the various aspects, such as income ability, credit score, and debt to equity ratio.

Applicants having bad credit status can also secure the loan. With the help of home equity loan, bad credit holders can strengthen and improve their financial status.

Home equity loan are classified in to two types viz. home equity line of credit and traditional home equity loan. The later can be entitled as second mortgages in which lenders approves a fixed sum of amount to those who purchased a new home. But, in home equity line of credit, applicants having home are entitled to a credit limit and can use the fund for multiple purposes at the equivalent time.

After having acquired the a to z knowledge of home equity loan, look for the suitable lender. For a better result, you should feel free to take recommendations of financial experts.



GARY

dwanal asked:


I’ve been approved for a 1st mortgage at a fixed rate of 7.38 and a 2n mortgage interest only at 10.425. This loan is for an investment property. I’ve been told that the 2nd loan is Home equity line of credit. How much will my payments go up on the 2nd mortgage and should I look for another loan. Thank You.

CLINT

Lesley Lyon asked:


Home Equity Loan in terms of common man is, by using an individuals home he can borrow money. In this case the property is used as a collateral guarantee for the money received. It has been understood that the individual has to repay the debt within a time frame, and if he fails to do so the money lender can sell the collateral and take his money back. So, in this case the equity in the home is used as collateral. If the debt has not been paid the concerned party will be forced to lose his home. If the loan amount has been paid, in full then the property will be the buyers. Equity can be explained as the difference between the worth of the home and how much loan exists on the mortgage and the banks will lend money against the equity only. This type of loan is taken for the purpose of major home repairs or improvements, education expenses, wedding expenses, medical expenses etc.

Home Equity loan can be classified into two different types as, Traditional Home Equity Loan and Home Equity Line of Credit and these are also known as second mortgages, as they are safe by the security of property. These types of loans are returned in a short span of time than the first mortgage.

Traditional Home Equity Loan is also known as closed end home equity loan which means the money borrowed must be returned or repaid within a predetermined period. In this type, the interest will start to accumulate immediately after the money has been given. And at the time of closing a lump amount of money can be borrowed and will not be able to get further amount. The loan amount will be determined by analyzing the credit history, income and value of the collateral. For this type of loan they have a specific period say up to fifteen years.

Home Equity line of credit will offer the borrower a cheque book or a credit card which can be made used to borrow money against the home equity when and how often the concerned party requires the amount. Until a purchase is made against the equity the interest will not begin to accumulate. This type is also known as open end home equity loan. The period fixed generally to repay the loan is over thirty years at a varied interest rate.

Generally home equity loans have some specific fees and some of them are Evaluation fees, Inventor fees, Stamp Duties, Concluding fees, Arrangement fees, early pay-off, Surveyor or Conveyor or valuation. In some cases, some of them may be ignored. This can be increased or decreased if the concerned party has his personal surveyor to examine the property. The fees differ from loan to loan so that the parties concerned must have a clear picture in the beginning itself. This type of loan helps in tax savings because the interest paid against the home equity loan is tax-deductible.



JAMIE