Peter Lee asked:


Mortgage home equity loans are calculated as the value of your present home less the mortgage loan you had borrowed from the mortgage lender. It allows you the option to access this equity that essentially is the value of your asset appreciated over the years of your mortgage. While this is a good way to obtain a good amount of cash, nevertheless one really has to use this cash wisely should you decide to take up this loan.

With this type of mortgage loan, you could qualify to borrow a lump sum of money with a fixed interest rate. Similar to your first mortgage loan, payments are to be paid monthly but the interest rate may be a lot higher than what you currently pay for your original mortgage. In addition, there could be other one time loan fees to be taken care off too.

Mortgage home equity loans are usually considered a smart debt but only if you are using it for the right intentions. Some of the good ways people have used it include: home repairs and renovations, children’s study expenses, credit card payments.

With this type of mortgage loan, the one big advantage is that you will be enjoying a lower interest rate since the loan is secured by your home. The disadvantage to this is that you are required to start repaying your loan straight away.

Although mortgage home equity loans can help in many ways to ease your financial burden on some important or unforeseen expenses, this is a second loan in addition to your original first loan. You will still need to do the necessary homework and calculation to determine if you are able to service this new loan commitment. Although these loans are helpful they can be expensive to maintain. They can also be a burden if you have neglected to find out more before you decided to take it up.



PAT

Joseph Kenny asked:


There are some alternatives available to the homeowner who needs financial help but does not want to refinance their present mortgage. There are however, at least two main options if some sort of equity loan is desired. You can obtain an equity credit line or a second mortgage loan and there are specific advantages and disadvantages with each one. Money can be saved over time if you take time to choose the loan that best fits your needs. Whatever you decide you will need to know the exact reason you want to borrow and the amount you need to make the loan for.

One of these loan options could be just the right thing to help solve your financial problem. You need to take a close look at both types of loan in order to see which one will give you the best type of service.

The most common form of equity credit is the Home Equity Line of Credit and this option gives the borrower the greatest amount of flexibility. If you want to do much needed repairs or renovations to your home, the best way to make this happen is to use the equity available in a loan that contains an equity line of credit. An equity credit line often comes with a debit card option that allows you to access more money when it is needed. Home improvements can often be estimated to be less expensive than they end up being, so the ability to draw on funds from the equity on your home is a very convenient option of a home equity credit line.

There are some disadvantages of the Home Equity Line of Credit. There could be a higher variable interest rate than with a second mortgage. The lender could make an adjustment in the credit rate at any time because the rates are variable and the changed interest rates could result in higher monthly payments. The interest is not tax deductible, so there are no tax advantages to HELOCs.

There are some definite advantages to a second mortgage. You may choose this option over the Equity line of credit. The interest rates on second mortgage loans are usually fixed rates and this is the main difference between the second mortgage and the equity line of credit. The second mortgage will allow you to borrow a fixed amount instead of having an open account from which to access funds and possibly put yourself into debt. The second mortgage loan can be used as a way to get out of debt. It can be used to consolidate outstanding debts and bring it all under one low monthly payment. You can also use the interest on a second mortgage as a tax deduction.

The biggest risk you encounter with a home equity loan is the fact that you are using your home as collateral for the loan. This is to protect the lender in the event that you fail to meet your loan payment requirements. The decision could be made to foreclose and you could end up loosing your home. Be sure you know just what is at risk when you take out a home equity loan of any type.



DENNY