Your home not only provides a roof over your head, it is a great way to help finance large expenditures which might come up over your lifetime such as home remodeling, tuition, medical bills or even a vacation. A home equity loan allows you as a property holder to secure a loan by means of the equity in your home as collateral. A home equity loan is a debt against your own property.
Once you have decided that this is the route you are going to take, you should compare and evaluate offers from several lenders and brokers in order to obtain the lowest home equity rate possible. These loans can be used for funding major home repairs, paying off medical bills or college education. A home equity loan a lien against the borrower’s house, and in return reduces your actual home equity until it is repaid.
The amount of money that can be borrowed through this type of home loan usually depends on the value of your home. Borrowers with bad credit history can also apply for the home equity loans.
Home equity loans are available in two types: closed end and open end. In Closed end home equity loan the borrower receives a lump sum at the time of the closing and cannot borrow further. Closed-end home equity loans generally have fixed rates and can be amortized for periods usually up to 15 years.
While Open end home equity loan is a revolving credit loan, also known as a home equity line of credit, where the borrower can choose when and how often to borrow against the equity in the property, with the lender setting an initial limit to the credit line based on criteria similar to those used for closed-end loans.
These lines of credit are available up to 30 years at a variable interest rate. A home equity loan is also advantageous because the home equity loan rate charged is usually tax deductible when the loan is used for its primary functions. As with any loan, be aware of your financial situation so you may repay the loan or risk losing your home to the lending institution.
When investigating your options, you must also factor in the fees. the fees that may apply to your home equity loan are: Appraisal fees, originator fees, title fees, stamp duties, arrangement fees, closing fees, early pay-off and other costs which are often included in the loan.
Category: PURCHASING A HOME