Advantages of a Home Equity Loan
Home Equity Loans are designed to allow a homeowner to
‘borrow’ or draw equity from their home. Most often, the equity withdrawn via an equity line
of credit is used to pay for house repairs or remodeling, medical bills, education, etc. but can really be used at the discretion
of the homeowner.
Typically, home equity loans become the second lien against a property (often
referred to as a second mortgage), with the primary or original mortgage being in first position. Sometimes
homeowners can have second or even third liens against their property, depending on their financial situation.
A home
equity loan is a typically a one time lump-sum loan, often with a fixed interest rate and shorter term than a traditional
mortgage.
Type
of Home Equity Loans
Home equity loans come in two types, closed end and open end.
Closed End Home Equity Loan
With a closed
end home equity loan, the borrower receives a lump sum at the time of closing and cannot borrow any additional monies beyond
that original amount. The amount of money that can initially be borrowed is determined by several variables
including your credit score, income, appraised value of your home, etc.
Closed End home equity loans typically have fixed rates
and a term of 15 years for repayment.
Open End Home Equity Loan
Open End Home Equity Loans is a
revolving credit loan and often referred to as a HELOC loan (home equity line of credit). With this type
of loan, the borrower determines home much and how often to draw equity from the property. Usually the
lender sets a maximum with drawl amount and the borrower can draw up to that amount. The monthly payment
depends on the amount of money withdrawn from the loan.
Open End home equity loans
typically have interest rates based on the current prime rate plus a margin set by the lender.
I’m
interested in an equity line. Now what?
Most home equity loans require good to excellent credit history, and reasonable
loan-to-value and combined loan-to-value ratios.
To determine how much you qualify for, contact loanandcreditpro.com. We can help you get the equity line you need to get started on your
next home project or other life-changing event.
Source: http://en.wikipedia.org/wiki/Home_equity_loan
