Equity Loan Basics

Equity loans are low risk loans because there is collateral involved, hence, the low interest.

Often, people use their homes as equity to secure financing for various purposes. Be it for long term functions such as home improvement, buying a car, or for short-term needs such as a vacation or medical emergencies, applying for an equity loan can be relatively fast and easy.

The most important step in applying for an equity loan is ensuring an accurate valuation of your property. The value of the property will, to a large extent, determine the amount you can take out on a loan. Normally, a clean property with no liens will get an equivalent home equity loan amount of 80% of its appraised value. Thus, a property appraised at $1,000,000 will allow the borrower to take out as much as $800,000. Generally, companies will have their own appraisers visit your property. The appraiser will look at the general condition of the house and the neighborhood. Prevailing market value of adjacent properties will have a big influence on the valuation of your property. You can get the services of a professional agent to help you evaluate your property so that you can be reasonably assured you are getting the best home equity loan available.

When you apply for a home equity loan, the lending company may run a credit history check on you. A history of bad credit can seriously affect your eligibility to secure an equity loan or the lending company could charge you with relatively higher interest if you are considered a high risk borrower. As such, it is always best to maintain a good credit standing to increase your leverage in financial matters.

Deciding on how much to take out on a home equity loan should be done with a great deal of restraint. Often, people are tempted to take the maximum loanable amount offered by the lending company. However, remeber that this is a loan and you will be paying for it for some time. As such, you should be very careful and ensure that the repayment scheme is something you can manage.

Resist the urge to binge on high end materials for your home improvement. Always bear in mind that the new Jacuzzi will not pay for itself. Exercise caution because, although an equity loan can give you a windfall of ready cash, it can leave you homeless as well. Remember that the lending company will not think twice of foreclosing your property should you default on your payments.

When getting an equity loan, bear in mind that you are putting a lien on your property. As such, you will need to commit on ensuring that you will be able to pay off the loan in time. Be sure to make an informed decision because your future and that of your family can be severely affected by an equity loan gone bad.

Whether you are looking for home equity loan line of credit, the lowest home equity loan, or debt consolidation home equity loan – there is a service that is available for you!

Home Equity Loans–The Pros and Cons of Home Equity Loans

A home equity loan may be the best option when looking for a source of funds for home repairs, costly purchases, or financial emergencies. Generally, an equity loan will allow you a bigger loan at lower financing charges compared to personal loans or credit cards. For whatever purpose you may be contemplating a home equity loan on, it is important to be aware of the basics to help you make an informed decision.

Many home equity loans fall into what is generally termed as a “standard home equity loan” wherein the lender gives you a certain amount of money corresponding to the value of your property. The money is a lump sum amount which you will then have to pay in fixed amounts for a certain period of time. Often, borrowers choose this type of home equity loan because of the simple, upfront transactions. You know how much you are going to pay and you will find security in knowing that after the fixed period of repayments, the lien on your property will be removed.

Another less popular type of home equity loan is the home equity line of credit. The difference of this type of equity loan is that, rather than giving you a lump sum amount as loan value, you will get a line of credit from which you can withdraw funds for your various needs. This is relatively more complex because the interest rates are not fixed and the repayment arrangement is not fixed. This type of home equity loan requires a greater degree of monitoring on your part but will actually pay off better when managed well.

When deciding on a home equity loan, you need to be armed with the right information because there are many deceitful groups preying on hapless borrowers. There are telltale signs of a corrupt company and often these are disguised as well-meaning “help” to get you the best deal out of your home equity loan. Some of these unscrupulous acts include unbelievable high loan offerings. While this maybe very tempting, consider the risks. A big loan amount will mean bigger amortization. If you get an amount higher than the actual fair market value of your property, you cannot enjoy appropriate tax deductions.

Another scam to watch out for is stripping. Corrupt home equity loan agents may encourage you to lie about your true income and actually help you facilitate securing documents showing an inflated income to allow you a bigger loan takeout. Again, while this may be tempting, consider that taking out a home equity loan that is more than your capacity to pay will only bury you in debt sooner or later. In short, they are not helping you get a good deal out of your equity; they are setting you up for foreclosure – and then your property is theirs.

Whether you are looking for home equity loan line of credit, the lowest home equity loan, or debt consolidation home equity loan – there is a service that is available for you!

Things to Know About Home Equity Loans

If you have outstanding debt that is eating up your monthly income with high interest rates and minimum payments, you may be considering a home equity loan to pay them off. However, using the equity in your home should not be taken lightly; there are a few considerations that should be examined prior to pursuing your possible loan.

Let’s start by discussing what a home equity loan is and does. With this type of loan, a bank or other lender will assess the value of your property and the amount you currently owe on it. Any difference in these amounts is considered your “equity”, or amount of the property you own free and clear. Home equity loans use this to secure funds to be released to you or directly to the creditors to be paid off, creating a new lien on the property.

One such type of loan is called a HELOC, or Home Equity Line of Credit. These are typically issued to finance home improvements, but can be used to reduce other forms of debt. This saves money in the long-term because home equity loans typically are issued at lower average interest rates than unsecured loans, and interest paid is also tax deductible.

A HELOC also allows you to only use as much as you need when you need it, rather than pulling the entire amount out at once. This is still a great option for home renovations that may vary in cost when compared to original estimates.

However, even with all of these benefits, you must be aware that these lines of credit work much like a credit card, and will increase your debt load. If you have trouble refraining from impulse purchases or spending beyond your means, this may not be a great option for you. Remember that you will still need to pay the debt back!

Home equity loans can be a great tool to get you on the right track in your debt reduction and management program as well. If you’ve resolved to change your ways and want to use the line of credit only to reduce your expenses and pay off old debts, this is a great option.

Before applying for a home equity loan, also consider if you plan on selling your home within the next few years. If so, it’s probably not a good idea to max out your equity and risk selling for less than what you owe; not having this second mortgage will allow you to be a little more flexible in selling price for the sake of a speedy sale.

Look online for a handy debt reduction calculator and compare how much you will save with your current situation compared to your proposed interest rate with a HELOC. This will allow you to reflect monthly and thus yearly savings, which can also be applied toward payments on your line of equity to reduce that balance in a reasonable amount of time as well.

Whether you are looking for home equity loan line of credit, the lowest home equity loan, or debt consolidation home equity loan – there is a service that is available for you!