Equity Lines & Loans

Home Equity Loan Vs Home Equity Line of Credit.

 

A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. Home equity loans are often used to finance major expenses such as home repairs, medical bills or college education. A home equity loan creates a lien against the borrower’s house and reduces the actual equity on the home. A home equity loan and a home equity line of credit are usually referred to as second mortgages, because they are secured against the value of a property just like a traditional mortgage. .

Owner’s Nest Egg

A home equity loan and a home equity line of credit are usually referred to as second mortgages, because they are secured

against the value of a property just like a traditional mortgage. Home equity loans and lines of credit are usually but not always

for a shorter term than first mortgages. Home equity loan can be used as a person’s main mortgage in place of a traditional

mortgage but can only be used to refinance and not to purchase a home. Home equity loan can only use a home equity loan to

refinance. In the United States, it is usually possible to deduct home equity loan interest on the borrower’s personal income taxes.

 

Home equity loans come in two types:

  • 1) Home equity loan, which has a fixed term, and
  • 2) Home equity line of credit, which has a variable term.

 

Most home equity loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios.

Home equity loans come in two types:

  • 1) Closed end HEL, and
  • 2)Open end HELOC.

 

HELOC (Home Equity Line of Credit)

 

A HELOC is a line of revolving credit with an adjustable interest rate whereas a home equity loan is a single time lump sum loan,

often with a fixed interest rate. In a HELOC, 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. Like the

closed-end loan, it may be possible to borrow up to an amount equal to the value of the home minus any liens. These lines of credit

are availablefor up to 30 years usually at a variable interest rate that is based on the prime rate plus a margin with the minimum

monthly payment can be as low as only the interest that is due.

A home equity line of credit is a second mortgage that can convert the home equity (owner’s nest) sitting in an owner’s home into

cash that the homeowner can use for financing home improvements, paying off high-interest rates debts like credit card, auto loans,

paying college tuition for their children, as seed or growth money for their business, or for any other purpose the homeowner

chooses.

 

As a homeowner, you can also borrow against the equity in your present property and use the proceeds for a down payment of a new house or home’s construction.

 

HE (Home Equity)

A Home Equity is the difference between the current market value of a property and the total debt owed against the property. Putting it

differently, it is how much a property is worth minus any mortgage(s) and/or other debts (liens) on the property.

 

Home Equity Benefit Characteristics

Need cash for home improvements, debt consolidation, start a business, grow a business…anything? Our home equity advisors can help you

secure the funds you need to:

 

Consolidate your debt into one low monthly payment:

  • 1)    Make home improvements
  • 2)    Pay for college education
  • 3)    Buy a car or other major appliances
  • 4)    Fund business startup or growth money
  • 5)    In some cases, a home equity may provide tax benefits.
  • 6)    Have a ready to use safety net for financial emmergencies

 

HEL Fees

A brief list of fees that may apply for home equity loans:

1)       Appraisal fees

2)       Originator fees

3)       Title fees

4)       Stamp duties

5)       Arrangement fees

6)       Closing fees.

7)       Early payoff fee

 

Surveyor and conveyor or valuation fees may also apply to loans but some may be waived. The survey or conveyor and valuation costs can often be reduced, provided you find your own licensed surveyor to inspect the property considered for purchase. The title charges in secondary mortgages or equity loans are often fees for renewing the title information. Most loans will have fees of some sort, so make sure you read and ask several questions about the fees that are charged.