How To Get A Home Equity Loan Without Losing Your Shirt

Obviously, the title here suggests that you can lose your shirt - or get ripped off with some home equity loans. Here is a common sense approach on how to get and use a home equity loan wisely.

Who Should Get A Home Equity Loan?

In most cases, not nearly as many people should get one as are currently applying for it. Oftentimes, it simply is the result of people who want something - and they want it now. A wise use of your home's equity, though, is to leave it right where it is - building up even more equity that come will come in real handy when you sell it.

A home equity loan, however, is really a loan taken out against your own home. This means that your home itself is the instrument that secures the loan. Your house has now become the guarantee that you will keep on paying your loan. Stopping payments for any reason - you lose it.

What Is A Home Equity Loan?

A home equity loan is typically a second mortgage. As such, it has a higher interest rate than a first mortgage, and a shorter time period to pay it back - up to 15 years.

What Are The Advantages?

A home equity loan can be used for any purpose. It has the best value, though, when used for renovations or improvements on your home. Besides adding to the value of your home (increasing equity even more), the portion used for your home improvement is usually tax deductible, too. This brings down the interest rate more when used for this purpose.

A home equity loan can also be obtained in two different ways. You can get them either as an adjustable rate mortgage, or as a fixed rate mortgage. This makes it most convenient, and gives you the flexibility of choice - based on the economy and your situation.

Is There Anything Better Than A Home Equity Loan?

The best deal you can get is to refinance your first mortgage with a cash out mortgage. This gives you new terms on your mortgage, can be used to combine two mortgages (or three), and gives you the lowest interest rate out there. It also gives you access to your equity by simply adding the amount of equity you want onto the loan. You should be planning on staying in that home, though, for at least the next five years to make it worthwhile.

What Should You Watch Out For?

When you go to apply for your home equity loan, you need to take the time to get several quotes and compare them. Lenders have different fees, and other things that they attach to a loan. Some will attach more than others - making their prices higher. By comparing carefully, you can come away with the deal you want. By not paying attention to what you are getting - you could lose your shirt. You could pay thousands of dollars more with one lender than with another. Real savings come to those who pay attention.

Also watch out for a lender who tries to give you a loan / equity with a total of more than 80% of the value of your home. You do not need a 125% equity loan - that creates negative equity and will keep you there a long time.

How Can You Get Better Terms?

Lenders base their financial decisions largely on your credit score. You need to get a copy of your credit report and make sure it is accurate. Also, if you reduce your debt beforehand and make corrections on your credit report, it can help you to get a better interest rate and other more acceptable terms.

Author: Joseph Kenny

Home Equity Loan - What Exactly Is It?

If you are a homeowner you have probably received information in the mail about taking out a home equity loan. Don't know what this is? Don't worry, you are not the only home owner out there that has had to stop and ask exactly what this is.

These have actually become more common over the last 20 years or so. But if you have never needed one before there is no reason for you to know all of the logistics.

Understanding the Credit

A loan on the equity of your home simply allows for a homeowner to borrow against his or her abode. Another way to look at it is that the homeowner uses the equity in his or her abode as collateral. These borrowings are often taken out by homeowners that need to finance repairs or remodeling, pay for unexpected medical bills, or even to pay for higher education.

Basically what this type of credit does is create a lien against the property and until it is paid off the actual value in the house is reduced by the borrowed amount.

Not everyone is a candidate for this. These are reserved for those that are and have been in good standing with their mortgage company and also have excellent credit histories. This loan is essentially a second mortgage because they are secured with the value of the house just as a first mortgage is.

Most of the time these are not as long term as a first mortgage, meaning they will need to be paid off before the original borrowing.

There are two basic types: open end and closed end. Open end home equity loans are those that are referred to as a line of credit. With this type of borrowing the borrower can determine when and how they would like to borrow. These usually allow for the borrower to borrow 100% of the value and can be made available for up to 30 years with a variable interest rate.

A closed end option is a bit different in that the borrower is given a lump sum of money and cannot borrow anything else. The amount that is given is figured by determining the value, the income of the borrower, as well as the credit history. These have fixed rates and the tenor is usually 15 years.

A home equity loan is a good idea for someone who owns a house and needs cash to pay for things such as those mentioned above. Many times homeowners are able to secure a better interest rate than they can on a personal loan, making this a more affordable option. Before assuming that this is the best choice for you, make sure you look into all of the fees to be sure that it really is the most affordable option.

By : Ajeet Khurana

Want a refinance loan? We will get you a home equity loan or a mortgage loan. Come to us for your home finance needs today.

Home Equity Loans - Cashing Out Home Equity

What are Bridge Loans, Home Equity Loans & Home Equity Lines of Credit (HELOC)?

Home equity loans are typically junior loans and should not be confused with a basic refinance, which means paying off an existing mortgage and replacing it with another loan. Refinances can take 30 days or more to process. Home equity loans fund fairly quickly and are subordinate to an existing first mortgage. In other words, an equity loan falls into second position.

The lender's security for the loan is your home, meaning if you go into default and do not make your mortgage payments or otherwise abide by the terms of the loan, the lender has the right to foreclose. In many states, like California, if a homeowner stops paying the first lender, to protect its security, the second-position lender can step in, make up the payments to the first lender and begin its own foreclosure proceedings.All of which means your home is at risk when you take out a home equity loan.

Bridge Loans

Bridge loans are used by sellers who want to buy a new home before selling an existing home but need the cash from the existing home. You will see bridge loans used more often in seller's markets than in buyer's markets. Common terms for a bridge loan are:

Loan amounts up to 80% of market value
Higher loan costs such as points or admin fees
No payments for 3 to 4 months
Right to renegotiate loan terms if home does not sell within loan term
Some lenders demand the borrower obtain the financing for their new home from the lender making the bridge loan

Home Equity Loans

Borrowers cannot obtain equity loans in all 50 states. Equity loans can be used toward the purchase price of a new home but the lender will not make the loan if your home is on the market. This is the main reason many sellers obtain bridge loans instead. But since costs are higher with a bridge loan, it makes more sense to get an equity loan if you can plan far enough in advance.

Borrowers also obtain home equity loans to pay for home improvements / remodeling, college education or medical expenses. Because interest is tax deductible on a home equity loan, many homeowners choose to borrow against a residence to buy consumer goods. They reason that if they finance consumer goods by obtaining an unsecured loan or putting the purchase on a credit card, they cannot deduct the interest, but they often do not stop to consider whether the item is really a necessity. It is not a good idea to borrow against your home to purchase luxuries such as motor homes, ski boats or vacations, but people do it. Advantages to a home equity loan are:

Typically, fixed rate of interest
Borrow 100% of equity or more
Amortized payments
Longer loan terms such as 3, 5, 7, 10 or 15 years.

Home Equity Line of Credit (HELOC)

Borrowers can take out a home equity line of credit and never repay a dime. That's because a HELOC is a line of credit, meaning if you never actually take any of the money available, you won't ever need to pay it back. It's available by writing a check for more than you have in your account or by making withdrawals against a specific account at your lending institution.
Some of the characteristics inherent with a HELOC are:

Generally, an adjustable-rate loan
Once the money has been repaid, you can borrow it again
Flexible payment terms, sometimes as low as 1% of your loan balance

Note: The time to apply for a HELOC is when you don't need it. It's credit that will be available to you should you ever need to draw on it, whether you are subsequently unemployed or facing an immediate financial emergency.

By : Elizabeth Weintraub

Finding The Best Home Equity Loan

Many homeowners are looking for ways to help improve their financial situation by using a home equity loan. These types of loans are the smartest way for homeowners to borrow for many reasons. Here is some information to help you get the most out of your home equity loan.

Home equity loans generally carry the lowest interest rate of any loan that you can obtain. The reason for this is that the risk to the lender is lower because of the type of collateral that the loan is secured by. Many lenders offer home equity loans that go up to 100% of the value of your home, but the rate is going to be highest for these types of loans. In order to get the best interest rate, try to keep the amount of your loan under 80% loan to value. For example, if your home is worth $100,000, 80% of the value of your home is $80,000. If you borrow this way, you will get the best rate and avoid many other charges like PMI, or private mortgage insurance, and points.

Many homeowners prefer to only have one payment. This is possible by rolling your first mortgage into the same loan as your home equity loan. This also has rate advantages over having separate first and second mortgages, because the rate on a first mortgage will always be lower than on a second. If you put the loans together, you will get the lowest rate on the entire amount of the home equity loan because the whole loan will be considered a first lien.

Home equity loans also have the jump on nonsecured loans and credit cards because they have tax advantages. Most homeowners can deduct the interest that they pay on real estate secured loans on their taxes. Generally speaking, if you are able to deduct your first mortgage interest you will also be able to deduct the interest that you pay on your home equity loan. This can significantly lower your tax burden. Be sure that you consult your tax professional about your specific circumstances.

When you are looking for a home equity loan, it is important to find a reputable lender. Look for one that has good reviews with the Better Business Bureau. Asking friends and family for recommendations is another smart way to find a good lender. You can also find great deals online. Many online lenders offer lower interest rates because they have less overhead costs than a larger, more traditional financial institution. They are usually more willing to negotiate fees and the processing time is usually quicker. Many people find this more attractive in today's fast paced world, since the only time you have to take the time to meet with a representative is at the closing.

Overall, if you are wise about it, a home equity loan can be a great way to save money on payments and interest rates. Because the interest is tax deductible, you are borrowing money in the most advantageous way possible. Keep the total amount of the home equity loan as close as you can to 80% loan to value and be sure to look online for great deals. If you follow these words of advice, you can find the perfect home equity loan solution to meet your needs.

For more insights and additional information about the Best Home Equity Loan as well as getting a free no-obligation loan quote, please visit our web site at http://www.personalloantips.com/home_equity_loan.php

By : Jon Arnold