Guide to Home Equity Loans
Home equity loans are quite simply a loan against your house. Another term for a home equity loan is a mortgage or second mortgage. Home equity loans are also known as equity release schemes. You are borrowing on what your house is worth. If your house is paid off, the term is "mortgage" and if your house is not paid off but has equity, the term is called a "second mortgage". For ease of understanding however, this article will refer to these loans as home equity loans.
Second Mortgage
It is a second loan that you take out on your home in addition to your mortgage. This is also called a second mortgage. This enables you to tap into your equity to get cash without refinancing your first mortgage. Many people think that the only way to access this cash is to sell their homes. The reality is that you can take out home equity loans to free it up without having to move at all!
Equity is the difference between the amount you owe on your current home mortgage and the current value of your home. Lot of finance companies today offer good deals on home equity loans, letting you borrow money based on the available equity on your home. This can be explained further, suppose you sold your home, you will be left with a certain amount of money after paying off your mortgage, which would mean actual cash in your pockets. It allows you to get that cash without having to actually sell your home or property.
Borrow
With home equity loans the amount you can borrow is determined by taking a percentage of your home's appraised value and subtracting the balances of any outstanding mortgages. It is fairly easy to get, if you are a homeowner. Some loan companies will allow you to borrow up to 125% of what your house is worth at the current market prices, less the amount that you owe on your mortgage. It is usually a one-time loan, which is paid out in a lump sum and can be used for anything and is usually a fixed interest rate loan.
The cost of home equity loans will depend on many factors including your personal circumstances, the amount you wish to borrow and over what period you wish to repay back the loan. Some good uses for home equity loans include debt consolidation, buying of a new car, home improvement, emergency medical expenses or luxury holiday.
People with poor credit ratings will find home equity loans more easily accessible to them because the lender is taking a lot less risk as the loan is secured against their home. It will usually mean that you get better interest rates on the loan, but you should always remember that your house is at risk if you fail to repay the loan.
Paul Rogers writes general finance and loan articles for the Loans UK Online website at http://www.loansukonline.co.uk
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