Are you worried to handle big expenses? Here is a way to handle it. You may have heard about home equity loan. What are they? Home equity is not a liquid term; rather it is a market value of one’s home minus outstanding mortgage. Under home equity loan, an applicant can borrow large amount of money by pledging his home as collateral. This type of loan creates a lien against borrower’s home and decreases its actual equity value. Most of these loans require borrowers to have good credit history. They are offered in two forms: Closed end and Open end. Its open end type is also known as home equity line of credit.
They are somehow similar like traditional mortgage. Loan amount borrowed can be spent to solve various financial issues like house repair, auto repair, paying big fee amount etc. These loans are offered long time period; that’s why they are also known as long term loans. Home equity loans amount cannot be used to buy new home, however it can be used to refinance the present home.
Online Home Equity Loan to handle big financial matters
Home Equity Loan Interest Rates
There is a difference between closed end and Open end loans. In open end loans, loan is offered at adjustable interest rates. On the contrary, closed end equity loan is offered at fixed rate on lump-sum loan amount. Thus, monthly payments remain same. It helps in stabilizing expenses by making easy budget. Interest rates applied via home equity loans are usually tax deductable; so indirectly a borrower also saves while paying interest.
Home Equity Loan Eligibility
Like every other facility, there is a certain qualifying requirement to borrow these loans. It is very necessary that borrower should own reasonable equity that his owing amount should be less than equity value of his home. Most of the lenders allow to borrow 85% of the value of home minus amount borrower owes. Typical checking of borrower’s credit score and history is done. Next is you should be able to proof your employment, monthly income. An applicant should be also debt-free. Every formality is same as it is carried out in your first traditional mortgage loan.
Home Equity Maximum Lending Amount
As mentioned earlier, you can borrow up to 85% of the amount of your home value. Here is a simple calculation to know that how much you can get.
Suppose your home value is $400,000 and you owe $100,000 on your current mortgage, then following calculated amount can be lend to you.
400,000 x 85%=$340,000-$100,000=$240000.
Home Equity Loan Checklist
Home Equity Loans Checklist
A borrower should always be aware of equity loan checklist because different lenders follow different procedures; so knowing everything may help you to make less payments otherwise.
1. Cancellation Fee: If borrower closes his loan before a certain date, he may need to pay extra. For e.g.:- If he closes before 3-5 years he may have to pay from $500 to $1000.
2. Minimum Loan Amount: It depends on a lender that how much he will allow you to borrow.
3. Up-front fees: Some upfront fee is charged by the lender to setup your equity loan. It is known as application or appraisal fee.
4. Discount: Discounts are also offered by some lenders if you set automatic repayments through your bank account.
Whenever you are borrowing any loan, borrow only that much amount which you can comfortably manage to pay back.