Home Equity Loan Vs. Refinancing

Posted on February 4, 2009 by Gary
Home equity loan and refinancing are two excellent ways that can help you manage your finances. However, it may prove difficult to choose one from the other and should depend on what your financial goals are. You can opt for the lower payment schemes of cash-out refinancing, or you can choose the great tax benefits offered by a home equity loan. The choice, however, does not prove to be as simple as this. Here is a comparison of these two types of loans to help you see which one is right for you.

Cash-Out Refinance Loan

Cash-out refinance simply means that you are refinancing your existing mortgage in order to lower your monthly payment and/or your current interest rate, and get some additional cash for other pressing reasons such as for home improvement, renovation, and the likes. If you are lucky to choose the right timing, you may be able to get all these with cash-out refinancing. Say, your home is valued at $300,000 and your existing mortgage balance is $200,000, your home equity remains at $100,000. You are free to borrow the remaining equity as you deem necessary.

Home Equity Loan

Home equity loans are usually provided in two kinds: the home equity line of credit and the home equity installment loan. A home equity line of credit line means that you are borrowing against the value of your home; your home is your collateral to the credit. Home equity plans are usually set at a fixed time; say 10 years but with variable loan rates. Your interest rate and the annual percentage rate of your mortgage can move up and down depending on the market trends. During the specified time, you are free to obtain the cash when you need it, and pay only for what you happen to spend. Some mortgages are offered with payment of full outstanding balance, while others allow repayment over a fixed time.

On the other hand, an installment loan is a loan that has a fixed rate that stays the same all throughout the rest of your home equity loan terms. Also called the closed end home equity loan, you amortize your loan for periods lasting up to about 15 years. In this kind of home equity loan, you usually receive a lump sum at closing depending on your home value, and you can not borrow further afterwards.

Which is better?

Remember that interest rates do not usually behave normally, much as you want them to. When this happens, home equity loans may actually prove cheaper than refinancing, although they are potentially riskier. Choosing what is better between the two should depend on individual circumstances. For example, if you plan to pay off your mortgage and do not need as much money, you can go for a home equity loan to get lower rates and shorter terms. On the other side of the fence, with cash-out refinancing, you can get all your money up front and simply pay off interest and principal on a lowered monthly basis as agreed upon, with no frills. Weigh carefully based on what your financial objectives are and choose one which you think will give you a fairer deal.



By: Alan Lim

About the Author:

Want to know how to go about with your current finances? Need some financial advice on what to do with your home mortgage? We can help! Visit Home Equity or Home Equity Loan for more information.



Submitted by Xiomara

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Is A Home Equity Loan Right For You?

Posted on October 4, 2008 by Gary
You keep hearing about home equity loans.

The bills are out of control and you need a new car. “Maybe we can get a new carpet and paint the house”, you say to yourself. And, you keep hearing about home equity loans.

These are just a few reasons why home equity loans can seem like the solution to all your problems and are so popular.

Home Equity Loans: The Upside and Downside

Home equity loans can be a fantastic way to start your own business or to take advantage of an investment opportunity. They can also make your situation worse than it was before you got the home equity loan.

The reason’s for taking advantage of home equity loans are the most important part of the process. Take the time to sit down and ask yourself, “Do I really need a home equity loan? Do I want to go on a spending spree or am I really trying to improve my life?”

A Home Equity Loan is Like Having a Second Mortgage on Your Home

Suppose your home is worth $200,000 and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your home value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.

This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with home equity loans.

A Home Equity Loan-Some Smart Reasons and Some Not-So-Smart

Let’s say you only need $20,000 for that new car and some home improvements. You decide to borrow another $15,000 of equity for that vacation to Hawaii you have been dreaming about. First of all, a vacation to Hawaii would not cost $15,000 unless you went on a first class, spare no expense vacation.

Using a home equity loan to buy a car may not be a great idea with today’s 0% interest rates and no money down loans. There is no sense in risking losing your home to buy a new car with these type of loan programs that are available in todays market.

On the other hand, a home equity loan for home improvements may be a great idea. This will add value to your home as long as you can afford the higher loan payments.

A business that’s doing great that you want to expand may be another good use of a home equity loan. As long as the business is already in profit and is not losing money.

Some solid investments can be a good idea if you have done your research before hand. The latest IPO may or may not be a great idea.

Consolidating high interest credit cards may be a great idea as long as you close the accounts and don’t run them back up. You really only need one or two credit cards in case of an emergency.

Educational expenses may be a good reason to take a home equity loan to get your children started in the right direction. Someday this type of an investment can pay off.

These are just a few things you can do with home equity loans. It’s very easy to borrow too much, only to find yourself having a tough time making the new payments.

The important thing to remember with home equity loans is to be logical and don’t let your emotions get the best of you. Again, take the time to sit down and research all your options. This way you can rest well at night and not have to be concerned about losing your home. You can enjoy the things you do with your home equity loan knowing you’ve made a wise decision.



By: Dean Shainin

About the Author:
Dean Shainin is a consultant specializing in home equity loan strategies and home mortgage loan information. To see a list of recommended home equity loans, advice and information, visit this site: http://www.homemortgageloantips.com target=_blank>Home_Equity_Loans



Submitted by Lorean

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How To Avail Home Equity Loans

Posted on September 24, 2008 by Gary
When it comes to your home mortgage, if you’ve owned your home for a while, there’s a good chance you have equity built up, this can allow you to get a home equity loan. Home equity loans are usually low interest loans that use your home or property as a security interest. As market values climb, real estate properties usually increase in value; hopefully, your home mortgage allows you to increase your equity. The whole point of purchasing real estate is to eventually own a piece of property whereby the increase in market value allows you to have a piece of property worth more than your loan.

This increase in market value is considered home equity. After paying on your home loan for several years, you can have several thousands of dollars in home equity available. A home equity loan is often available for those homeowners who have equity built up. The home equity loan can be used for a variety of different uses from improving the home, purchasing other pieces of property, going on vacation, to solving a debt problem. You need to be careful when it comes to home equity loans, after all, your home is again going to be used as security, and you need to understand that you can lose your home, even with a home equity loan.

Thoroughly research any home equity loan and make sure you shop around for the best home equity loan financial package. There are a variety of different institutions willing to loan you money on your home equity. Not only do you need to thoroughly research the financial company, but you also need to understand your home equity loan contract. There are plenty of available financial companies and a lot of them are available on the Internet, make sure your financial company itself is secured, reliable, and has a good reputation.

You can also shop for home equity loans and you’ll find a variable interest among the different financial packages. Many of the Internet financial companies are going to be able to offer you a lower interest home equity loan than your downtown financial institution. Their low overhead allows them to not only operate less expensively, but to pass on those savings to the consumer. Online Internet financing companies are often major financial companies, and you can apply right online. You don’t have to actually sign on the dotted line in order to find out how much your home equity loan is going to cost you. This means that you can shop with several different companies, apply for several different types of loans, and then choose the best home equity loan package your credit history will give you.



By: Marlon Dirk

About the Author:

This site will give you different kind of information on Loaning. The basic ideas about home equity loan, Also, you can find it here broad articles about residential loans and home improvement loans. Aside from loan articles about your house, you can also check out on used car loan, purchase loan, secured loans and interest loans.



Submitted by Sadie

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How Do Home Equity Loans Work?

Posted on July 31, 2008 by Gary
A home equity can be a great way to to get some money fast. Home equity loans are also sometimes called second mortgage. They allow a homeowner to borrow money from the equity they have in their home. Home equity loans can be for as much as $100,000 allowing homeowner to borrow to do renovations, pay off debt, etc. The interest on a home equity loans is tax deductible which has made this type of loan quite popular in the 1990s. Let’s look at how they work. Home equity loans come in two types. There are fixed rate home equity loans and line of credit home equity loans. In both cases, the terms vary from five to fifteen years. However, in both cases, the loans must be repaid in full in the event that the house is sold. The fixed rate home equity loans option gives the home owner a lump sum payment from the equity. The home owner will then repay the loans over a pre-determined period of time at a fixed interest rate. In most cases, the repayment is made monthly and the interest rate and the monthly payments remain the same over the life of the loan. In the case of the line of credit home equity loan, the principle is much the same as with a credit card. In fact, this type of loan often comes with a credit card. The home owner will be notified of the maximum limit of the line of credit and he or she can spend the money either by using the credit card or the cheques that the lender provided. Just like credit cards, line of credit home equity loans work on a variable rate of interest, which is determined monthly. Repayment of the loan must be made monthly, based on the amount borrowed that month. Once the life of the line of credit is over, the outstanding balance must be repaid in full. Home equity loans are a great source of money for home owner that need access to cash quickly. The money can used for anything at all but most borrowers will use the money to do home improvements, send kids to college, pay off another loan, etc. Home equity loans can be very appealing as their interest rate are almost always lower than other types of loans and certainly lower than credit cards. Someone with a credit card loan would benefit from taking a home equity loan on their home in order to repay the credit card debt. Not only will the home owner reduce his interest rate, the loans will be consolidated into one month bill and the interest rate on the home equity loan is partially tax deductible. Home equity loans are a great financial tool. Particularly for home owners looking to do renovations or with unforeseen expenses. They provide fairly easy access to money at a relatively low interest rate. However, remember that the loan must be repaid and that if you sell your home, the amount that you borrowed will not be profit in your pocket.



By: Stefan Hyross

About the Author:

Stefan Hyross writes on topics that include Forest Hill real estate in Toronto and other market information. If you are looking for a Yorkville realtor, real estate information and related real estate articles, please feel free to visit the site.



Submitted by Johana

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Home Equity Loans Give Financial Acuity

Posted on July 22, 2008 by Gary
Suppose you have obtained a first mortgage worth ₤150,000 on your property. You have paid ₤70,000 in last 5 years. Your home value has also increased to ₤300,000 in these 5 years. So your home equity is ₤1, 50,000 (₤300,000 – ₤70,000). Now if you take a home loan worth ₤2, 30,000 keeping the home equity as security for the debt, then such loans are called home equity loans.

Equity is the difference between how much the home is worth and how much you owe on the mortgage if you have more than one on the property. Home equity loans are second mortgages that let you turn equity into cash, allowing you to spend it on home renovation and improvements, business extension, availing children higher education, debt consolidation, or other expenses.

There are many benefits of home equity loans. Followings are some:

•Low interest rate home equity loan

•Borrow up to 125% of your home value (amount ranges ₤3, 000-₤75, 000)

•Flexible repayment term (term of 5to 25 years)

•Make any use of the loan amount

•Free online advice for home equity loans

•Lower interest rates

Home equity loans are quite useful, and have several advantages over other types of loans, such as credit card loans or more traditional secured loans. The biggest advantage is that the interest on home equity loans is tax deductible. The interest rates on home equity loans are already pretty competitive, but the addition of the tax deduction makes them pretty hard to beat.

Home equity loan is risk less loans. The lenders use the borrower’s home as collateral security. Home equity loans allow users to access funds depending upon the borrower’s requirements in varying amounts up to their credit limit.

For this cause, there are innumerable lenders present online. With the respective terms and conditions, these lenders are going in for alluring borrowers one way other. Availability of home equity loans online has made availing rather time-saving and instant at processing.



By: Dina Wilson

About the Author:

Dina Wilson is an expert loan advisor at Online Home Improvement Loan. She has done MSc Management and Finance from University of Whales.To find home equity loans, home improvement loan UK, home equity loan, home improvement loans, home loan visit http://www.online-home-improvement-loan.co.uk



Submitted by Burt

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Financing Options On Home Equity Loans Are Affordable

Posted on July 7, 2008 by Gary
Home equity loans can be a wonderful resource for homeowners who need to get their hands on cash for an emergency or for a big purchase. These loans open the door for borrowers with equity to be able to take out a loan either in the form of a lump sum or as a revolving line of credit that can be used at the homeowner’s discretion.

Because equity loans are secured against what the lending industry considers to be the best and most stable type of asset a person can have, their home, the interest rates are lower. In general, the only borrowings that will carry a lower interest rate are original mortgages. Depending on the market, and the terms of the original mortgage, people can still walk away with a home equity loan that is at a lower interest than their first mortgage home loan.

Home equity loans are generally widely available to all homeowners, even to those who have had some negative marks on their credit reports and need to seek out bad credit loans. When evaluating a borrower for a home equity loan, the most important thing to the lender is how much equity there is in the home.

Secondly, a lender that offers equity borrowings will also look at the condition of the house to be sure that it has not undergone some type of damage that would lessen the value, and therefore reduce the amount of growth in the home. They will also require the property to have a current appraisal to determine how much the house has appreciated since the original home financing was done and to understand the market trends.

But, equity loans are not only approved on the basis of the growth in the property, the condition of the home, and the real estate market situation. The borrower must also be able to prove that they have the ability to make the payments on the loan as well.

In the case of a homeowner who has a good deal of growth in their home, but is unemployed or unable to work because of illness, it might be difficult to secure any equity loans. If they do, the interest rate will probably be very high because part of the calculation on loan rates includes the risk of the borrower defaulting on the borrowing.

This brings up an aspect of equity loans that some people will overlook, especially if they have difficult financial circumstances to deal with and are almost desperate to find a way to borrow money. The problem is that borrowing against the growth in the home puts the house in jeopardy of being lost to foreclosure.

Many people think that as long as they are making the payments on their original mortgage home loan that their house would not be in peril from equity loans which are “second mortgages” or in “second position.” But if the borrower is not able to make the payments on the equity borrowing, then the lender can start foreclosure proceedings. There have been instances where people who were struggling to meet their monthly obligations failed to make the payments and ended up losing their house because they were unaware of this danger.

With that word of warning in mind, home equity loans can still be the best option for people who have damaged credit and who also have the ability to repay the borrowing. The lenders not only have their loan secured against an asset that is growing in value, they also know that most people will do everything in their power to avoid losing their house, so the risk is lower and therefore, so are the interest rates.

When people clearly understand the full ramifications and risks associated with home equity loans, they can be one of the most useful financial options that homeowners have. Not only can they save money with these loans because the interest offered is as low as you can get aside from a new mortgage, but in most instances the interest is even tax deductible.



By: MIKE SELVON

About the Author:

A free home equity audio gift awaits you at our portal site, where you can enrich your knowldege further about home equity loans. Your comment is much appreciated at our home mortgage blog.



Submitted by Gerry

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Home Equity Loans: a Low Cost Option for Financial Assistance

Posted on June 1, 2008 by Gary
Your home may yield a much comfortable option to avail a financial help. The equity of your home can be used to arrange a good sum for your needs. You can find this option very comfortable; as such borrowers are always preferred for granting financial help. The equity of the home is used as collateral and you are provided with a low cost financial grant. You can avail these financial help in the form for home equity loans.

Home is one of the preferred options that are used to avail a loan. Usually your home has some obligations towards the lender and not free for its total value. So, when you need a further financial grant the equity of the home is used as collateral. The equity of a home is that value which is left after total obligations with a home. This means equity is the real asset for you when you go for loan against your home.

Home equity loans can be used for a number of purposes you have. You can invest the amount on buying a car, renovation of the home, wedding cost, luxury holiday and debt consolidation.

Amount is not a matter of constraint with Home Equity Loans. It is totally dependant on the equity’s value of your home. You can avail up-to 100% of your equity’s value as amount. However, the range of amount that is generally provided with the home equity loans vary from £ 3000 to £ 100000. For the repayment you always get a convenient schedule for it. Here, you are provided with a long stretched repayment durian that can be of up to 25 years.

You always get a fair rate with home equity loans. The rate of interest is lower to other loans. You can also find a differed rate of interest with different lenders. So, you can conduct an online comparison to find the best option. Several lenders are providing services online to reduce the hassle at processing.

You can avail the home equity loans even if you have bad credit. Borrowers with CCJs, IVAs, arrears, defaults, etc. are not deprived for this loan. However, you can be charged with a somewhat higher rate of interst for this.

You always need a loan that incurs a low cost for you. With the home equity loans you find it easily. Moreover, the equity of the home increases with the market value, that eventually reduces your burden to a considerable level.



By: Dina Wilson

About the Author:

Dina Wilson is an expert loan advisor at online home improvement loan. She has done MSc Management and Finance from University of Whales.To find home equity loans, home improvement loan, home loans, online home loans visit http://www.online-home-improvement-loan.co.uk/



Submitted by Denis

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Bad Credit Home Equity Loans

Posted on April 20, 2008 by Gary
Bad credit home equity loans are special home equity loans available to people with a low credit score. If you have been eyeing a new home or wish to take a new loan to pay off high interest debts, then bad credit home equity loans are something you should consider applying for.

Fixing Of Interest Rates

Your credit score or FICO score is used to determine the interest rate you will have to pay. You gain FICO points depending on your ability to repay loans, your salary and assets. You lose points when you default, make late payments or file for bankruptcy. Scores range from 350 to 850 points.

Those who have a high credit score pay low interest rates. People who have a score of less than 600 are usually asked to pay a high rate of interest or denied loans. However, they can always avail of bad credit home equity loans.

What Is A Bad Credit Home Equity Loan?

Originally, home equity loans were designed to pay for renovations and add on structures to your home. However, as lenders never check where the money is going, you can use it for almost any purpose. People with low credit scores usually go in for bad credit home equity loans to pay off their debts. The only difference between bad credit home equity loans and regular home equity loans is the slightly higher rate of interest.

Lending companies and banks are always ready to dole out cash as bad credit home equity loans. As the loan is secured by a mortgage on your house, the lender faces very little risk. If you are unable to pay the loan in the future, they simple repossess your house to recover their dues. Plus the high interest rates and loan charges make it quite profitable for them.

Advantages To People With Bad Credit

Bad credit home equity loans are extremely useful to people who are stuck in a cycle of debt or in a debt crisis. If you have multiple high interest rate arrears like credit card debts, then it makes sense to use a low interest home equity loan to pay it off. The advantages are -



You will have to deal with just one creditor – the home equity loan company.

You will make smaller monthly payments



 

As you pay off the previous loans, your credit rating will increase. This debt consolidation function of bad credit home equity loans is the reason why it is become so popular today.

 



By: Thomas Lonsdale

About the Author:

Thomas Lonsdale works for clickoncredit.co.uk
a secured loans broker aimed at the uk market.



Submitted by Catharine

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Home Equity Loan – A Popular Fund Raising Option

Posted on March 8, 2008 by Gary
Home equity loans have become one of the most popular fund raising options for individuals.

Home equity loans are the loans taken using your home’s equity as the collateral. Thus they are a type of secured loan.

These loans are based on two facts – first, that you have repaid a certain portion of the home mortgage and thus should be able to reutilize that equity; and second that the value of your home has increased since you first purchased it.

The common reasons for taking an equity loan are home improvements, educational expenses, medical bills, debt consolidation etc. There are usually no restrictions on how the borrowed money is used.

The interest paid on such loans is usually tax deductible. Also the interest rates on them are lower than credit card other type of consumer loans. (They are higher than the first mortgage.)

Let’s understand what “home equity” is.

Home equity is defined as the difference between the market value of your home and how much you owe on the mortgage (or mortgages in case you have more than one.)

The market value of your home will be determined by bank’s appraiser or a licensed appraiser.

Suppose market value of your home is $ 100,000 and you have made a down payment of $ 10,000.

Then your equity

= market value – amount owed

= $ 100,000 – $ 90,000

= $ 10,000

After three years if you have paid back $15,000 more of the debt, you will still have $75,000 of the debt left. However after three years the market value of your home would have increased to $ 150,000.

Thus your equity after three years would be

Market value – amount owed

=$ 150,000 – $ 75,000

=$ 75,000

Besides home equity loans (fixed rate home equity loans), there is another type of home equity debt – home equity line of credit or HELOC.

Both of them are known as “Second Mortgages” as they are secured by your home just like the first mortgage.

“Second Mortgages” are repaid sooner than the first mortgages, which are usually repaid in thirty years. Home equity loans usually have a time frame of five to fifteen years.

Home equity loans are a one time lump sum loans, that are repaid over a time period decided beforehand.

On the other hand, home equity line of credit or HELOC allows you to borrow up to a certain limit for the period of the loan. The time limit of the loan is set by the lender. You can withdraw money any time during the time period and repay it any time. It works the same way like a secured credit card.

A HELOC has a variable interest rate that varies through out the period of the loan. The HELOC interest rate depends on the prime lending rate (prime lending rates are fixed by the federal reserve in the US.) The payments can vary depending on what is the amount that has been borrowed, the interest rates and whether the loan is in the draw period or the repayment period.

The credit rating of the borrower is also a factor in deciding the home equity loan interest rates.

The draw period of the line of credit is the period during which you can borrow any amount up to the limit specified by the lender. Also only the interest has to be paid during this period; however you may choose to repay the principal amount if you wish.

During the repayment period, no new debt can be taken and the existing debt must be paid back.

Usually draw periods are for ten years and repayment periods around fifteen years, but this varies depending on the lender’s policies.

Withdrawals for HELOC can be done by checks, credit cards or EFT. Lenders may have certain terms which make require you to take an initial advance when the HELOC is setup, borrow a minimum amount each time you use it and keep a minimum outstanding balance.

If you decide to sell off your home, you have to pay back full amount of the home equity loan.



By: Sachin A

About the Author:
Sachin A. is a freelance writer and specializes in articles that require extensive
research. Check out his work at http://www.articlemanual.com
. More home equity articles at home equity loan



Submitted by Rebeca

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Home Equity Loans: Financial Aide Against Home Equity

Posted on February 15, 2008 by Gary
You may have heard the term home equity loan but are not really sure whether this type of loan will work for you. The first step is to understand the concept of home equity.

Equity is the worth of your home after reducing the amount to be paid for your home loans. That is in simple terms if you sell your home, the equity will be the amount left in your wallet after paying off the mortgage amount.

These types of loans help you to get a fresh finance without considering of refinancing options. Also the home equity loans can be taken to clear off the home loan also.

Many of you like the idea of taking out a home equity loan when they need fund to a home improvement or make some other type of purchase.

In the case of home equity loans you will get finance with much lower interest than many other options available. These loans are hence feasible for all types of people to fulfill their needs.

You can use the home equity to take a home equity loan or a home equity line of credit. These two terms are different. A home equity loan provides you with a one time lump sum of money as a loan. You can repay this amount with a minimum interest over a period of time.

A home equity line of credit (HELOC) is more similar to a credit card. Instead of receiving the sum of money at one time you will have the ability to borrow up to a specified amount of money for the duration of the loan in this case.

There are many factors which controls your decision on home equity loans. Interest rates, loan amount and repayment period are the main factors. If you choose for long term repayment, you can manage a lower interest rate.

Home equity loans are suitable for anybody for any purpose as these loans come with less interest rate. Also these loans are good options for the people with bad credits, as the lenders are willing to issue loans on the security of your worthy home.

Home equity loans are one of the best options for house owners to meet all their requirements.



By: Dina Wilson

About the Author:

Dina Wilson is an expert loan advisor at online home improvement loan. She has done MSc Management and Finance from University of Whales. To find home loan, home equity loans, online home improvement loan, cheap home improvement loan, bad credit home improvement loan visit http://www.online-home-improvement-loan.co.uk



Submitted by Jake

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