3 Types To Consider Home Equity Loan
Here are some of the important aspects of what you should know about home equity loans. Home equity loans are one of the most attractive borrowing tools for homeowners. The interest rates of home equity loans are tax deductible. The interest rates of home equity loans are much lower than other types of loans and they are easy to acquire.
The other important aspects of what you should know about home equity loans is that the borrower can loan up to eighty percent of the equity of their home. However like everything else, there are risks with home equity loans.
One of the most important factors of what you should know about home equity loans is that if you obtain a home equity loan you are putting your home as collateral. In order to understand the complex details of what you should know about home equity loans, you must first understand the basics terms of home equity loans.
Equity is one form of a secured loan. In the case of home equity, the loan is secured through the borrower's property and equity is the amount of your home value that you can borrow.
One factor of what you should know about a home equity loan is that you can not sell the portion of your home that is covered by the home equity loan. You can get hold of the money through a home equity loan through a second mortgage or refinance your home equity loan. The good thing about a home equity loan is that you can do whatever you like with the money.
If you are thinking of doing some home improvements, applying for home equity loans is advisable. Also if your home is worth a lot more than you will be paying for it, a home equity loan is a great way of taking advantage of a financial opportunity.
The 3 Types of Home Equity Loans
There are three ways to make the most of the equity of your home:
* By refinancing your first mortgage and taking advantage of your equity possibilities, for example, debt consolidation program or cash out option.
* By adding a home equity loan and leaving your first mortgage in tact.
* By opening a home equity line of credit.
Through those ways, different types of home equity loans can possibly be chosen for whatever suits your financial situation.
1. Through refinancing, you are shifting the debt from various bills (with all the different rates, payments, and due dates) to one lender at a lower interest rate with a fixed repayment plan. In addition to convenience of consolidating payments and payment dates, you create a tax benefit. You will have the benefit of paying a lot less interest, not to mention the cash you'll save by making the interest expense tax deductible.
2. Home equity loans, on the other hand, is a second mortgage with a fixed amount to be paid off over a predetermined term, usually 5 to 30 years. There is a one-time distribution of the loan and once you get the money, you can not borrow further from the loan.
3. The home equity line of credit, or HELOC, is like a bank account where you continue to write checks sponsored by the equity of your home. A HELOC does not have a fixed period of time wherein it will be paid off, because you can continue to borrow against it, just like to a credit card. This type of equity loan is usually offered to borrowers that need credit repeatedly. Among other types of home equity loans, HELOC often has higher interest rates overall. However, there are several lenders who offer lower rates to low risk borrowers.
All of the types of home equity loans let you turn equity into cash, allowing you to spend it on home improvements, college education, or other important expenses.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site: best home mortgage loans
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