When you say "home equity loan," the best word to use is "equity." Start with the home's fair market value, then take off the first and second mortgages and any other liens on the property. What's left is the equity. This equity can be used as security for a loan or mortgage to get cash.
The amount borrowed is a percentage of how much the home is worth. The percentage rate can be anywhere from 75% to 125%. Also, the length of the loan will vary. There are two main types of home equity loans: loans with fixed rates and loans with rates that change over time.
Fixed-rate loans give you a set amount of money at a set interest rate, which you pay back in equal payments over the life of the loan. Loans with a fixed rate cost more to set up and have higher interest rates than loans with a variable rate. But if they stay in their homes and the interest rates go up, they will save money compared to a similar loan with an adjustable rate.
The interest rate on an adjustable-rate loan goes up or down based on the index on which it is based. There will be a limit on how high the interest rate can go on loans with an adjustable rate. This type of loan, which is often called an ARM (Adjustable Rate Mortgage), has lower costs up front and starts with a lower interest rate than fixed rate financing. This means that the first month's payments will be less.
b>Making good use of home equity/b>
The top ten reasons to get a home equity loan, according to the Consumer Banker Association, are:
- Spending money
- Costs for the house
- Education expenses
- Automobile purchase
- Business expenses
- Buy something big
- Medical expenses
- Home improvement
- Debt consolidation
Most of the time, people cash out their home equity to pay off debt. This is a smart way to get money because it can save you money. Say you owe $15,000 on a credit card with a 17 percent interest rate. If you get a 9 percent interest debt consolidation loan and pay it off in five years, you'll save more than $30,000.
If you pay more than 15% interest on any of your debts, you should think about getting a debt consolidation loan. Depending on interest rates, origination costs, and tax consequences, the right terms could cut your monthly payments by 35% to 50%.
Even if you have bad credit or have gone bankrupt, you can still get a home equity loan. It can be a great way to start over. Websites like www.easyhomeequitymortgages.com help people with bad credit get the home equity loan that works best for them.
