Equity loans are based on the market value of your home minus your outstanding mortgage. You are making an investment and building equity every time you make a mortgage payment. Your home also appreciates in value with each passing year. Your bank or mortgage company will loan you money against your home equity and the interest you pay on a home equity loan is tax deductible.
Equity loans typically are the second mortgage and the home equity line of credit. In the case of the second mortgage, money will be loaned to you in a lump sum. You will be obligated to repay this loan through regular monthly payments at a specified rate of interest over a specific period of time. The same laws and regulations that apply to your first mortgage will apply to this second mortgage.
In the case of the home equity line of credit the borrower is provided with a credit card or checks. When you use the credit card or checks you are using money from the equity in your home. Interest is only accrued on purchases you make with your home equity credit card or checks. This is a popular choice for many homeowners as it gives you more choices as to when and how much of that money you will borrow and ultimately, repay.
The Equity Loan Process
Many homeowners borrow against their equity to make repairs, remodel, consolidate higher interest debt or fund an education or a wedding. The availability of home equity loans reveals to the homeowner what a great investment buying a home is. What a relief when you are in need, to know that home equity loans are accessible. Your lending institution will go over all details and responsibilities to you regarding equity loans.
The process of taking out a home equity loan is just like getting your original mortgage. Your bank will check your credit score, your income and your current debt load. They will also want to know of any home improvements you’ve already made. Remember, the higher the market value of your home and the more you’ve already paid on your first mortgage, the higher the amount you’ll have available to borrow through equity loans.
No comments:
Post a Comment