An equity mortgage is a second mortgage in which you have borrowed money against the equity you have in your home. The equity you have in your home is the homes’ market value minus the outstanding mortgage balance. With every mortgage payment you have made and with your homes’ appreciation as the years pass you are building equity. You can borrow this money as an equity mortgage, otherwise known as a second mortgage. Once you’ve been approved you can use this money for any purpose you choose.
The same laws and regulations that apply to your first mortgage will also apply to your equity mortgage. The interest you pay on your equity mortgage is tax deductible. You will be required to repay your equity mortgage including interest through regular monthly payments over the period of time agreed upon by you and your lender. When you apply for an equity mortgage the lender will check your credit rating and consider your ability to pay as with any other loan.
Equity Mortgage: What For?
You may want to take out an equity mortgage to consolidate bills, pay off student loans or other higher interest loans. Perhaps you have medical expenses or an upcoming wedding to finance. Consider the cost carefully as you will be paying your first mortgage as well as the equity mortgage. You need to continue paying your property taxes as well as your homeowner’s insurance of course. The more you borrow as an equity mortgage the higher your payments will be and the more years you’ll probably be paying.
The equity mortgage is a typical equity loan. The other types of the equity loan are not available in an equity mortgage. You will receive a one time lump sum of money to be repaid at a determined rate of interest over a specified length of time. Like any other mortgage you do not want to default on this equity mortgage. If you have been in your home for some time and have been paying that mortgage faithfully, chances are that your investment has enabled you to get approved for an equity mortgage.
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