Home Equity Loans, aka “Second Mortgages,” are loans that homeowners can obtain by leveraging the equity in their home. In fact, a consumer’s home may likely be a unnoticed source of wealth they may not even be aware of. A home’s equity is the difference between what is owed and what the property is worth. This type of loan allows a consumer to borrow money based on that amount. Additionally, the amount of equity a consumer currently has is not based on the sale price of their home, but it is based on what the house is worth. The amount a consumer can borrow against their equity varies from one lender to another and is determined by the loan the consumer takes out. For instance, if a consumer takes out a new mortgage, they might borrow more than their equity value. Should a consumer take out a second mortgage or home equity line of credit (HELOC), they can generally borrow up to 75% of their equity. There are many Home Equity Loans that come as Fixed-Rate products and have varying terms anywhere from five to fifteen years.
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The qualifying process for a Home Equity Loan is quite similar to that of a first mortgage loan. The chosen lender will make a determination of one’s credit limit by estimating the consumer’s ability to pay back the loan. There are a few factors lenders will also take into consideration such as the consumer’s income, other debts or financial responsibilities. Lenders will look at items such as amounts owed on vehicles, credit card debt, spousal support/child support and any court-ordered payment obligations. There are some lenders who charge points. One point is the equivalent to 1% of the amount of the credit and the points are then paid when the loan closes – they are not added into the interest rate.
Home Equity Loans are an viable solution for unexpected/expensive cost outlays. Examples of unexpected, costly items are emergency medical bills or important/necessary home improvements. These examples are sufficient, good reasons to obtain a Home Equity Loan if the consumer has the means to pay it back. On the downside, if a consumer has poor/bad credit issues or spending problems and need cash to pay off their debt, a Home Equity Loan is not a good solution. The APR on Home Equity Loans is generally much lower than most other consumer debt. Consumers should BEWARE their home is collateral for the loan; therefore, if the consumer defaults on payments, they could lose their home.
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About Home Equity Loans
There are also a great deal of ways a consumer could borrow against their home equity with all the various programs/products now available, such as:
• Cash Out Refinance Loans
• Refinance Loans
• 125 Home Equity Loans
• Second Mortgage Loans
• Home Equity Lines of Credit (HELOC)
• Bad Credit Home Equity Loans
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