Do You REALLY Need a Home Equity Loan?

Your equity is the amount your home is worth, on the market, minus the amount you owe to your mortgage broker. For example, if your property is worth $200,000 and the balance you owe your mortgage broker is $100,000, then your home equity – the part of your property that you own free and clear – is $100,000.

A home equity loan is a loan that uses the equity in your home as collateral. That means you are using your home as a guarantee that you will repay the loan. Before you even consider borrowing against your home equity, you need to understand that the loan reduces your equity by the amount of the loan and that if you do not repay the loan, you could lose your house.

These loans have advantages and disadvantages compared with other kinds of borrowing. You should consider the “Pluses” and “Minuses” of borrowing against the equity in your property before apply for a equity home loan.

Pluses

*The interest paid on a home equity loan is tax-deductible, just like the interest on your mortgage. This of course is not the case with credit card interest.

*Equity home loan rate may be lower than other kinds borrowing, such as credit card debt, because you’re using your property to guarantee the loan will be repaid.

*A home equity loan gives you a source of funds for important big purchases: a college education, home improvement, a medical emergency, or other emegencies that may arise.

Minuses

*Your payments on your home loan must be met or you could lose your home.

*Often you will have to pay closing costs, which can be substantial, this is money which will not be recoverable and will diminish your loan value.

Having excess equity in your home will make you a target of unscrupulous sales tactics designed to get you to rush into an expensive loan you may not need. If you feel like you’re being pressured to borrow, just say no – always take your time when you take out a home equity loan.

There are reasons that make a home equity loan a good choice but also reasons that are not good. You should consider them wisely.

Good reasons to take out a home equity loan.

*Improving your finances – A home equity loan can consolidate your debts, by paying off high-interest credit cards or other high interest loans which are not tax deductible.

*Investing in your home – You can use a loan to increase the value of your home by using it for needed home improvements or repairs.

*Investing in your future – Home equity loans can help finance an education or start a business.

Bad reasons to take out a home equity loan.

*Spending the money on luxury items – Don’t risk your house to buy that new car, big boat or take an expensive trip. You should save until you can afford it.

*Using the money for living expenses – If you’re spending more than you’re earning day after day, a loan will only delay the “inevitable.” Try to find ways to cut your expenses instead. A credit counselor can help.

*Loan the money to a friend or relative – Remember, it’s your house that’s on the line. Don’t let a friend or relative pressure you to take out a loan for them. If they don’t pay you back, they lose nothing – but you could lose your home.

If you’re thinking about taking out a home equity loan as a last resort to get out of serious financial trouble, DON’T. Chances are, you’ll just run up your debt again and will soon be just as bad off as you are today, and possibly lose your home as well. Get help instead! A credit counselor can help you improve your finances at little or no cost to you.

Getting the Lowest Rate Home Equity Loan

Home equity loans have several advantages. For starters, they allow homeowners to tap into their homes equity and receive a lump sum of money. Money is useful for debt consolidations, home improvement, education, and so forth. Some people confuse home equity loans with refinancing. Nonetheless, there are slight differences between the two. Individuals who refinance their home may also tap into their home’s equity to borrow money. However, the amount received is wrapped into the mortgage, which increases the amount owned to the lender.

What are Home Equity Loans?

Home equity loans operate differently than a refinance. Instead of borrowing money and increasing the original mortgage amount, individuals with a home equity loan take out a second mortgage. Thus, they are making two monthly payments. The first payment is toward their mortgage, whereas the second payment is applied to the home equity loan.

Home Equity Loan Interest Rate

Traditionally, home equity loans carry a higher interest rate than a first mortgage. Lenders consider these types of loans riskier. However, homeowners with a decent interest rate on their first mortgage are generally able to handle the payments associated with a higher interest rate on their second mortgage. Moreover, home equity loans are sometimes better because homeowners may incur a higher interest rate when refinancing their homes.

Getting the Lowest Rate

Although home equity loans tend to carry a higher rate, homeowners must search for the best deals. Receiving a quote from several different lenders is beneficial. Mistakenly, some people accept the first quote they receive. It is recommended that homeowners contact at least three lenders. Working with a broker is helpful because they provide multiple offers from several lenders. This way, homeowners can compare rates and services.

Low interest rates on a home equity loan also depend on a homeowner’s credit rating. This score is used by lenders to determine whether an applicant is trustworthy. Improving ones credit score can assist with receiving a low rate. Of course, most people seek home equity loans when they need quick cash. Therefore, they do not have the opportunity to fix negative remarks on their credit report. In this circumstance, shopping around proves worthwhile.

Great Benefits of a 125 Home Equity Loan

Do you know what a 125 home equity loan is? I’m sure you know all about traditional home equity loans where you can borrow money using the equity in your home as collateral for the loan. These secured loans provide many people with cash for a wide range of uses. Of course there are other types of equity loans besides the traditional equity loan, and the 125 home equity loan is one of these options. This type of loan lets you get even more cash than usual based on the available equity in your home.

Let me first define what equity is. Your home’s equity is quite simply the difference in what you owe the bank still and the value of your home. For example, if your home is valued at $300,000 and you still owe $150,000 to the mortgage company then you have $150,000 in equity. One nice benefit is that in a rising real estate market you gain additional equity simply through the rise in your homes value.

Traditional Home Equity Loans vs. 125 Home Equity Loans
In a traditional home equity loan you are offered a loan that does not exceed the amount of equity present in your home. So, if you have $25,000 in equity you’re able to get a loan for $25,000. This loan can be used to pay for anything you want from home improvements to education or even a vacation if you choose.

The difference between the traditional secured loan and a 125 home loan is in the amount you can borrow. With a 125 loan you can borrow up to 125% of the present value in your home. In this case if you have $25,000 in your home you would be offered a loan of $31,250. In the past many lenders would shy away from this type of loan since part of it is unsecured and increases their risk. These days however more and more lenders, especially online lenders are offering this kind of partially unsecured loan. If you’re thinking of applying for this type of loan you should know that a high credit score will help you greatly in getting approved.

125 Home Equity Loan Warning
The 125 secured loan is especially suited for those who need access to a large amount of money. If you are thinking of using the money to start a business or take on a large home improvement project a 125 loan could meet your needs quite well.

Keep in mind that as long as home values continue to rise or at least stay stagnant you’re in little danger from this type of loan. However, if your home value declines your equity will decline as well and you could actually end up owing more than your home is worth.

It really depends on your needs and circumstances to determine how much sense a 125 home equity loan makes for you. As I said previously, it can be very useful for those starting a business, particularly if you expect the business to have good cash flow. It is also useful for large home improvements since they are likely to increase your home’s value and also your equity. Just be careful that you don’t overextend yourself when taking any type of home equity loan.

Reaping Financial Rewards – Bad Credit Home Equity Loans

Home is the place you inhabit. It is the place where you live, breathe, grow, thrive. It does more than just providing a living space. The moment you build up this house, or moved to your present apartment, you did not realize that you have struck it rich. ‘Rich’ – that is not the exact word to define your current status as you are struggling with bad credit. I know you want to argue on this point but let me explain. There is something called home equity that lies in the embryonic state waiting to be germinated. Home equity has more to it than what meets the eye. However, many of us do not understand the meaning of home equity. Let alone use it for their own prosperity.

Let us begin with the fundamentals. Home equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property). A home equity loan or line of credit is a loan that facilitates the borrowing of money using home equity as collateral. A home equity loan is in essence a secured loan. Accordingly aborting the repayment agreement will result in seizure of your property or home. That you certainly don’t want since you already have been suffering due to bad credit. Confiscation of your property is the one thing you don’t want on your list of financial fiasco. Thus careful introspection is recommended in relation to bad credit home equity loans. A key word that might be encountered by you is home equity line of credit. It is categorized as the kind of home equity loan. A HELOC or home equity line of credit allows the loan borrower to borrow various sums up to a fixed amount over a period of time. A home equity line of credit works in a way which is analogous to a credit card; you use it when you need it. Different States set their own laws on limits you can borrow against your house.

Bad credit home equity loans can be used for any personal reason. Bad credit home equity loans are second mortgage that converts your home equity into ready money. This cash can be used for many purposes like home improvement, debt consolidation, college education, and any other expenses. There is no expiration to possibilities to a home equity loan. Tapping on the home equity with bad credit is effortless if the loan borrower understands his own expectations and status in the context of bad credit home equity loans. Bad credit home equity loans are currently very attractive but then again you what is good for someone else might not be good for you. So bad credit home equity loans should be contemplated seriously before taking a concrete decision. You don’t need another bad decision on your credit report, so chose wisely.

Bad credit has unwelcome consequences on your entire investments plan. This includes your plans for taking a home equity loan. You might have blundered earlier but this time it is our home which is at stake. Discuss your bad credit with the loan lender you are opting for. Commissioning the right loan lender is crucial for your bad credit home equity loan. In fact it is the thing that guarantees your success in acquiring bad credit home equity loans.

Little do people realize that home equity is a powerful tool for making a statement while placing a loan application. Bad credit home equity loans have a very high incidence of being the finest option of people contemplating debt consolidation. You success with bad credit home equity loans rests on the simple fact that you make a plan and cling to it religiously. The credit card debts have been weighing heavily on you. Those irksome little debts, those just hamper your personal expenditures in every possible way. Get rid of them this time with bad credit equity loans. Let you wallet weigh less of credit card debts and more of ready cash for you personal usage.

Bad credit home equity loans have this great opportunity for home owners. Bad credit home equity loans can be used fittingly for the purpose of home improvement. Make the minor little changes that you have been putting off due to this bad credit. There is an added benefit. You build up your equity while using equity for in your home. Bad credit home equity loans can even help to fund your vacation. Clasp the snow stricken mountains, or go for a dip in the clear blue waters of the Caribbean islands. It can all be realized through home equity loans even if you can’t shed off the bad credit tag.

A very congruent utilization of bad credit home equity loans is for initiating a retirement plan. Retirement is to be realized some day. A lot depends on how you are planning your retirement that will reflect on your financial independence in the future. Many bad credit home equity loans have been used to proffer investments. A trusted loan lender or financial advisor can advice you suitably for your current financial status. Make a bad credit home equity plan and see how it can reap economic rewards.

Economic rewards! Does that come with bad credit? You are throwing your hands up in the air and saying ‘no way’. ‘No way’ but you have read all about it. Haven’t you? You see the house you are standing on, now see the four walls surrounding it. Yes this house, your house that you own. There is a gold mine hidden there in terms of home equity. And you were searching the road to Eldorado.

Home Equity Loan – Understanding the Basics and Advantages

You may have heard the term home equity loan but are not really sure whether this type of loan will work for you. The first step is to understand the concept of home equity. Equity is the difference between the current appraised value of your home and the amount that is owed on the home. So, for example; if your home has recently appraised for $200,000 and you only owe $100,000 on it then you have $100,000 in equity in your home.

Many homeowners like the idea of taking out a home equity loan when they need to fund a home improvement or make some other type of purchase because they can often obtain the money they need at an interest rate that is lower than charging it to a credit card. In addition, there are also possible tax advantages as well.

When you take out a home equity loan you are taking out a second mortgage that gives you the ability to convert the equity in your home into cash. You can then spend that cash on any number of expenses including college education, medical expenses, debt consolidation, home improvements and much more.

You will generally need to decide whether you wish to take out a home equity loan or a home equity line of credit. These two terms are different. A home equity loan provides you with a one time lump sum of money that you will then pay off over a specified period of time at an interest rate that is fixed. It is much like your first mortgage.

A home equity line of credit, commonly referred to as HELOC, is more similar to a credit card. Instead of receiving the sum of money at one time, you will then have the ability to borrow up to a specified amount of money for the duration of the loan. That time period is set by the lender. As you pay off the principal amount of the loan, you can once again use the credit. In this regard, a HELOC is much like a credit card.

There are advantages to both a home equity loan as well as a HELOC. Many homeowners prefer the flexibility of a line of credit over a fixed rate equity loan. If they do not need all of the money up front, they are able to maintain control over how much money they draw down from the loan. The disadvantage to a line of credit is that it frequently features an interest rate that is variable. This means that the payment amounts will vary based on the prevailing interest rate.

In most cases, the draw period for a line of credit is between five and ten years while the repayment period ranges between ten and fifteen years. You will usually be able to access the funds of a line of credit with a credit card, check or electronic transfer that can be ordered by phone. Typically, an initial advance is required when the loan is set up.

Bad Credit Home Equity Loans – Tips On How To Obtain A Bad Credit Home Equity Loan

Bad Credit home equity loans require that you own a property and have sufficient equity left to secure the loan. Bad credit can be overlooked since the lender has sufficient assurance that he will recover his money either by payment or through repossession. Home equity loans come with variable interest rates as well as fixed rates . Depending on your ability to pay and your choice of payment, the terms of interest will be decided. Home equity loans have a very high incidence of being the finest option for people contemplating debt consolidation. Your success with bad credit home equity loans rests on the simple fact that you make a plan and cling to it religiously.

Improve your financial status to enjoy your financial life. The home equity loans will also minimize your cost of the payments that you have to make on a monthly basis. Improving your credit score and repairing your credit should be a high priority. Want to learn how to get approved for the credit you deserve?

All lenders prefer to do business with people with good credit history. Therefore, for people with bad credit history, it is advisable to seek alternatives to getting your loans. Lenders are currently offering loan products for all types of credit situations. If you have bad credit and own your home, a home equity loan can be designed to fit your individual needs.

Lenders base their financial decisions largely on your credit score. You need to get a copy of your credit report and make sure it is accurate. Lenders are required to provide these settlement costs after application is submitted. Lenders also keeping the competitive atmosphere in mind are ready to negotiate the interest rates by making low and reasonable offers. So, applicants, by collating the loan quotes, can spot economical figures suitable to their budget.

Lenders use your credit score to determine whether you are a bad credit risk or not when lending money. Bad credit can be repaired over time.

Lenders are more flexible if a loan is secured by greater equity. Lenders consider a credit score of 620 and above as safe for providing a loan.

Mortgage lenders are offering great interest rates and easy terms on home equity loans, even if your credit history is less than perfect. Mortgage rates can change daily, and sometimes even multiple times per day depending on economic factors. For accurate mortgage rate comparisons, try to get quotes on the same day! Mortgage can be defined as a loan which will provide monetary help to purchase any real estate property. The borrower can make his payments regularly to the lender.

Bad credit home equity loans can be obtained online or from a mortgage lender . You should first begin your search by contacting your mortgage lender and asking about home equity loans. Home equity loans are preferred for many reasons. The interest rate of an equity loan is comparatively low.

Various Uses of Home Equity Loans

The best way to obtain a low rate loan is to go for a secured loan. A secured loan is given against a property. The rates of interest on secured loans are much lower than the rates on unsecured loans. If you are a homeowner, you can put up your house as a security to get a secured loan. Such a loan is known as a homeowner’s loan. If your house is already mortgaged, you can apply for a home equity loan. For instance, if your unpaid mortgage balance is, say 80% of the value of your house, you can apply for a home equity loan on the remaining 20% of the value of your house. This value, which is not covered by the mortgage amount, is known as home equity.

A home equity loan can be used for any purpose. Since it is a low rate secured loan, it can be very useful in consolidating your debt. The basic purpose of a debt consolidation loan is to replace your high rate loans into a single low rate loan. Therefore, a home equity loan is ideal for debt consolidation.

A home equity loan can be used as a business loan. Because of a high rate of failure of new businesses, lenders are reluctant to offer business loans. Since a home equity loan is a secured loan, it reduces the risk for lenders and they easily offer such a loan for business purpose. Home equity loans are also a convenient way of obtaining bad credit loans. If you have a poor credit score, a home equity loan can help you avoid a high rate of interest.

A home equity line of credit is a type of home equity loan. In case of a home equity line of credit, the borrower is allowed to borrow money against his house up to a certain limit. The borrower does not have to pay interest on the entire amount. He has the freedom to use a part of the entire loan amount and pay the interest on only that much amount which he has used.

Learn How Home Equity Loans Work!

If you want to seize the fabulous opportunity that your home provides you to get finance at incredible rates compared to other personal loans, you need to have an insight on home equity loans.

Home Equity Loans

A home equity loan, often called a second mortgage, is a loan that uses your house as security, or collateral. Home equity loan guarantees the lender that you will repay the loan because they can pursue foreclosure if you default severely on your monthly payments. Home equity is determined by deducting the debt that is secured on your home from what your house is worth.

Benefits You Can Obtain

While the interest rate on a home equity loan is lower than that of a credit card or unsecured personal loan, it is higher than that of a standard mortgage because the lender is second in line should the home be sold or foreclosed on by the primary lender. However, you’ll find the interest rates on home equity loans to be quite favorable because the investment requires less risk on the part of the lender.

Another advantage with a home equity loan is that regardless of how you use the money, the interest you pay on the first $100,000 borrowed is tax deductible ($1,000,000 if the money is used for home improvements or to purchase an additional home).

This means that if you pay $4,000 in interest on your home equity loan, you can reduce your taxable income by $4,000 when doing your taxes. Credit cards and other unsecured loans don’t carry this advantage, which the home equity loan gives. You will certainly want to consult a tax advisor to be certain about any appropriate tax benefits.

Drawbacks You’ll Have To Face

With the advantages of home equity loans come some disadvantages as well. The biggest drawback of home equity loans is that if you can’t keep up with the payments, your home may face foreclosure. In addition, when you decrease your home’s equity value, you also reduce the ownership you have in your property. Finally, aside from the interest you will pay on the home equity loan, there are also some costs associated with taking out a home equity loan that are similar to when you took out your first mortgage.

Different Home Equity Loans

There are two different kinds of home equity financing, a home equity loan (second mortgage) and a home equity line of credit. A Home Equity loan resembles a term loan in the sense that it works like a traditional cash loan. You will receive a lump sum payment as your home equity loan and pay a fixed interest rate on the funds. Depending on the terms of your home equity loan you’ll pay a fixed monthly payment until the loan is paid in full. As an example, a $30,000 home equity loan at 7.5% will require ten years of monthly payments equal to $356.11.

With a Home Equity Line Of Credit, you are granted an amount that you are allowed to borrow but you only have to take what you need when you need it. If you don’t borrow it, then you won’t owe any interest on it. For example, if you are given a $20,000 home equity line of credit and you only use $10,000 of it, you’ll only pay interest on the $10,000 you borrowed. As the principal is paid back, your available funds will increase accordingly.