What Do You Need to Get a Home Equity Loan
If you have seen a significant rise in the value of your home or have owned it for some time now, understanding home equity loan basics is essential in getting a loan against your home’s equity. The money on your loan may be used for buying new car, home improvements, or other purposes. In home equity loan basics, you will know that this loan allows you to apply putting up your home as bank collateral to borrow large amount of cash with lower interest rate.
Home Equity Loan Basics: What is it?
Home Equity Loans are also considered as Second Mortgage. If you are applying for a Home Equity Loan, your loan will be secured by your home. In other words, the lending company will collateralize your home when your loan is already funded. Should you default on your loan, the lender is given the right in foreclosing, repossessing, and even selling your property.
Home Equity Loan Basics: Which Homes Qualify?
If your home is zoned as residential, as with most properties, then your home would qualify. The most common type of homes used as home equity loans’ collateral includes condos, townhouses, and single-family homes. The lenders’ guidelines are sometimes used in determining the eligibility of your home for this loan since you may be disqualified if you are paying lot rent for your mobile home or your home is used for business. In addition, yours may be disqualified for home equity loans if it is earth shelter, log home, geodesic dome, as well as other unique home.
Home Equity Loan Basics: What is the Loan Limit?
Basically, factoring in a primary mortgage will be made by most lenders and your loan will not exceed higher than 75% – 80% of the total value of your home. In case you did not put any amount down upon your purchase of your home and not a dime to pay back the principal, any rise in your home’s market value could make this loan feasible for you.
Home Equity Loan Basics: Interest rate and Loan Term
Home equity loans interest rates are higher than primary mortgage since there are greater risks for second lenders on getting the full amount of loan back, but the interest rates are still lower compared to typical credit cards. This type of loan has a shorter loan term, common is 10-15 years. This may mean higher monthly payments but overall you have less interest to pay.
Learning home equity loan basics is essential so you can plan and think your choices through. Moreover, should you be able to secure a HEL, spend in the most prudent manner like home improvements. This way, you have the alternative of refinancing if you have to when can’t pay this back and risk foreclosure.