Home Equity Loan Quotes
A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax deductible. Home Equity Loans are often used for home improvements or for freeing equity to invest in other real estate and assets. Recommended by many to replace or substitute for consumer loans with interest that is not tax deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.
Types of Home Equity Loans
Closed-End Home Equity Loans are loans in which the borrower receives the entire sum at the time of the closing and cannot borrow further. The amount of money that can be borrowed is determined by variables including credit history, income, and the appraised value of the collateral. It is possible in some cases to be able to borrow up to 100% of the appraised value of the home, less any liens. However, state law governs in this area; Texas (which was, for many years, the only state to not allow home equity loans) only allows borrowing up to 80% of equity.
Closed-End Home Equity Loans usually have fixed rates and can be amortized for periods up to 15 years. Some Home Equity Loans offer reduced amortization whereby at the end of the term, a balloon payment is due. Larger payments can be avoided by paying above the minimum payment or refinancing the loan.
Open-End Home Equity Loans are generally referred to as Home Equity Lines of Credit where the borrower can choose when and how often to borrow against the equity in the property. The lender sets an initial limit to the credit line based on criteria similar to those used for closed-end loans. Like the closed-end loan, it may be possible to borrow up to 100% of the value of a home, unless there are any liens. These lines of credit are available up to 30 years, usually at a variable interest rate. The monthly payment can be as low as the interest that is due.
What Home Equity Loans Are Not
Although, Home Equity Loans are similar to secondary mortgages; these lines of credit are generally repaid in a shorter period than a mortgage. Mortgages are usually set up to be repaid over 30 years. Home Equity Loans often have a repayment period of 15 years, but it may be as short as 5 years or as long as 30 years.
Who Needs Home Equity Loans?
Homeowners should consider Home Equity Loans if they desire to remodel their home. They may also use these lines of credit when reinvesting the worth of their home into more profitable avenues.
Here is a list of possible fees that may apply to your Home Equity Loan: appraisal fees, originator fees, title fees, stamp duties, arrangment fees, closing fees, early pay-off, and other costs included in the loan. Valuation fees may also apply to loans; some may be waived. Survey and conveyor valuation costs can often be reduced, provided you find your own licensed surveyor to inspect the property considered for purchase. Most Home Equity Loans will have fees of some sort, so make sure you ask about the fees that are included with the loan.