Home Equity Loans
Home equity loans users guide. What you need to know to find a home equity loan that's perfect for your needs.
A home equity loan is a second mortgage loan that allows you to turn your home equity into cash that you can use for anything you want. It is a one-time lump sum that is paid off over a set amount of time with a fixed interest rate and the same payment each month. Once you get your money, you're not allowed to borrow further on the loan.
You can use the proceeds for home improvements, debt consolidation, college expenses, or whatever you want. Your home equity is the difference between what your home is worth and what you owe. This equity typically arises when your home increases in value after you buy it, accompanied by the fact that you have paid down some of the original principal, thus creating additional borrowing power.
Home equity loans are appealing for a number of reasons. For one thing, interest rates are relatively low by comparison to other types of borrowing. For another, the interest on home equity loans is usually tax deductible, just like home mortgage interest. Additionally, proceeds from a home equity loan can be used for just about anything.
Home equity loans, like home equity lines of credit, allow you to borrow money by using your home equity as collateral. They differ from lines of credit in that the loan amount is paid out to you all at one time. By comparison, a home equity line of credit lets you draw down money over a period of time, and pay interest only on the amount outstanding at any given time.
A home equity line of credit gives you more flexibility than a home equity loan. The HELOC has a variable interest rate that fluctuates over the life of the loan. Payments vary depending on the interest rate, the amount owed, and whether the credit line is in the draw period or the repayment period.
With either a home equity loan or a home equity line of credit, you will be required to pay off your balance when you sell your house.
Your Next Step
Assuming that you've figured out how much you'll need for your home improvements, debt consolidation and/or special needs, it's time to "crunch" the numbers and get a better idea of what you're looking at for your home equity loan.
It's one thing to run your own estimates based on how much you think you'll need at a certain assumed interest rate and over a certain term, but it's another thing entirely to get actual quotes, from actual lenders, based on the specific and unique information you provide them.
The good thing about it is that there's a quick, easy, and free way
to take this next step, and it puts you under no obligation whatsoever. You can
go the LowerMyBills.com free service and
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home equity rates
by entering your specific information on a single quick and easy form. You'll
receive up to 4 free quotes in a short amount of time, and you'll quickly be
able to confirm or refute the validity your own estimates.
You may choose to proceed further with one or more of these lenders, or you may decide to go elsewhere for your home equity loan, but at least you'll have a better idea as to whether the loan you have in mind is "do-able". The quotes you'll receive will take into account your state of residence, your stated general credit standing, and a number of factors that you provide that are specific to your situation.
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