When Is The Best Time For A Home Equity Loan?

Americans have been tapping their equity from their homes for decades by taking out home equity loans, equity lines of credit or refinancing. When I was child growing up in the sixties, it was inappropriate for neighbors to talk about a second mortgage, because it meant that you mismanaged your money and the implications were always centered on financial trouble. Times have changed, because over 60% of homes purchased today include a second mortgage in the sales transaction.
If you are a homeowner, you have most likely received solicitations all the time to apply for a home equity loan or refinancing your second mortgage. Home equity loans can be efficient tools for financing home improvements and consolidating credit card debt. Home equity lines of credit can improve cash flow, and provide flexibility for investing. Having an equity line of credit secured to your property, can provide a safety net of cash reserves for family emergencies, or sudden investment opportunities. We suggest getting approved for a home equity loan when you need it least. What we mean by that is, "Don't wait until you are late on your bills or when a close family member needs your help." Rarely in life can you plan for investment opportunities, financial obstacles. Remember that mortgage lenders and banks can always get you a loan when you need it. For example, If you are late on your credit card bills and the banks report you late to the credit bureaus, there is a good chance that your credit scores have dropped, and you might not qualify for the home equity loan you need. The same is true, for if you stumble across a worthy investment. Typically investments have a small window of opportunity, and by the time you get approved for a second mortgage, and actually close escrow, the opportunity may be gone.
There are three popular second mortgages that are worth considering.
1. Standard Fixed Rate Second Mortgage- This is your traditional lump sum 2nd loan that features a fixed interest rate and repayment terms that range between 15-30 years. Typically these loans have a 3 year pre-payment penalty that can be bought out in most cases if requested in advance to the loan closing. These 2nd mortgages are recommended for consolidating debt or helping with the down payment of a second home. With these loans each payment you make will go towards paying down the principal and the interest. (125% combined loan to value)
2. Home Equity Line of Credit- This 2nd mortgage is a revolving line of credit similar to a credit card, but interest is deductible to 100% of your homes' value. The best thing about home equity lines is that you only pay interest when you access cash. If you never touch the line, then you never have a payment due. Home equity lines have variable interest rates and the payments start out low with because, only the interest is due each month during the initial 10-year draw period. This is a very popular short-term finance vehicle for home improvement projects and construction. Once the project is completed people will typically refinance the loan into a fixed rate mortgage loan. We recommend this type of home equity financing for establishing reserves in cases of emergency or investment opportunity. (100% combined loan to value)
3. Home Equity Loan Hybrid- This home equity loan boasts of a fixed interest rate with the ability to make interest only payments for the draw period that is usually 5 or 10 years. These home equity loans have fixed interest for the life of the loan, but they allow you to make a minimum payment of just the interest if you choose. The hybrid equity loans usually require high credit scores, but ask your loan officer about the underwriting guidelines, because the program criteria may change. . (100% combined loan to value)
In summary, don't wait until the last minute to get approved for a home equity loan. If you really don't know what you will need, then remember the home equity line will cost you nothing each month if you never use it. Talk to your loan officer, and discuss whether or not you will be doing a full documentation loan, or stated income loan. This will determine whether or not you will need to submit your W2's and pay-stubs with your loan application. Discuss the interest rates and closing costs for each home equity loan option. Takes a few minutes and review the "good faith estimate" with your loan officer, so you feel good about taking out a loan against your home. Don't wait for the interest rate to go up any more, and get approved for the second mortgage that gives you flexibility today and access to cash tomorrow when you really need it.


Article Source: http://EzineArticles.com/193228

Home Equity Loans Or Equity Line of Credit?

Nowadays it seems that lenders are offering home buyers more choices when it comes to borrowing money. From equity lines of credit to home equity loans to fixed rate home equity loans to mortgage refinancing to adjustable rate mortgages, what does it all really mean? With so many catch phrases and too few definitions lending companies are often only serving to complicate matters instead of clearing things up.
Let's take a look at the equity line of credit versus a fixed rate home equity loan. The first question to ask is what is the difference? To begin, let's define what a home equity loan is and how it works. If a home buyer decides to use the equity already built up in his home he may qualify for a large amount of credit with a lower interest rate when needing to borrowing money. Also, depending on the situation the borrower may be able to deduct this interest rate from his taxes since the debt is protected by the home.
A home equity line of credit is a form of credit that is extended with your home being the main source of collateral. This type of credit line is basically what is known as "revolving credit" and it can be utilized for big ticket items such as children's education, home improvement, medical bills or just to get ahead on monthly bills and expenses. A good idea of what kind of credit you will be given is to figure roughly 75% of your home's appraised value and then deduct the remaining balanced owed from the existing mortgage.
Of course other factors come into play when applying for this type of credit line. These include any additional outstanding debt, your financial history and your income. However, after you are approved you can borrow money up to the amount of the credit line whenever you need by using a check or credit card that has been furnished to you by the lender.
In some cases with a home equity line of credit you will be given a specific period of time in which to borrow the money. At the end of the "draw period" you might be able to renew the credit line however it is just as possible that you won't be able to borrow any additional money. This is usually spelled outlined in the lending agreement therefore before any paperwork is signed read the fine print and ask questions. Also, be aware that you might just have to pay the money you borrowed from the home equity loan back in full at the end of the designated period.
Some lenders will offer a discounted interest rate on home equity loans, but chances are good that the lower interest rate will only apply for the first three to six months of the loan. If you opt for what is called a variable interest rate you will find that your monthly payments will change as interest rates change. If you decide to sell your house you will also be expected to pay off the home equity line you have borrowed.
Along the same lines of a home equity loan comes the fixed rate home equity loan meaning the borrower knows what the monthly payments will be and the time period of repayment. The fixed rate home equity loan is typically secured by either a first or second mortgage and the loan can be granted for up to several years or more. First Horizon Home Loans in Memphis Tenn. describes fixed rate mortgages as "featuring an unchanging interest rate, which is determined when you are approved for a mortgage and remains the same for the term of the loan."
Remember too that there are fees involved for establishing a home equity loan so take that into consideration before making a final decision on a loan overall. The most important factor a person should take into consideration when choosing a loan program whether it be an equity line of credit, a fixed rate home equity loan or something in between depends on your financial portfolio, how you believe your finances will change within the next five years, how long you plan to keep the house you are currently living in and how secure you feel with changing your mortgage payments and increasing your debt. Do you feel more secure with the knowledge that your payments will be the same amount every month for a set number of years (fixed rate home equity loan) or that the amount can fluctuate based on interest rates and how much you borrow within your window of opportunity (equity line of credit). Either way, before securing a loan talk to a financial advisor and determine all your options before making a final decision.


Article Source: http://EzineArticles.com/203269

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.


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Home Equity Line of Credit - Helpful Home Equity Loan Tips

We've all been there: life deals you a bad hand, and unexpectedly you need money you don't have. At times like this, it's important to remember the best asset you have: your home. You might consider refinancing as a way to help you through the tough times.
One option you have is a home equity loan. Home equity lines provide homeowners with quick access to extra cash in times of need.
What is a Home Equity Loan?
A home equity line of credit allows you to borrow against the value of your house. The cap on the loan is usually determined by estimating a percentage of the value of your house - 75% or 85% of the house's value, if your credit is good - and subtracting what you still owe on the first mortgage. Home equity lines usually allow you to draw from the account using special checks or credit cards. The terms of the specific loan will determine the length of the loan, the length of the "draw period" (the period of time during which you can withdraw money on the loan), the interest rates, the minimum and maximum amount that you can withdraw at any one time, and the method and payments with which the loan will be repaid.
For instance, some home equity loans may credit payments only against the interest due on the loan, leaving the borrowed amount to be paid in full at the end of the loan period. Other loans may simply have a larger-than-usual payment, called a balloon payment, as the last payment. However, it may be helpful to note that the interest you pay is usually tax-deductible, meaning that you will get it back on your tax returns; if managed correctly, this "bonus" money can balance the impact of a large final payment on the loan.
In contrast, taking out a second mortgage on your house will give you the borrowed money all at once. Mortgages usually have fixed interest rates, which might be set slightly higher than the introductory rates on a home equity loan. On the bright side, though, the rates and payments on a second mortgage won't change, whereas the variable interest rates of a home equity loan may mean a payment that increases steadily over the years.
Shopping for a Home Equity Loan
Shopping for a home equity line of credit is like shopping for almost anything else: lots of different lenders provide lots of different choices. In order to make the choice that will best serve your needs, you should be prepared to obtain and compare quotes from many different lenders.
Most home equity loans have variable interest rates, which are determined by an index. When comparing home equity loans, you should know the index that each loan uses to determine your interest rate. Variable interest rates also have a couple of caps that are important for you to know, as they limit how far and how fast the interest rate can rise. The periodic cap limits how much the rate can change at one point in time, and the lifetime cap limits how much the rate can change over the life of the loan. It's also important to know whether the rate you've been quoted is a discounted introductory rate; if so, make sure you know how long the introductory period is, and what the rate will go up to when it's over.
If you are comparing a home equity line of credit to a second mortgage, understand the differences between them. Primarily, when comparing the costs of both, realize that the APR quoted to you on the second mortgage will be the only cost of the loan, whereas home equity loans also have account fees and other charges that are not built into the APR.
Costs to Consider
"For a true comparison of credit costs, compare other charges, such as points and closing costs, which will add to the cost of your home equity loan," the Federal Trade Commission (FTC) advises in their document, "Home Equity Credit Lines." The Truth in Lending Act requires lenders to be open about the terms and costs of a loan, but you may need to ask for this information up front if you are comparison-shopping before committing to any one lender.
o Application fee - In order to qualify for credit, you will have to submit an application to the lender. This application will allow the lender to check your credit score and your debt-to-income ratio, two important factors in determining your credit worthiness. Be aware that your application fee probably won't be returned to you if you fail to qualify for the loan.
o Appraisal fee - The lender will want to first appraise your house in order to determine the value of the property. From that appraised value, they will determine your line of credit. Appraisal fees can be considerable, and should be compared between lenders as one of the costs of the loan.
o Up-front charges - The lender may assess charges for setting up your account. These charges may vary considerably between lenders, so it's wise to compare these charges when deciding between multiple home equity loans.
o Closing costs - Just like when you bought your house, you may have to pay closing costs when you get a home equity loan. "These expenses can add substantially to the cost of your loan, especially if you ultimately borrow little from your credit line," the FTC states. Different lenders feature different closing costs, so any comparison of home equity loans should take these costs into consideration.
o Interest rates - Interest rates determine how much interest you will have to pay over the life of the loan. In order to compare multiple loans, you'll need to be able to see the "full picture" of what the loan will cost you, which includes the interest rates as well as the other fees and charges the loan will accrue.
o Account fees - Home equity lines often have continuing fees associated with the account, such as transaction fees, maintenance fees, or an annual membership fee. These fees will also vary between lenders, and should be compared as one of the costs of the loan.
Keep in mind that a home equity loan with low interest rates may make up the difference in other costs. For that reason, when shopping for the best deal it's a good idea to assess all costs associated with each loan.
Using Your Home Equity Line of Credit Wisely
"Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses." This statement, made by the Federal Reserve Board in their document, "When Your Home is on the Line: What You Should Know About Home Equity Lines of Credit," reminds us that home equity loans should not be taken lightly. After all, if something goes wrong and you cannot repay the loan according to your terms, you risk losing your most important possession of all: your home.
The FTC notes, "Because home equity loans give you relatively easy access to cash, you might find you borrow money more freely." The temptation to spend freely will be there, so it will be up to you to remind yourself that you risk losing your home if you let your spending get out of control. Borrow only what you need, and what you know that you can repay according to the terms of your loan. The equity on your home can provide relief in times of difficulty, but if you abuse that privilege, you risk losing the most valuable asset you have.


Article Source: http://EzineArticles.com/201605

Home Equity Loans - Basics

Home equity loans have become increasingly popular in the past few years. With property values rising, more people have realized the benefits. They allow you to borrow a certain amount of money, using your home's equity as collateral. Collateral is property offered to a lender as security for the loan. It gives the lender a guarantee that you will repay the debt, because if you did not, the lender could sell your property to get the money they lent you back. Equity is the difference between how much the home is currently worth and how much is owed on your mortgage. Home equity loans may seem complicated but they are actually quite simple. You just need to understand a few terms and concepts.
What is a Home Equity Loan?
A home equity loan is a second loan on your property that gives you money based on the amount of equity in your property. You can spend it on anything you want. Most people use it for home improvements, debt consolidation, college educations, vacations or car purchases. The interest that you pay on your home equity loan is typically tax deductible-and that is a huge benefit to this loan. Consult your tax advisor regarding the deductibility of home equity loan interest.
What's the difference between Home Equity Loans and Lines of Credit?
There are two ways a lender can loan you money based on your home's equity. First is a home equity loan which is based on a set loan amount, and second is a home equity line of credit, also known as a HELOC, which is a revolving line of credit. Both are referred to as second mortgages, because they are secured by your property, behind your first mortgage. With home equity loans, you apply for a set loan amount and pay it down based on a fixed interest rate. The maximum amount of money that can be borrowed is determined by several variables such as your credit history (FICO score), income, first mortgage and the recent appraised value of the collateral property.
How much can they loan to me?
The relationship between your loan amount and your home's appraised value is called the "loan-to-value" ratio, or "LTV". As LTVs increase, the interest rate of the loan in question usually increases as well. ("Home Equity FAQs"). The maximum amount the lender loans is partially determined by this ratio. The maximum LTV varies per lender. Note that if the LTV is too high, it could affect your approval, interest rate or conditions due to the increased risk for the lender.
Can I get an equity loan on my rental property?
Home equity loans can be taken out on primary residences, second homes, investment properties and vacation homes. However, each property has individual conditions for approval. It is also more difficult to qualify. This is due to the increased likelihood of defaulting. Underwriters prefer applicants with better credit and more assets than they do with applicants purchasing their primary residence.
What if my income is too difficult to determine?
If you have difficulty providing all the income documents necessary for the loan, you can apply under special loan programs such as stated income, "no doc" or "low-doc." Applicants who are self-employed or commission-based use them often. People who do not want to share their financial history and complicated tax returns with a lender fall into this category as well.
Can you refinance your mortgage with a home equity loan?
If the interest rate or mortgage payment on any property is too high, a home equity loan is also a good way to refinance your existing mortgage loan, take some additional cash and make one easy monthly payment ("Home Equity FAQs"). Refinancing is the process of adding a new first mortgage to replace an existing first mortgage and any other liens you may have. There are two ways to refinance: no cash-out and cash back. No Cash-Out refinancing reduces your monthly mortgage payment and the remaining term of your loan. It can help you save thousands of dollars in interest. Cash back refinancing allows you to borrow money in excess of what you currently owed on your mortgage. You still reduce your interest rate and term, but you also get a hold of the money you earned when your property's value increased. Cash back refinancing is a smart decision if you have future expenses that will need financing. If you need a new car, you could take an additional $30,000 and add that amount to your loan. The interest rates will likely be lower than your credit cards or car loan, and again, the interest you pay can be tax-deductible.
Refinancing with a home equity loan is similar to refinancing with a traditional mortgage. The main difference is that equity loans are typically repaid in a shorter time than first mortgages. Traditional mortgages are usually repaid over 30 years. Equity loans often have a 15-year repayment period, although it might be as short as five or as long as 30 years ("Home Equity Credit Lines").
Now that you are familiar with some basic home equity loan terms and concepts, the process should seem straightforward. When you need money, obtaining a home equity loan not only simplifies your life, it also saves you money. It gives you piece of mind through the fixed low interest rate and low monthly payments. The process only takes several days and the funds are transferred into your bank account upon the loan's closing. It is as easy as pie.


Article Source: http://EzineArticles.com/206523

Home Equity Loans - Encash the Equity in Your Home

Equity in your home can do wonders for you. Yes, it is true. If you are a homeowner with a good credit history, you can make use of the equity in your home to get the money you need.
Home equity loans provide borrowers with a solution to release the equity in their home, which is usually available upon sale of the house. You need not sell your home to get the money you need. Home equity loan will be secured on the borrower’s home, without affecting his or her existing mortgage. This is also known as second mortgage charge.
A borrower can use a home equity loan for several purposes. It could be for financing college education or going out for a luxurious holiday. Home equity loans can be used for consolidating debts. It solely depends on the borrower, how he plans to use the loan.
Home equity loan [http://www.ukfinanceworld.co.uk/uk_home_equity.html] is also referred to as “Equity Release Scheme” as it helps in releasing equity from the home. Equity release can be categorized into three areas: -
  • Loans and mortgage – With a home equity loan, one can borrow a percentage of his or her home’s value. A borrower can use this loan for any purpose he or she desires. Using a home equity loan for making improvements at home can be a good idea. These improvements may increase the value of the home. Further equity will be helpful in refinancing loan.



  • Home Income Plans – This is used to generate monthly income. The loan will usually be invested in an annuity-based investment that pays your income plus the interest on the loan.



  • Home Reversion Schemes – If you wish to remain in your home and need to supplement your regular income, you can consider a home reversion scheme.

  • Home equity loans can be useful for the elderly people too. They can release the equity in their home and can use the money to add-on to their pension. Home equity loans allow the elderly people to borrow the money at relatively low rate of interest and manageable monthly payments.
    With a home equity loan, a borrower gets the option to take the loan in lump sum or through credit line. Under the lump sum scheme, the entire loan amount will be given to the borrower at once and interest becomes payable on it immediately. A credit line or a line of credit option is popularly known as HELOC (Home Equity Line Of Credit). HELOC provides borrowers with the choice to borrow funds in the manner that they choose, up to a maximum credit limit for which the borrower has qualified. The most preferable feature of HELOC is that the interest is charged only on the amount of loan used and not on the entire loan amount.
    The biggest advantage of a home equity loan is, that the interest on it is tax deductible. Another important advantage of taking a home equity loan is that it offers a relatively fast and easy way to get the cash you need at a very low interest. Low interest rate helps in controlling the cost of loan. Home equity loan is a way of freeing up the cash from your home, without any of the hassles or costs associated with moving.
    You need to know few things before you apply for a home equity loan. Find out whether you have enough equity in your home to apply for the loan. In addition to this, more you know about applying for and negotiating for the home equity loan, the better deal you will be able to get.
    To avail the benefits of home equity loan, you should firstly talk to your current mortgage company about the options available to you as a borrower. Nevertheless, do not stop there; you need to make some efforts to get the best deal. Search for various lenders such as banks and online lenders who offer home equity loan and collect loan quotes from them. Compare the loan quotes and choose the one that matches your expectations to the best.


    Article Source: http://EzineArticles.com/106610

    No Equity Loans and HELOCs For Debt Consolidation

    Do you need a Home Equity Loan or HELOC (home equity line of credit) but have no equity in your home? A No equity loan or no equity HELOC sometimes referred to as "no equity second mortgages" or "freedom loans" are loan products that allow homeowners to take cash out of their homes, even if, they have no equity in the house.
    Home equity is the difference between what your home is worth and how much you own on your mortgage loan. For example, if your mortgage loan is $100,000 but your home is worth $95,000 - this means that you have no equity in your home. If you sold your house today, you will lose $5000. To get a HELOC or home equity loan, you need a no equity loan.
    No equity loans products usually offer between $30,000 to $50,000 in cash. Using the example above, you can get a 125% LTV No Equity Loan, which allows you to get $30,000. The math is as follows: (($100000 * 125%) - $95000).
    Consumers get no equity loans for various reasons, the most prevalent being for credit card debt consolidation, home improvement or real estate investments.
    Lenders, who offer no equity loans require their customers to have a 670 FICO credit score or above. If you have a FICO credit score below 670, it doesn't mean that you cannot find a subprime mortgage lender, who offers no equity loans.
    No equity loans usually have higher interest rates than traditional home equity loans. This should not deter you from getting a loan, if the cash is crucial to your finances and you believe your home's value will appreciate. In most cases, the interest rate on your no equity loan will be much lower than the interst rate on your credit cards so you will still save money on your monthly bill payments.
    Some experts warn consumers about no equity loan but the fact is consumers continue to take advantage of this product because there is a strong need for cash and they are optimistic about their home's value.


    Article Source: http://EzineArticles.com/410561