The equity of a house can at times come to the rescue of the owner. Without losing ownership, he can advantage from the equity of his home by taking home equity loan to meet urgent financial requirements.
Home Equity Loans are based on the equity of the home. In these loans the equity of the home is accepted as collateral. So a homeowner is only eligible for home equity loans. The equity of a home is the market value of the home minus the outstanding mortgages against it. So if the market value of a home is £200000 and the outstanding mortgages amount to £70000, then the homeowner has £130000 as the equity to get a loan.
Home owners can get these loans in two forms, as home equity loans and as home equity line of credit popularly known as HELOC. In home equity loans, the entire loan amount is given to the borrower as a lump sum. Interest starts accruing on the loan amount from the day it is disbursed.
However, in HELOC, borrowers can withdraw money according to his needs up to a maximum limit he is entitled to. The scheme acts like a credit card. Here interest is charged only on the amount used and not the entire amount.
In home equity loans, the borrower is generally entitled to get only 80% of the equity of the home. There are, however, borrowers who give loan amounts up to 125% of the equity. With home equity loans one can borrow money in the range of £5000 to £75,000. Repayment terms ranges between 5 to 25 years.
Home equity loans offer cash relatively fast and at low interest rates which control the cost of the loan. Another big advantage of these loans is that the interest is tax deductible.
Before taking a home equity loan the borrower should find out the equity of his home. For getting deals suitable to him, he should do proper research both offline and online. He should not rush in to grab whatever is nearer to his hand.
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Frequently Asked Questions
Closing cost
By: googooblue | 20-08-2008
We got a home loan but we don't think we can pay the closing cost. What will happen if we can't pay?
I just listed my house with a realtor but now have ...
By: J Gallagher | 21-07-2008
I just listed my house with a realtor but now have decided to re-finance FHA, are there terms that you have to wait after listing your home on an FHA loan like there is on a conventional loan?
Refinanceing my home I have discovered that a ...
By: driseball | 02-07-2008
Refinanceing my home I have discovered that a fictious phone number was used to secure my loan, not working at the time or now, a phone number was used in order to qualify me for the loan, does that constitude fraud, and whom do I contact to obtain information about this ? A fictious work number was used !!
How old to i have to be to get a business loan?
By: billym | 10-01-2008
how old to i have to be to get a business loan?
I filed for bankruptcy on 4/5/07 and was ...
By: mkobran | 03-01-2008
I filed for bankruptcy on 4/5/07 and was discharged on 10/2/07. Today, I received a postcard from my Trustee demanding that I provide him with a copy of my 2007 income tax return once filed and turn over any refund check directly to him. Can he do this?
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