Home equity loans are taken where the borrower uses the home as collateral. These loans may be useful for home repair, medical bills or even for education. Most home equity loans require good to excellent credit history. These come in two forms, closed end and open end.
Both of the above types are considered as second mortgages as they are secured against the value of the property just like any mortgages of traditional type. Home equity loans are usually (but not essentially) for a shorter term than first mortgages. In United States, Home equity loans interest can be deducted on one's personal income taxes.
Closed end loans
The borrower will receive a lump sum on sanction but cannot borrow further. The amount of money that can be borrowed are normally depends upon certain variables like appraisal value of the collateral, credit history of the borrower, income source of the borrower among others.
Normally, the borrower can take up to 100% of the appraised value of the home less any liens, although there are lenders that may go above 100% when doing over-equity loans. However, state law governs in this matter. Closed end loans have fixed rates normally and generally amortized for periods up to 15 years.
Some offer reduced amortization and at the end of the term a balloon payment becomes due. These larger payments may be avoided by paying minimum payment or by refinancing the loan.
Open end home equity loan
Revolving credit loan of this nature is also referred to as a home equity credit loan where the borrower has the option to choose when and how often to borrow against the equity in the property and the lender setting a initial limit to the credit line on the basis of some criteria as mentioned above for closed end home equity loans.
Similar to closed end equity loans, it is possible to borrow up to 100% of the value of the home less any lien. These line of credit are normally available up to 30 years at a variable interest rate. The minimum monthly payment may be as low as only the due interest rate and the interest rate is based on the prime rate plus a margin.
Fees
Following are the list of possible fees that may apply to home equity loan: Appraisal fees, originator fees, stamp duty, title fees, arrangement fees, closing fees, early pay-off, and other costs are added in loans. Surveyor and valuation fees may also apply to loans, but some may get waved. The survey and valuation costs can also be reduced provided the borrower provides his own licensed surveyor to inspect the property under consideration.
Title charges in secondary mortgages or equity loans are fees for renewing the title information. The borrower should read and ask questions about the fees being charged to make himself sure about the fees since all these loans have some sort of fees tagged
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Balance of a rep
By: joe | 30-07-2008
djdin a forclosure you hypothetically you owe the bank 150 thousand and the the property goes into auction. at auction the property sells for 100 thousand. as the original lean holder are you responsible for the balance of what was borrowed. that is if you don't file for bankruptcy
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By: haymonroe | 30-07-2008
Where do you put the fresh air kit, by your wood stove and can you put it in your hearth where your stove sits on or how far away from the wood stove in a manufactured home. Is it alright to put it in the floor?
New mortgage
By: gloria | 30-07-2008
hi david, im a parapaligic i've owned my home for 26 yrs my husband died in november, my house is not handicapped accesable, ive put my home up for sale. i owe 120.000 i want to purchase a house for 205.000 my home now is on the market for 205.000 my mortgage and taxes are included.i did have a slight credit problem 10 yrs ago. i took out a loan to repay my debt. my bills are paid on time .will that affect my chances for a new mortgage for the new house.. thank you. kim
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By: jim k | 30-07-2008
how much equity in your home in california can you keep?
Pay off mortgage or not
By: chela | 30-07-2008
HNello, I'm 33years old and my husband is 34. We both bring home about 110k a year. We do not have children and plan not to have any. We have a money market account, long term cd, no debt and owe 145,000 on our existing mortgage. We plan to stay in this house. I've heard many of my colleagues at work that paying off your house early leaves no room for tax breaks later on in life. What is your opinion? If we continue paying our principal down, we will be mortgage free by 2014.
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