More Information on Home Equity Loans

A home equity loan works similar to a credit card or revolving line of credit. Your bank provides you with a checkbook that is used to draw against your line of credit. You can write checks for major purchases, such as a car or medical expenses, or just draw out some cash and go on vacation.

Advantages of obtaining a home equity loan in this manner include: (1) a home equity loan gives you the flexibility to borrow only as much money as you need at the time and (2) a home equity loan has the potential to receive a lower interest rate* versus a second mortgage loan. Please consult your Loan Advisor for more detailed information about a home equity loan. Home equity loans typically involve variable rather than fixed interest rates. The variable rate is based on publicly available index (such as the prime rate or a U.S. Treasury bill rate). Thus, as the index changes, the Home equity loan interest rate you pay may increase or decrease. The effective rate of interest you pay on your home equity loan over the course of the loan may be higher or lower if you had obtained a fixed rate second mortgage. Thus, you should carefully consider the risks and rewards of a home equity loan.

As with a second mortgage, with a home equity loan you expose yourself to the risk of foreclosure if you should run into any unexpected financial problems, such as a job loss, and are unable to repay your first mortgage or home equity loan. If you arte interested in learning more about a home equity loan that may be right for you please complete our no obligation home equity loan request for information form.

Equity, put simply, is the amount of your home value that you own. It's the difference between the property's present market value and the outstanding loan balance and any liens. Many times people take out a loan against this equity.

Let's say your home was worth $80,000 when you bought it. You've paid off $10,000 of the loan used to buy your home, plus your house has appreciated in value $20,000. If your home now has a market value of $100,000 and an outstanding loan balance of $70,000, you'd have $30,000 in equity. Loans against equity have become increasingly popular because of several factors including: (1) steadily rising home values have increased the equity in people's homes; (2) the interest rate on loans borrowed against a home is usually lower than other forms of personal loans and; (3) the interest payments made on a home equity loan are tax deductible subject to specific limitations. Mortgage Loans Online always suggests consulting with a tax professional to determine the applicability of any tax deduction to a borrower's individual circumstance.

Home equity loans usually come in two varieties: the traditional second mortgage and a home equity line of credit.

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