What is A Home Equity Loan?
Arm Loans; What is A Home Equity Loan?
By: Ben Anton
A home equity loan is a one-time lump sum credit a homeowner can
acquire by placing their residence as the guarantee for payment.
This type of credit is most appealing to consumers who may have
poor credit standing, but need a large amount of money. Aside
from these benefits, the borrower gains a lower interest rate
and the possibility of tax-deductible interest.
Why do lenders offer large amounts and charge lower interest
rates? Because lenders understand that most homeowner debtors
diligently pay their loans rather than risk losing their homes.
Besides, the borrower cannot tuck the house away or conceal it.
The three biggest advantages a home equity loan offers are:
Large Loan Amount
The borrower can obtain as much as 85% appraised value of their
home, minus the unpaid mortgage payments owed on the first
mortgage. However, there are other factors as well that the
lender will assess, such as the borrowers' credit standing,
monthly income, or ability to pay and state of unsettled loans.
If the borrowers' credit record is spotty, the loan will
necessarily be smaller.
Low Fixed Interest Rate & Tax-deductible .
This type of loan has a lower interest rate, in comparison to
personal or credit cards loans. Additionally, a fixed interest
rate assures you that the payment remains constant right until
the end of the entire loan. This makes it easy to work the
monthly payments into your budget. Another advantage a borrower
can claim are tax deductions on the interest of the loan for as
much as $100,000.00. However, do not assume that the advertised
APR (annual percentage rate) is the real rate. Ask and shop
around.
Ease of Use
The one-time release of the entire loan will enable the borrower
to consolidate existing debts, pay for home improvements, or use
the amount for emergencies, or any big-ticket items.
The two real disadvantages are:
Home Foreclosure
If you default in paying the principal and interest fees for the
loan, you will lose your home. This is certainly not the ideal
type of loan for a couple who might use their retirement money
to bail themselves out of the difficulty, or first time
homeowners, who are inexperienced in handling finances. That is
why, when you negotiate with the lender, you should ask about
the penalties attached for late payments, as well as the
conditions in defaulting payments and have all your agreements
documented.
Long Term Repayment Period
The convenience of repaying the loan, which can vary from a 15
to 30 years period, is ultimately more expensive, because you
are taking longer to pay. Another negative possibility is, if
the real estate market bottoms out, you will be paying for a
house which is worth a lot less. This could spell disaster
especially if you are intent on selling the house. On the other
hand, you are required to pay the remaining loan balance if you
put the house up for sale.
Given what you now know about home equity loan , become a more
prudent borrower. Carefully consider why you need the loan and
if you can comfortably meet the monthly payments. Then educate
yourself on the options that will best serve your financial
needs and still leave you with your home.
About the author:
http://www.mortgagelendingsite.com/arm-loans.htm Ben Anton writes for Labworks Design, located in Portland, OR. Labworks, a national web design firm, specializes in media development, and search engine marketing.
By: Ben Anton
A home equity loan is a one-time lump sum credit a homeowner can
acquire by placing their residence as the guarantee for payment.
This type of credit is most appealing to consumers who may have
poor credit standing, but need a large amount of money. Aside
from these benefits, the borrower gains a lower interest rate
and the possibility of tax-deductible interest.
Why do lenders offer large amounts and charge lower interest
rates? Because lenders understand that most homeowner debtors
diligently pay their loans rather than risk losing their homes.
Besides, the borrower cannot tuck the house away or conceal it.
The three biggest advantages a home equity loan offers are:
Large Loan Amount
The borrower can obtain as much as 85% appraised value of their
home, minus the unpaid mortgage payments owed on the first
mortgage. However, there are other factors as well that the
lender will assess, such as the borrowers' credit standing,
monthly income, or ability to pay and state of unsettled loans.
If the borrowers' credit record is spotty, the loan will
necessarily be smaller.
Low Fixed Interest Rate & Tax-deductible .
This type of loan has a lower interest rate, in comparison to
personal or credit cards loans. Additionally, a fixed interest
rate assures you that the payment remains constant right until
the end of the entire loan. This makes it easy to work the
monthly payments into your budget. Another advantage a borrower
can claim are tax deductions on the interest of the loan for as
much as $100,000.00. However, do not assume that the advertised
APR (annual percentage rate) is the real rate. Ask and shop
around.
Ease of Use
The one-time release of the entire loan will enable the borrower
to consolidate existing debts, pay for home improvements, or use
the amount for emergencies, or any big-ticket items.
The two real disadvantages are:
Home Foreclosure
If you default in paying the principal and interest fees for the
loan, you will lose your home. This is certainly not the ideal
type of loan for a couple who might use their retirement money
to bail themselves out of the difficulty, or first time
homeowners, who are inexperienced in handling finances. That is
why, when you negotiate with the lender, you should ask about
the penalties attached for late payments, as well as the
conditions in defaulting payments and have all your agreements
documented.
Long Term Repayment Period
The convenience of repaying the loan, which can vary from a 15
to 30 years period, is ultimately more expensive, because you
are taking longer to pay. Another negative possibility is, if
the real estate market bottoms out, you will be paying for a
house which is worth a lot less. This could spell disaster
especially if you are intent on selling the house. On the other
hand, you are required to pay the remaining loan balance if you
put the house up for sale.
Given what you now know about home equity loan , become a more
prudent borrower. Carefully consider why you need the loan and
if you can comfortably meet the monthly payments. Then educate
yourself on the options that will best serve your financial
needs and still leave you with your home.
About the author:
http://www.mortgagelendingsite.com/arm-loans.htm Ben Anton writes for Labworks Design, located in Portland, OR. Labworks, a national web design firm, specializes in media development, and search engine marketing.
posted by Tim at 9:46 PM
0 Comments:
Post a Comment
<< Home