Home Equity Loan

A Home Equity Loan is the money that you get as a loan based on the value of your own home. In other words the money that you've invested in purchasing that lovely home can be leveraged to buying an automobile, paying off a student loan or any other loans. Besides being easily available at attractive rates, it's also a loan which is interest deductible.

Some of the benefits of Home Equity Loans are: 

Fixed payment and rate  

5, 10 and 15 year fully amortizing loan terms available  

Minimum loan amount as low as $10,000  

Borrow up to 100% of the value of your home  

Loan amounts up to $200,000.  

Home Equity Loans can be used to pay off the other higher interest rate loans like credit cards, loans etc in addition to save some money as a way of income tax deductions that are available on payment interest rates. In a typical home equity loan, a specific amount of money is loaned in a lump sum for a definite period of time, which is usually for a 15 year or a 30 year loan. A standard home equity loan is also known as a Second Mortgage Installment Loan. With home equity loans, you can make some profit on the capital you invested in your home without selling the home.  

Steps to get a Home Equity Loan: 

In order to get a Home Equity Loan there some issues that you should explore. The first step consists of analyzing these issues as they will determine the amount of money you take as a loan and the tenure etc.. These issues are:  

Ensure that the home that you are offering as collateral is satisfactorily valued.  

If you have any relationship with a financial institution, you should contact them for this loan also. They may offer you preferential treatment rather than a new institution that will start a relationship with you. 

If you prefer to deal with a new institution ask your local real estate mortgage broker to provide you with lender recommendations.  

While factors like loan to value ratio, credit history etc will determine if you could have a fixed or floating rate loan, sometimes you may have the option, so make the right decision.  

Decide if you need The Standard Home Equity Loan, Home Equity Line Of Credit or Cash-Out Refinancing.  

The Standard Home Equity Loan or Term Loan is like a traditional loan and works like a Second Mortgage Loan. You will get a lump sum amount at a fixed rate of interest that will be repayable in monthly installments, each of certain fixed amounts.  

Three types of Equity Loans you could take: 

Home Equity Line of Credit works like a standard line of credit in which you are granted loan but you do not get full amount, you get the amount that you could withdraw the amount as and when you want it. 

With Cash out Refinancing, you get a sum of money that exceeds the existing mortgage that you owe to the lender; you pay in full the existing debt and keep anything that is left for any other purpose.  

Applying for a home equity loan: 

The loan process takes some time and isn't as quick as with other loans. Typically you will get a loan in the period of around three weeks after applying.  

When you apply for the loan, the lender will take into consideration the following information:  

Your Credit History and Credit Report  

Debt-to-Income Ratio  

Your LTV Ratio (Loan To Value Ratio)  

Employment History 

So keep all this information in good stead such that you will have no issues with any lender when you applied for the loan. 

The process of loan consists of putting the application and some documents that will be submitted after based on the check list of lender. After that the Home is valued by an independent Assuror, who will put a value to your home. 

The next step is that the lender will request your Credit History etc after asking for your permission. The lender will make an assessment and will draft the Loan Document. After this is drafted, you can go through it, scrutinize and sign it. The loan will then be sent to your bank account! Now you can make any use of this money.