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How To Get A Good Home Equity Loan
At a time when more and more Americans are finding themselves in debt due to purchases using high interest credit cards, home equity loans are being offered as a lower-cost means to get out of debt, or in some cases access to equity one’s home to cover out of the ordinary expenses.
Home equity loans, just like any other type of secured loan that someone might get from a bank or credit union, are a type of loan where the person borrowing money uses the existing equity in their home and property as collateral to secure the loan. Unlike a second mortgage which usually specifies what the money can be used for (like home repair), the money obtained through home equity loans may be used for anything you wish such as college education tuition, family vacations, medical expenses, or paying off high-interest debt such as credit card balances Once in place, the home equity loan functions legally like a secondary mortgage or lien against the property should it be sold. It is expected that the borrower will pay off the loan in full from the proceeds of the sale of the property if it is sold prior to the amount of time the loan is set for.
In general, there are two types of home-equity loan. The first kind is called a “closed and” loan which usually exists for a fixed amount of time for repayment such as 15 or 30 years at a fixed rate of interest. Although somewhat rarer, there are also variable rate home equity loans whose rate of interest increases each time the prime lending rate increases. The second type of law is known as “an open-ended loan” or a home-equity line of credit. This is a revolving line of credit which allows the borrower to borrow up to an amount which equals the maximum of equity credit (a sum to be determined at the time the loan is taken out) any time you need it. There may be no fixed time for this type of loan to be repaid, and like a credit card, pay back can last for as long as there is an unpaid balance.
Like a traditional loan, there are usually fees involved which include costs for items like appraisal of the property, closing costs, property inspection, originator fees, title fees, stamp duties, arrangement fees, closing fees, early pay-off among other costs. Surveyor and conveyor or valuation fees may also be included in loans, or sometimes may be waived. The survey or conveyor and valuation costs can often be reduced, provided that you find your own licensed surveyor to inspect the property. The title charges in secondary mortgages or equity loans are often fees for renewing the title information which indicates whether or not there are existing liens against the property and who the authentic owner of record is. Few loans exist that will not have fees of some sort, so make sure you read all the relevant material provided by the lender and ask several questions about the amounts and kinds of fees that are charged.
Home equity loans traditionally have a much lower interest rate than a credit card (for example, 6 1/2% for home equity loan versus up to 34% for credit card). Remember that this type of loan must be paid off regularly on time just like any other type of loan to avoid late payments and possible foreclosure on the property offered as collateral.