Home Equity Loan Comparison – An Overview of Home Equity Loans

June 11th, 2021 by dayat No comments »

In an economy where housing prices are increasing and employment rates are stationary, the use of an equity loan is often the choice of homeowners who need extra funds. Such loans are sometimes known as second mortgages or even third mortgages and, if you have enough equity in your home, are relatively easy to get. Before choosing a lender, the homeowner considering such a loan should submit an application to several lenders and then do a home equity loan comparison to find the best deal. Today, with a struggling economy, this type of loan may be difficult to get, and the choices of terms may be limited.

What Does the Term “Equity” mean?

Home equity can be defined as the cash-in-pocket worth of the home. To calculate this amount, the estimated market price of the home less the amount of money still owed on the home is considered the equity. At the time of purchase, the equity technically is zero. If you make a down payment, that amount reduces the principal and gives you some ownership in the home. When you make your mortgage payment each month, a tiny portion of the payment is applied against the principal. As the amount owed decreases, the equity is increased by a like amount

As market prices of homes in the neighborhood increase, the value of your home is assumed to have increased as well. This is the second way in which home market values can be improved. If you were to sell the home at the improved price and pay off the existing mortgage, you would receive the difference, that is the equity, in the form of cash..

Your home’s equity will be increased if the value of your home improves because you have carried out home improvement projects to the building. Adding a room, upgrading the kitchen or bathroom or adding significant energy saving features typically increases the market value, and thus the assumed equity.

Home equity loan Proceeds Usage

An equity loan on your home makes sense for the borrower when there is need of significant cash at a low interest rate. Because the proceeds of the loan are secured by the home’s value, it typically costs much less than credit card debt. Sometimes the homeowner will pay off credit cards and other loans with a high interest rate by taking out a home loan.

Another common use for the proceeds of a second mortgage is the cost of college for you or for family members. An equity loan may be needed for catastrophic medical expenses not covered by insurance plans. Home owners sometimes obtain home equity loan funds in order to pay for major improvements or repairs on the home, especially those that increase its value.

What Borrowers and Lenders Look For in a Loan

Lenders want to know that you can repay the money that you borrow on your home’s equity. The amount of the loan, the length of the repayment period, your credit score and the interest rate all affect the amount of monthly repayment on the loan. The lender usually looks at the current market value and the amount of equity you have accrued before setting the amount they are prepared to make available in the form of a loan.

Great Benefits of a 125 Home Equity Loan

March 11th, 2021 by dayat No comments »

Do you know what a 125 home equity loan is? I’m sure you know all about traditional home equity loans where you can borrow money using the equity in your home as collateral for the loan. These secured loans provide many people with cash for a wide range of uses. Of course there are other types of equity loans besides the traditional equity loan, and the 125 home equity loan is one of these options. This type of loan lets you get even more cash than usual based on the available equity in your home.

Let me first define what equity is. Your home’s equity is quite simply the difference in what you owe the bank still and the value of your home. For example, if your home is valued at $300,000 and you still owe $150,000 to the mortgage company then you have $150,000 in equity. One nice benefit is that in a rising real estate market you gain additional equity simply through the rise in your homes value.

Traditional Home Equity Loans vs. 125 Home Equity Loans
In a traditional home equity loan you are offered a loan that does not exceed the amount of equity present in your home. So, if you have $25,000 in equity you’re able to get a loan for $25,000. This loan can be used to pay for anything you want from home improvements to education or even a vacation if you choose.

The difference between the traditional secured loan and a 125 home loan is in the amount you can borrow. With a 125 loan you can borrow up to 125% of the present value in your home. In this case if you have $25,000 in your home you would be offered a loan of $31,250. In the past many lenders would shy away from this type of loan since part of it is unsecured and increases their risk. These days however more and more lenders, especially online lenders are offering this kind of partially unsecured loan. If you’re thinking of applying for this type of loan you should know that a high credit score will help you greatly in getting approved.

125 Home Equity Loan Warning
The 125 secured loan is especially suited for those who need access to a large amount of money. If you are thinking of using the money to start a business or take on a large home improvement project a 125 loan could meet your needs quite well.

Keep in mind that as long as home values continue to rise or at least stay stagnant you’re in little danger from this type of loan. However, if your home value declines your equity will decline as well and you could actually end up owing more than your home is worth.

It really depends on your needs and circumstances to determine how much sense a 125 home equity loan makes for you. As I said previously, it can be very useful for those starting a business, particularly if you expect the business to have good cash flow. It is also useful for large home improvements since they are likely to increase your home’s value and also your equity. Just be careful that you don’t overextend yourself when taking any type of home equity loan.