Home equity loans are considered as a powerful instrument of getting a loan at lower interest rate when compared to other loan options. They are basically secured loans taken by the borrowers against the equity in their home. The home has to be offered as security by the borrowers to the loan providers. Equity in the home is equal to current market value of the home minus the debts of the borrower. If the market price of the home increases, the equity will increase and if the debt on the homeowner is way below than market value of the home, then also the equity increases.
The amount a homeowner can borrow depends on the equity of the home. Lenders find out the market value of the home put as security and see the outstanding liabilities on it and then provide a difference of the two called net worth as home equity loans. We can come across several financial requirements such as home improvements, education, meeting medical expenses or consolidation of the debts by taking these loans.
Types of Home Equity Loans:
Home equity loans are basically secured loans taken by the borrowers against the equity in their home and are considered as a powerful instrument of availing loan at lower interest rate when compared to other loan options. The maximum repayment period is of 30 years.
The amount a homeowner can borrow depends on the equity of the home. Lenders find out the market value of the home put as security and see the outstanding liabilities on it and then provide a difference of the two called net worth as home equity loans. We can come across several financial requirements such as home improvements, education, meeting medical expenses or consolidation of the debts by taking these loans.
Types of Home Equity Loans:
- Closed Home Equity Loan: It is the most popular type of home equity loan. In this type the agreed loan amount is provided in lump sum to you. The loan amount has to be repaid in fixed interest rate for the particular period. The maximum repayment period is of 30 years. However, low repayment schedule is preferred since it will lower your expenditure for the long term interest payment.
- Home Equity Line Of Credit: The home equity line of credit (HELOC) loan is used if you require money constantly. The lenders transfer the agreed loan amount of the loan to an account and you can get the money when you require it. The major benefit is the flexibility and the user is free to get the money at any time during the given period. You have to repay the interest for only the amount you have withdrawn from the account. However, you have to close the account within the given period of time.
- Home Equity Refinancing: This is the other type of home equity loan. It is a first mortgage loan whereas home equity closed loan and HELOC are second mortgages and it is usually used when you do not have much equity in the home.
Home equity loans are basically secured loans taken by the borrowers against the equity in their home and are considered as a powerful instrument of availing loan at lower interest rate when compared to other loan options. The maximum repayment period is of 30 years.
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