Heleigh Bostwick asked:




If you are thinking about undertaking a major home improvement project or debt consolidation for those mounting credit card bills, then perhaps it’s time to consider a home equity loan. While the two most common home equity loans are the home equity loan and the home equity line of credit (HELOC), there are a couple of other mortgage loan options as well including the 125% loan and cash-out refinancing. When comparing home equity loans several factors should be considered such as whether it’s a fixed or variable interest rate, if you have good or bad credit, which affects the interest rate of the loan, how much equity you have in your home and how much money you need and for what purpose, and which loan offers monthly payments you can afford.

What is a Home Equity Loan?

A home equity loan allows a homeowner to obtain cash in the form of a loan or line of credit in return for the equity built up in their home. Equity refers to the difference between the original loan amount on the mortgage and what the home is currently worth. For example if a home with an original mortgage loan of $100,000 is now worth $150,000 the amount of equity in the home is equivalent to $50,000.

Homeowners can benefit from second mortgages in several ways. Home equity loans generally have a lower interest rate than other types of loans and since most homeowners already have some equity built into their homes, they are a convenient and easy source of cash. There are also tax advantages in that the interest is tax deductible unlike credit card or loan interest.

What Kinds of Home Equity Loans are Available?

A home equity line of credit (HELOC) or home line of credit is a variable rate loan. Monthly payments vary according to the interest rate, which corresponds to the prime rate set by the Federal Reserve Bank. With a HELOC, homeowners are pre-approved for a specific amount of money and use the loan like a line of credit, withdrawing cash as it is needed. Interest rates (and monthly payments) often start off low but eventually end up rising.

In contrast, a home equity loan offers homeowners a lump sum payment with a fixed interest rate and loan terms ranging from 5 to 15 years. Homeowners pay the same amount of money every month for the duration of the loan. Both are considered second mortgages, and as with a conventional mortgage loan, both home equity loans and home equity lines of credit have closing costs associated with them. According to Don Taylor, PhD, CFA, CFP, a columnist at Bankrate.com, if you need money for a big-ticket item or single home improvement project go with a home equity loan. If you need money on a continuous basis and don’t mind the fluctuating interest rates, go with a HELOC.

The 125% loan is a 2nd mortgage loan option in which homeowners can borrow up to 125% of home’s value. For example, if your home is worth $100,000 and your first mortgage is $95,000, you can borrow $30,000, for a total of $125,000. The total of the first and second mortgages combined cannot exceed the appraised value of the home however. A 125% loan is useful when a homeowner needs more cash than can be obtained through a conventional home equity loan. Cash-out refinancing refers to refinancing your home at a lower interest rate (either a fixed or variable rate) and getting cash out, providing cash to a homeowner to pay for home improvement projects or pay down credit card bills.

John

S Kung asked:




Have you been trying to get an approval for a loan with no success? If you are interested in getting a low interest loan then you should consider using the equity in your home to get the loan. Second mortgage and home equity loans are perfect for people who are looking to get low interest rate loans. These loans both have low interest rates that are over the period of a few years.

People with a bad credit rating often find it very difficult to get approval for loans. A home equity loan can help you get that loan that you have been hoping to get. These are secured loans that use the collateral in your home to secure the loans. These equity loans are quite common for people who are looking for a source of finding.

If you are interested in trying to consolidate your high interest debt, you should consider getting a second mortgage loan. These loans are perfect for people who are interested in putting all of their high interest debts into a single low monthly payments loan. You should make sure that you can afford to get the loan before you apply because lenders use your home as collateral. If you fail to repay the loan, the lenders can foreclose your home.

People who are interested in seeking out a second mortgage home equity loan should start their search online. Due to the vast reach of the internet, you can find a variety of different lenders who are willing to give these loans.

Lloyd

Maria Ny asked:




Many realtors offer basic advice on getting your home ready to sell like making your house like a blank canvas that allows buyers to view it as their potential home by cleaning, removing clutter, and putting away family photos and other items that personalize your home to you and your family in storage.

It is normally not advisable to refinance your mortgage, get a home improvement loan, construction loan or a home equity loan (second mortgage) for anything expensive such as remodeling. However, sometimes it you need a loan to help with necessary repairs and upgrades especially if the market is particularly competitive. “These days, regardless of what your budget is, fixing up your home for sale is even more imperative in a transitional market,” says Clay Hinrichs, a Realtor with Prudential California Realty in Studio City.

When budgeting for improving the curb appeal of your home, keep the following in mind: the first priority is to clean, landscape and paint. Then, with what’s left, take care of any necessary repairs. “Update and replace whatever appliances you can–microwave, refrigerator, dishwasher–and replace or refinish old kitchen cabinets,” advises Jimmy Wood, a Realtor with ZipRealty in Los Angeles.

Most people don’t like the textured “popcorn” ceiling that is so common with houses built in the 1960s and 1970s. If yours has this, it may be a good idea to have it removed. That ceiling may be why your house is still on the market. Before having it removed, test it for asbestos. It will be more expensive to remove textured ceilings with asbestos because a licensed professional is required for the job, but it will make your house more marketable.

If it turns out you need a loan, mortgage refinancing from your fixed mortgage rate to an adjustable mortgage rate (ARM) with an initial low interest or getting a small 2nd mortgage may help you cash out on your home equity to make the repairs without putting too much strain on your budget.

Vanessa

Josh Ramos asked:




If you’re wondering about home equity loans, the basics are pretty simple. These kinds of loans are secured by the equity in your house. In other words, if you have paid off at least a part of your home mortgage, then you have a certain percentage of ownership in your home.

You can borrow against this ownership and use the funds for a variety of reasons. Home equity loans were originally meant to be used for financing home improvements. However, they are now being used in many more situations such as paying off high interest credit card debt or financing a new car purchase.

Of course, borrowing against your house to buy a new car is not exactly the smartest thing you could with the funds. Paying off high interest debt, however, would be a wiser use of your funds.

Even so, it is important to examine your situation thoroughly before you make the commitment involved with a home equity loan. After all, if your current debt situation is a result of your lack of self control, you need to address the spending habits.

Otherwise, the home equity loan will be a temporary escape, but in the long run it will end up being just another loan. Always remember that these kinds of loans are still debt!

If you can make the commitment to control your spending, however, the home equity loans can be a valuable tool to help you get out of debt. Another point to consider is that with a home equity line of credit, the funds do not have to be spent immediately. Just like with a credit card, you can use the credit whenever you need it. If you don’t use it, you will not owe anything.

You may want to consider applying for a home equity line of credit even if you don’t see the immediate need for it. If you have a good job and a good financial history, you should be able to obtain this line of credit. If you have any financial catastrophe in the future, this line of credit can be very useful to you. Just remember to exert some self control and save the line of credit for when you need it the most!

Ralph

Katharine Norman asked:




Mortgage refinancing can make good sense if you want to make improvements on the house, pay those college fees, or pay-down higher-interest loans. As property prices have gone up and up, homeowners often find they have more equity than they ever dreamed of when they first bought. Richard Syron, CEO and Chairman of the Federal Home Loan Mortgage Corporation — or ‘Freddie Mac’ — says “more than a dozen years of sustained growth in housing prices have turned many middle class homeowners into millionaires; put countless children through college; and made the family home the most valuable egg in the American nest”. Maybe we can’t all be millionaires but, even so, “for the typical family, home equity accounts for the bulk of their wealth,” agrees Frank Nothaft, chief economist at Freddie Mac.

It all looks good, so far. But now that you’ve started to look for that home equity loan — most likely a fixed-term second mortgage, or a line of credit — maybe you’re starting to wonder why home equity rates are generally higher than all those great first mortgage packages?
There are quite a few reasons. For a start, you’re comparing apples and oranges –they’re different breeds of loan, and the interest rates reflect the different features offered by each. But how, exactly, are those interest rates set? Frank Nothaft explains that “home equity loans are typically linked to the prime rate … many home equity loans have rates that are 1 percent or more above the prime rate” and, by comparison, “most 30-year first mortgages are typically below prime”. The interest rate for a typical home equity loan needs to take several factors into account: the risks to the lender, the duration of the loan, the flexibility offered to the borrower, and the amount of the loan in relation to the amount of equity available (referred to as the Loan to Value (LTV).

The first mortgage, of whatever kind, is just that — it’s the first lien on your property, and the first in line if you default on your loans. When you got your first mortgage you put your home up as collateral against the loan. If you can’t make the payments, the mortgage company can proceed with a collection action — in a worst-case scenario, you lose the house to pay off the loan. And, because it’s the primary loan, your first mortgage has priority in any collection action. Essentially, the mortgage company is confident that they’ll get their money back if you default. For a second mortgage, the situation’s different: whether it’s a conventional repayment mortgage or a line of credit (or any other kind of loan), it’s second in line if things go wrong. So that’s a bit more of a risk to the mortgage company, particularly if the value of your house depreciates, or you take out yet more loans.

And then there’s the time factor. The term, or duration, of a home equity loan is usually far less than that of a first mortgage. Most first mortgages are for a period of maybe 15, 20, or even 30 years. That’s because most people want to minimize their mortgage payments as much as possible, especially at the outset, and they’re in it for the long-haul. And, just think about it: while you’re making the payments, you’re paying interest, and you’re making the mortgage company money. You’re a good bet. That’s why, when it comes to first mortgages, companies compete with each other so aggressively to get your custom. And they pass that competition on to you, through lower interest rates.

A standard home equity loan is effectively a second mortgage, and can be a fixed or adjustable rate mortgage. The money is loaned in one lump sum, and payments are made over a pre-arranged duration — just like a first mortgage. But a home equity loan is typically for a short term, possibly only for a few years. Usually it’s for a specific purpose — home improvements, or paying of a debt — and the higher interest rate means most people prefer to pay it off as soon as they can, rather than mount up large amounts of interest. The mortgage company doesn’t have your custom for the long-haul, and it takes this into account when setting the interest rate.

Even so, this kind of mortgage can be far cheaper than the interest rates on credit cards or unsecured loans. As interest rates rise, pushed up by the Federal Reserve’s successive increases in the prime or ‘index’ rate, more and more borrowers are seeing the value of fixed-rate home equity options, in the 10-15 year range. Although these still have higher interest rates than first mortgages, homeowners have the best of both worlds: the comfort of knowing the rate won’t rise, and the ability to improve their quality of life by releasing the equity in their home.

With the other kind of home equity loan, the line of credit, you can draw cash whenever you want, up to your limit. When you pay money back, that credit is released again for you to use, immediately. In that sense it’s an “open account”, a bit like having a credit card, but with lower interest rates. This freedom to dip in and out of the loan can be a boon for the homeowner, who only pays interest on the amount owed, and nothing more — but it is more unpredictable, and less lucrative, for the mortgage company. So you pay that bit more for the flexibility of being able to use the loan as you wish, and that comes in the form of a higher interest rate.

But, given the ability to release your equity and use your wealth when and where you want, it can certainly pay to refinance. Don Taylor, of Bankrate.com, agrees, saying that a home equity loan, or a home equity line of credit (HELOC) can “allow you to restructure your debts or finance something that’s important to you,” and adds that both kinds of loan typically have much lower closing costs than a first mortgage.

Maurice

Joyce P asked:


We relocated and purchased our home about a year and 7 months ago in an area that was more expensive than we were coming from. The purchase price was $239,000, we put down $14,000, and took a home equity loan of $34,000 to finance the rest of the purchase price and to avoid PMI. I recently submitted a question about whether or not to start paying down the first mortgage or the home equity loan, and got great advice, but I am wondering now that my tax value of my home has increased in January from $200,000 to $279,000 due to reassessment, (I know it wouldn’t sell for that now because we recently had comparables done in January), would I save money by refinancing my first mortgage and adding in the home equity loan so the total amount has a lower interest rate? My husband thinks we have to wait 2 years before we can refinance, and I’m not sure about that, but that would be this July. My goal is to pay off our house as soon as possible.

Teresa

Maria Ny asked:




With mortgage interest rates rapidly rising, now may be the time to refinance your variable interest rate home equity line of credit (HELOC) or adjustable rate mortgage (ARM) home equity loan into a fixed interest rate second mortgage. Otherwise, your payments could become more than you can afford, which could be dangerous because your HELOC is secured by the equity in your house.

By refinancing your existing home equity loan or line of credit you could save a lot of money in the long run. There are many places you can find a fixed interest rate second mortgage loan. These tips can help you keep your costs down and help you avoid unpleasant surprises at closing.

randysoby asked:


To make a long story short I applied for a home equity loan and was declined by B of A. My credit scores are a 790, 812 and a 680. The 680 was so low b/c of an AT&T charge off that was never mine (the SS# was one digit off from mine). I had that removed already but after B of A declined me. I even sent a letter that the AT&T charge off was removed but it still didn’t help. I owe 93,000 on my house and it is valued at 189,000. My area didn’t get hit bad by the foreclosure issue. The lady at B of A told me that they will do 85 ltv. The only other bad thing that I had were 3 late Searscard payments mid last year. They were 15 dollar payments that I forgot to pay. I owe nothing on credit cards, 1 joint car payment for 200/month with my wife and my mortgage of 950/month. My house is only in my name (not joint with my wife’s). I make 55k/year. I thought that my situation sounded like a banks dream. Any opinions? Are loans really that tough to get with the real estate situations or does B of A suck that bad? Oh, did I mention that I have 46k in a savings account with B of A? What do you think? Am I better off going to a bank or a credit union? I don’t want to run my credit again unless I am sure that I will be approved. I value your professional opinion but please dont waste your time trying to get my business.
I cant use my wife because her name is not on the house.

Willie

Greg Smith asked:


A process where an advance of funds from a lender, called the mortgagee, to a borrower, called the mortgagor is secured by real property and evidenced by documents is called mortgage. This mortgage sets forth the conditions of the loan, the manner and duration of repayment, and reserves to the mortgagee the right to repossess the pledged property if the mortgagor fails to repay any portion of principal and interest. A mortgage loan which can be either for a home purchase, a refinancing, or a home equity loan is a product, so the price and terms are always in the mode of negotiation. If you in the market for a mortgage loan and want to make sure that you get the absolute best mortgage loan rate that you can possibly qualify for Here are few tips that will help you get the best deal in mortgage loans. “Get hold of information from several lenders

Before going for a mortgage loan you should clearly have an idea about the lenders in market. Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a mortgage through a mortgage broker. This will enable you to grab the best deal.

“Gather all important cost information First of all be sure how much of a down payment you can afford, and then find out all the costs involved in the mortgage loan. Keep in mind that knowing just the amount of the monthly payment or the interest rate is not enough. The following information is important to get from each lender and broker:

1.Rates – be sure whether the rates are fixed or adjustable. If the rate is an adjustable-rate loan, be sure how your rate and mortgage loan payment will vary, including whether your loan payment will be reduced when rates go down. Also ask about the annual percentage rate.

2.Points – points are the fees paid to the lender for the loan and are often linked to the interest rate.

3.Fees – a mortgage loan often bears many fees such as loan origination or underwriting fees, broker fees, and transaction, settlement, and closing costs.

4.Down payment and private mortgage insurance – keep in mind that when government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services are available, the down payment requirements may be substantially smaller. If private mortgage insurance is required for your loan, be sure of the terms and conditions.

“Compare and negotiate Don’t forget that this might be the only big transaction you are making. So for better result shop, compare and negotiate before coming to final decision on your mortgage loan.

“Legal help If you find yourself not well equipped to handle the legal problems and intricacies involved in the mortgage loan process, it is advisable to seek the help of a legal expert. This will be hassle free and smoother with process oriented expert guidance.



Melissa