How do home equity loans work?
A home equity loan is a way of cashing out your investment in your house.
Basically you're borrowing against your investment -- your equity-- in your home. Example: Suppose you bought your house ten years ago for $100,000. Today, it's worth $120,000. You have paid off $20,000 in principle. So, your current mortgage is for $80,000 and your home is worth $120,000. A home equity loan would allow you to borrow $20,000 - $40,000.
Be aware that many, many people are using home equity loans to finance elaborate vacations or spending sprees, which most financial advisors discourage. Such a move usually reduces your net worth to zero -- or below. That's money you will have to pay back, usually before you retire.
Home equity loans may be a wise choice if a)you use them to finance education, b)you use them to pay off high-interest credit card debt or c) you invest the money in an asset that returns more than real estate.
For most people, whose home is their single largest investment and who need to pay it off to retire -- home equity loans are not great ideas.
Home equity loan is a loan in which the borrower uses the equity in their home as collateral. Home equity loan online is based on the equity in your home that you are willing to pledge as collateral. Home equity means the amount that your home has in it after subtracting the remaining dues on home from its current market value.
The Home equity loan lender will approve a loan that is equal or less than the equity in home. This way lender is safer as in case of payment default, the lender can recover the entire loan amount. Home equity loans carry low rate of interest as they are given out against securities.
There are two types of Home Equity Loan:
* Standard Home Equity Loan
* Home Equity Line of Credit
Standard Home Equity Loan is the loan that is assured by your home or is secured by the equity in a home. This is a better option if you need a long term large amount of loan . Standard home equity loan is also known as Second Mortgage or equity loan.
If you are a homeowner and want a home equity loan but have built no equity in your home, then 125 percent equity home loan will solve your problem.
A 125 percent equity home loan is a second mortgage loan that allows to borrow up to 25% more than the value of your home.
