| In an economy where housing prices are increasing | | | | your home improves because you have carried out |
| and employment rates are stationary, the use of an | | | | home improvement projects to the building. Adding a |
| equity loan is often the choice of homeowners who | | | | room, upgrading the kitchen or bathroom or adding |
| need extra funds. Such loans are sometimes known | | | | significant energy saving features typically increases |
| as second mortgages or even third mortgages and, if | | | | the market value, and thus the assumed equity. |
| you have enough equity in your home, are relatively | | | | Home equity loan Proceeds Usage |
| easy to get. Before choosing a lender, the homeowner | | | | An equity loan on your home makes sense for the |
| considering such a loan should submit an application to | | | | borrower when there is need of significant cash at a |
| several lenders and then do a home equity loan | | | | low interest rate. Because the proceeds of the loan |
| comparison to find the best deal. Today, with a | | | | are secured by the home's value, it typically costs |
| struggling economy, this type of loan may be difficult to | | | | much less than credit card debt. Sometimes the |
| get, and the choices of terms may be limited. | | | | homeowner will pay off credit cards and other loans |
| What Does the Term "Equity" mean? | | | | with a high interest rate by taking out a home loan. |
| Home equity can be defined as the cash-in-pocket | | | | Another common use for the proceeds of a second |
| worth of the home. To calculate this amount, the | | | | mortgage is the cost of college for you or for family |
| estimated market price of the home less the amount | | | | members. An equity loan may be needed for |
| of money still owed on the home is considered the | | | | catastrophic medical expenses not covered by |
| equity. At the time of purchase, the equity technically is | | | | insurance plans. Home owners sometimes obtain |
| zero. If you make a down payment, that amount | | | | home equity loan funds in order to pay for major |
| reduces the principal and gives you some ownership in | | | | improvements or repairs on the home, especially those |
| the home. When you make your mortgage payment | | | | that increase its value. |
| each month, a tiny portion of the payment is applied | | | | What Borrowers and Lenders Look For in a Loan |
| against the principal. As the amount owed decreases, | | | | Lenders want to know that you can repay the money |
| the equity is increased by a like amount | | | | that you borrow on your home's equity. The amount of |
| As market prices of homes in the neighborhood | | | | the loan, the length of the repayment period, your |
| increase, the value of your home is assumed to have | | | | credit score and the interest rate all affect the amount |
| increased as well. This is the second way in which | | | | of monthly repayment on the loan. The lender usually |
| home market values can be improved. If you were to | | | | looks at the current market value and the amount of |
| sell the home at the improved price and pay off the | | | | equity you have accrued before setting the amount |
| existing mortgage, you would receive the difference, | | | | they are prepared to make available in the form of a |
| that is the equity, in the form of cash.. | | | | loan. |
| Your home's equity will be increased if the value of | | | | |