| A home equity loan is a special type of loan that is | | | | the loan ends, the homeowner may need to pay what |
| used by homeowners who wish to use their equity as | | | | is called a balloon payment. To avoid the balloon |
| collateral. It may be necessary for a family to obtain a | | | | payment, the homeowner will need to either pay more |
| home equity loan for things such as medical bills, | | | | than the minimum payment each month or refinance |
| college costs, or house repairs. In a nutshell, a home | | | | the home equity loan. The open end home equity loan |
| equity loan is basically a lien that is placed on the | | | | may also be called a home equity line of credit. With |
| property. Obtaining a home equity loan requires the | | | | this loan, the homeowner can decide when they want |
| customer to have good credit, and they should be a | | | | to borrow money against the equity of the home. |
| low risk borrower. Home equity loans are divided into | | | | At first, the lender will set a limit on the credit line, and |
| two types, and these are open end and close end. A | | | | this limit will be dependent on many of the things that |
| home equity loan may also be referred to as being a | | | | are used with closed end home equity loans. As with |
| second mortgage. | | | | the closed end loan, it is possible for the homeowner |
| When compared to traditional mortgages, home equity | | | | to borrow 100% of the value of their home with open |
| loans tend to be shorter in length. In places like the US, | | | | ended home equity loan. The length of these loans |
| homeowners may be able to deduct the interest the | | | | may be as long as 30 years. The interest rate for the |
| earn on their income taxes. With the closed end home | | | | home equity line of credit will be variable. The minimum |
| equity loan, the homeowner will be given a set amount | | | | payment that is made each month will be directly |
| of money at the closing, and they will not be able to | | | | connected to the interest. The interest rate of both of |
| borrow any more money. The amount of money that | | | | these loans will typically be dependent on the prime |
| they are given will be determined by their credit score, | | | | rate. |
| salary, and the value of the home. It is not uncommon | | | | Home equity loans have a number of powerful |
| for a homeowner to borrow 100 percent of the value | | | | advantages, and they are utilized by millions of |
| of the house, and some lenders will go beyond 100 | | | | consumers. Many people encounter situations where |
| percent in a process that is called over equity. | | | | they need large sums of money, and they money that |
| Closed end home equity loans will often have rates | | | | they have may be tied up in investments. Home equity |
| that are fixed. In addition to this, the loan may be | | | | loans are a great way for them to pay for these large |
| amortized for as long as 15 years. Once the term of | | | | expenses. |