| There will be times when you need extra funds to do | | | | 80% of the loan and the rest is for the equity. |
| home improvements, purchase a car, or go on a | | | | - Reverse mortgage is designed for the elderly |
| vacation. A homeowner who does not want to use his | | | | population and enables them to tap into the equity of |
| credit card or tap into his savings can use the equity | | | | their homes right now. |
| of his home. | | | | - Cash-out refinancing is redrawing a larger refinancing |
| With equity loans, you tap into the value of the home | | | | amount against the home. It will be wise to take this |
| and place the home as collateral for the loan. Equity is | | | | loan if you are getting a lower interest rate, shorter |
| the value that you have in your home computed by | | | | loan term, and if the loan can roll in the closing cost so |
| market value minus what you owe on the home. | | | | you don't have to shell out cash. |
| It is wiser to get an equity loan rather than go for | | | | What to Do Before Borrowing |
| consumer loans. Home equity loan interests are tax | | | | If you are decided to tap into the equity of your home, |
| deductible and the homeowner has several options | | | | here are some reminders that may help you out: |
| when getting a loan. | | | | - Financial Adviser- You may consult financial advisers |
| A homeowner must remember though that equity | | | | to make sure that you are entering a right deal. They |
| loans are against the mortgage. Non-payment of the | | | | can help you assess your current situation and advise |
| loan can lead to someone losing his home. | | | | which will be the best way to go. |
| Types of Equity Loans | | | | - Compare and Shop- Homeowners may consult their |
| The most common equity loans are the home equity | | | | primary lender and see if they can offer something |
| loan and the HELOC or home equity line of credit. | | | | better. Shop around different lending institutions to see |
| Here are the main differences: | | | | which one can give you the best deal that can save |
| - Equity loan - This loan involves a closing cost and is | | | | you hundreds or even thousands of dollars. |
| given in lump sum. The interest rate is often fixed for | | | | - Know the Terms - HELOCs for example are |
| the life of the loan and is also tax deductible. | | | | published with teaser rates that increase as the loan |
| - HELOC- Closing cost is not an issue for HELOCs. | | | | matures. It is best to know the details of the terms of |
| The money is dispersed as desired by the borrower. | | | | the loan. Remember that a delinquent loan may lead to |
| The interest paid is also tax deductible but the rates | | | | losing your home. |
| may vary according to market trends. | | | | - Know your Borrowing Rights- The federal |
| There are other options like taking a hybrid HELOC or | | | | government has required lenders to fully disclose the |
| equity loan, piggy backing, reverse mortgage, cash-out | | | | terms of a loan to a borrower. This includes the |
| refinancing. | | | | interest rates, closing costs, pre payment, etc. There is |
| - Hybrids are variants of HELOCs and equity loans. | | | | also a law that allows you to cancel a loan within three |
| The terms highly vary and it is advisable to consult the | | | | days. This is known as the right of rescission. |
| lender for the exact terms of the loan. | | | | The rule of thumb for taking out loans is to know the |
| - Piggy banking is taking concurrent first and second | | | | right reasons for that loan and knowing how to fulfill |
| mortgage usually to avoid private mortgage insurance | | | | your responsibility of paying it back on time. |
| in place of a down payment. Usually, the first takes | | | | |