| > | | | | rate financing. This means lower initial monthly |
| | | | payments. |
| A home equity loan converts equity to cash by means | | | | Putting home equity to good use |
| of a mortgage. Equity is the difference between a | | | | According to the Consumer Banker Association, the |
| home’s market value and the balance owed on | | | | top ten reasons for getting a home equity loan are: |
| it. The most popular reason people cash out their | | | | 10. Vacation |
| home equity is for debt consolidation. Even people with | | | | 9. Medical expenses |
| bad credit can make good use of their home equity. | | | | 8. Business expenses |
| The optimum word in home equity loan is equity. | | | | 7. Household expenditures |
| Start with the fair market value of a home, subtract | | | | 6. Investment |
| the mortgages (first and second) and any liens against | | | | 5. Major purchase |
| the property, and what you have left is the equity. This | | | | 4. Education expenses |
| equity can be used as collateral to secure cash in the | | | | 3. Automobile purchase |
| form of a loan or mortgage. | | | | 2. Home improvement |
| The amount borrowed is based on a percentage of | | | | 1. Debt consolidation |
| the appraised value of the home. The percentage rate | | | | Debt consolidation, the most popular reason people |
| can vary from 75% to 125%. The length of the | | | | cash out their home equity, is a smart form of |
| financing will also vary. The two main types of home | | | | financing because of the money it can save. For |
| equity loans are fixed rate loans and adjustable rate | | | | example, say you owe $15,000 on a credit card that |
| loans. | | | | charges 17% interest. If you get a debt consolidation |
| Fixed rate loan - provides a fixed amount of money at | | | | loan at 9% interest and pay it off in five years, |
| a fixed rate of interest, repayable in equal payments | | | | you’ll save you over $30,000! |
| over the life of the loan. Fixed rate financing costs | | | | If you’re paying more than 15% interest on |
| more in set-up fees and comes at higher interest than | | | | anything, you should seriously consider a debt |
| adjustable rate loans. But if homeowners stay put and | | | | consolidation loan. The right terms could drop your |
| interest rates go up, they will save money over a | | | | monthly payments by 35% - 50%, depending on |
| comparable adjustable rate loan. | | | | interest rates, origination costs and tax consequences. |
| Adjustable rate loan - the interest rate goes up or | | | | Even for people who have bad credit or who have |
| down according to the index upon which it is based. | | | | filed for bankruptcy, a home equity loan is not out of |
| Adjustable rate loans will have a cap on how high the | | | | reach. It can be a good way to make a fresh start. |
| interest rate can go. Usually called ARMs (Adjustable | | | | Websites like Easy Home Equity Mortgages help |
| Rate Mortgages), this type of loan has lower up-front | | | | borrowers with bad credit get the home equity loan |
| costs and starts at a lower interest rate than fixed | | | | that best fits their unique situation. |