home equity loan rate mortgage refinance help

Home Equity Loan Help and Information

A Home Equity Loan has become an increasingly popular way for consumers to borrow money, especially with the continued increases in interest rates on credit cards. Your home equity is the percentage of the home that you own; it’s the difference between the current value of the home and the amount you still owe on your mortgage.

Home equity loans have allowed millions of Americans to take control of their debt. The average household now has nearly $10,000 in credit card debt, and borrowing against the value of your home can allow you to pay those bills through debt consolidation. The interest on a second mortgage is usually tax deductible, something other types of loans haven’t offered in more than twenty years. A line of credit can offer the opportunity to borrow money on a revolving basis. And the payment schedule can be arranged over a specific amount of time, which offers the homeowner the convenience of scheduled payments as well as affordability.

This type of financing offers several advantages over other types of borrowing. Interest rates tend to be lower, and are often half the rate of credit card loans.

This type of financing is considered to be secured loans. The financing is granted by the lender using the portion of your house that you own as collateral. If you purchased your house for $100,000, and you have paid off $20,000 of the principal, and the value of your house has increased in the meantime to $120,000, then you now have $40,000 in equity, and you can borrow money against that in the form of a second mortgage.

Banks and other mortgage lenders generally like issuing home equity loans. For most people, their house is their biggest single asset, and they are reluctant to lose it. As such, the default rate on such financing is much lower than average; about 2% typically. For the lender, this type of financing offers greater assurance that the amount borrowed will be repaid. The borrower benefits from the lower interest rates offered with “safer” financing.

Once people borrow, what sorts of things do they do with their funds?

Debt Consolidation - The borrower can use the money to pay off other high-interest debt, such as auto or credit card bills.

House Improvement- Using the money for remodeling your kitchen or to add a room or patio to your property can increase its value

Education Repayment - You may wish to pay off educational expenses at a lower interest rate or over a longer period of time.

Medical Bills - Low interest rate borrowing with deductible interest are ideal for paying off unexpected medical expenses.

There are typically two types of ways to borrow against your property - the standard term (or “closed-end”) or lines of credit (or “HELOC”), which allow you to borrow again and again. Both have advantages and disadvantages, and you’ll have to decide which type is right for you. There is also a third type, known as the reverse mortgage, for those who already own their house free and clear.

Our site contains a lot of useful information for anyone who wants to buy a house, refinance a house or borrow against the value of his or her property. Here you will find information regarding property appraisal, scams and frauds, credit reports and how they can affect your ability to borrow, trends and statistics and a host of other information related to the sale of real estate. The links on the left will guide you to the section of the site with the information you need.