Closed End Home Equity Loans Will Often Have Rates That Are Fixed

Business, Financing.

Home equity loan facts - a home equity loan is a special type of loan that is used by homeowners who wish to use their equity as collateral. In a nutshell, a home equity loan is basically a lien that is placed on the property.

It may be necessary for a family to obtain a home equity loan for things such as medical bills, or house repairs, college costs. - obtaining a home equity loan requires the customer to have good credit, and they should be a low risk borrower. A home equity loan may also be referred to as being a second mortgage. Home equity loans are divided into two types, and these are open end and close end. When compared to traditional mortgages, home equity loans tend to be shorter in length. With the closed end home equity loan, the homeowner will be given a set amount of money at the closing, and they will not be able to borrow any more money. In places like the US, homeowners may be able to deduct the interest the earn on their income taxes.

The amount of money that they are given will be determined by their credit score, and the value, salary of the home. - closed end home equity loans will often have rates that are fixed. It is not uncommon for a homeowner to borrow 100 percent of the value of the house, and some lenders will go beyond 100 percent in a process that is called over equity. In addition to this, the loan may be amortized for as long as 15 years. To avoid the balloon payment, the homeowner will need to either pay more than the minimum payment each month or refinance the home equity loan. Once the term of the loan ends, the homeowner may need to pay what is called a balloon payment.

The open end home equity loan may also be called a home equity line of credit. - at first, the lender will set a limit on the credit line, and this limit will be dependent on many of the things that are used with closed end home equity loans. With this loan, the homeowner can decide when they want to borrow money against the equity of the home. As with the closed end loan, it is possible for the homeowner to borrow 100% of the value of their home with open ended home equity loan. The interest rate for the home equity line of credit will be variable. The length of these loans may be as long as 30 years.

The minimum payment that is made each month will be directly connected to the interest. - home equity loans have a number of powerful advantages, and they are utilized by millions of consumers. The interest rate of both of these loans will typically be dependent on the prime rate. Many people encounter situations where they need large sums of money, and they money that they have may be tied up in investments. Home equity loans are a great way for them to pay for these large expenses.