Home Equity Loans Made Easy

Mortgage Finders Network have made home equity loans easier than ever before. They are big news these days, but does that mean they are right for you? Like everything else, home equity loans have advantages and disadvantages and come in two different forms, closed-end home equity loans and home equity lines of credit. We will give you the facts so you can decide if they are the way to go.

Home Equity Loans & Home Equity Line of Credit

A home equity loan allows a homeowner to get a lump sum of money by using the equity in your home as a collateral. Your home equity is equal to your home's appraised value minus your outstanding mortgage balance. A home equity loan can only be obtained after having a prior mortgage on the property, which is why it is commonly known as second mortgages.

Advantages of Home Equity Loans:

• They tend to have lower interest rates than credit cards and consumer loans.
• Offer significant tax savings because the interest you pay is tax dedecutible up to $100,000 or the equity value in your home, whichever is less.
• Can be used to consolidate other debt with higher interest rates, finance weddings, pay college tuition, or purchase other expensive items.

Disadvantages of Home Equity Loans:

• Your home is pledged as security for the loans. In other words, it is a collateral and if you can't pay the loan then you may lose your home.
• If the loan has a variable interest rate then it will change as the economy changes. This means your monthly payments can increase or decrease. Find out what the cap is on the loan you're getting. The cap rate sets a limit on how much your interest rate can change each year.
• As with everything else, there are fees involved. Make sure you know all the fees included such as the origination, application, and withdrawal fees.

The second type, the home equity line of credit is similiar to a credit card in which there is an approved dollar amount where you can use as much or as little of the credit line you want. Funds being borrowed begin accumulating interest when a purchase is made, while interests accrue immediately after the lump sum is disbursed for the home equity loan.

A home equity loan can be either of the following rates:

• fixed rate
• adjustable rate

Home Equity Loans are useful for:

• College tuitions
• Weddings
• Debt consolidation
• Bills
• Home repairs