Home Equity Loans
Home equity loans are given by financial institution and the loan is paid within a fixed period of time. If you have amassed equity in your assets it is easy to convert these assets to money. The equity loans have significantly lower rates compared to personal loans and credit cards in general. The equity is tax deductible in certain circumstances while the closing costs are fairly low. You can say this is a second mortgage because it is minor to the first mortgage. In case one is not able to pay the mortgage, any sale of the property will pay off the first loan. This means the lenders are exposed to risk by offering home equity loans.
The equity loan has two categories; the home equity referred to as HEL and the equity credit called HELOC. The home equity loan has a fixed interest rate and it is paid off within a specified time frame. The payments are a bit high because of interest as well as the principal. This is a good borrowing plan if one has the ideas of the exact amount needed because it is highly consistence every month. The good thing with HEL is that, one keeps on building equity on the property while repaying the loan.visit this website to get latest news.
HELOC is more flexible depending on the circumstances. The financial institution provides a credit line to spend as need arises. This is the same scenario like a credit card but the interest rates are much lower. The interest rates however, vary for each index and accumulate every month. The lender allows the owner to withdraw money at the time of the draw usually in ten years. In most cases, the interest is paid at the period of the draw.
It is important to follow this plan while paying the principal because it accumulates gradually. When the draw period is over one is expected to pay the remaining principal. This is done as a lump sum or on repaid basis and cannot withdraw any more money. The HELOC method is disadvantageous because interest does not accumulate equity when being paid. The interest is also not specific thus one cannot know the budget of the money expected to be paid.see more details at http://www.huffingtonpost.com/micahel-lazar/differences-between-a-reverse-mortgage-and-home-equity-loan_b_7494068.html
The home equity loans can be borrowed up to 80 percent of the total equity property. This is calculated by the current value the property is worth. The mortgage is subtracted from this value and then divided by 80 percent to get the real value.