Dec
A Home Equity Loan – What You Should Know?
Filed Under (Home Loan) by Trenton Home Loan on 02-12-2010
Tagged Under : consolidation, debt, equity, Home, home equity loan, home equity loans, loan, loans, mortgage, refinancing, values
Asking yourself, “Is a home equity loan right for me?” is the first and most important step to take.
Home equity loans have become so popular today because of increasing home values. A home owner can access money for consolidating debt, home improvements, a new car, education or starting a new business.
Emotions can take the place of logic when considering a home equity loan.
It’s a good idea to sit down and take your time before signing up. Educating yourself will benefit you in the long run.
A home equity loan is like having a second mortgage on your home. Suppose your home is worth $200,000, and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your homes value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.
This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with a home equity loan.
The second step should be to get an idea of what your home is worth in today’s real estate market. You can look at what others in your area have sold their home for. A realtor can help you with getting an idea of your homes fair market value. Be sure to get a few quotes because some realtors may be interested in inflating your home value in hopes of earning your business.
When you have an approximate figure, you can get an idea of how much equity you have in your home. At this point you should have an estimate of how much money you need to borrow. It’s best if you can avoid borrowing up to the full 80% of your homes value.
This is where some home owners get carried away with their emotions and logic goes out the window. It can be so easy to say, I have $60,000 available and I really only need $40,000 for remodeling my kitchen and bathrooms. Why not borrow $50,000 so I can go on my dream vacation. It’s important to remember that the more you borrow, the higher your payments will be. This is simple logic. But, emotions can take over and you can end up having a tough time paying back the home equity loan, with the risk of losing your home.
The third step is to figure out what type of home equity loan you want. In today’s market, there are two popular types of home equity loans. A line of credit and a closed end loan.
With a line of credit, it is just like having a credit card with a large credit limit. Depending upon the bank, you may be required to make minimum monthly payments. Others may only have you make payments if you’re at your credit limit. If you have had problems with high credit limits in the past, this may not be a good idea. It’s best to have discipline with a line of credit and big credit limits.
Having a closed end loan is just like your standard home mortgage loan. You borrow the money for a set period of time and make monthly payments until the loan has been paid off.
The fourth step is to figure out how long you want to borrow the money. This is where mortgage calculators can help you. It’s easy to find them online and helps you to avoid having to talk to a loan broker before you are ready. Try different time frames to see what you can and can not afford. Be sure to decide if you’re going to take a line of credit or a closed end loan before you put in your figures. This is an important step to see how much you can afford repaying on a home equity loan. It’s best again to use logic, not emotion in regards to how much you can afford to repay.
The fifth step after choosing the home equity loan you want, is to find a good bank or lender. Shopping online can save you valuable time. Banks and lenders are very competitive for your business online. You can use this to your advantage and save money on fees. Be sure to look over the fine print of your home equity loan contract before signing anything. Read everything, and if you have a questions be sure to have them answered first. Be very clear on everything and take your time.
A home equity loan is a great way to help you take care of things you would like done or feel you need. If done properly , a home equity loan can be a valuable resource. Educate yourself to find out what is best for your situation. Try not to compare your situation to someone else. Only you know what is best for you. Home equity loans can be a big windfall or a big headache. It really depends upon you taking the time to research your options and choosing the right loan.
Watch the video related to home equity loan
Getting a home equity loan on a house that will be rented out involves having at least 20 percent equity in the home, examining a credit report and applying for the loan through various brokers. Get a home equity loan with advice from an experienced property manager and landlord in this free video on rental property. Expert: Damon Thompson Bio: Damon Thompson owns three rental properties in Detroit, Mich. and has owned up to seven rental properties at once for more than 15 years. Filmmaker: Lynell Doyle
Help answer the question about home equity loan
Can you change a home equity loan to a personal loan?My brother-in-law took out a home equity loan and he went to refinance his house and for whatever reason the house did not appraise for what it needed to partly because of the home equity loan that he already had. He was told to pay off his home equity loan and come back to refinance his house. Is there anyway that he can change his home equity loan to a personal loan? Or would that even help? please help. thanks.
Never use the equity in home for a vacation or new truck! Never use the equity for depreciating assets! Especially in this economic climate. I don't know where you live, but the real estate is not gonna go up anytime soon. And it's not going to allow you to buy a new home with no down payment. Get yourself educated on real estate investing, and investing in general, before you take out a home equity-loan. This is a once-in -lifetime opportunity to invest in real estate, but you have to know what you're doing!
Who cares what your friends are doing. They might know what they're doing, they might be idiots! You don't want to follow them off a cliff.
And what do you mean, your mortgage is coming up for refinancing next year? Do you have an option-ARM? Or some other "bad loan?" Then you really don't know what you're doing! Go read and educate yourself, find someone who is a "mortgage consultant" not just loan agent who will "sell" you another lousy loan for a big commission to him! Or find an accountant or CFP who knows how to include mortgage planning in your over-all financial plan! Good luck
Hi,
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yeah real good info
I gotta get off this ‘debt train.’ CHOO! CHOO!
amazing vedio~~!
i love it~~~~! thank you so much!!
(That’s because you don’t ACTUALLY have that 1.5 mil yet, you have it when you sell the house) No you won’t because u can not know its price untill someone pays you a price.
I would say your personal experience strongly indicates that you shouldn't take any more money from your home equity. You indicate that you did this a couple of months ago, but "didn't end up paying off all the credit card bills". What additional evidence do you need that the temptation to spend is stronger in you than the desire to pay off debt? If you had paid off the credit cards then, you wouldn't have to consider repeating the same exercise now. I suggest you prove to yourself that you're capable of paying off one debt before taking on another.
ya but schooling should have no base on if you get a lone or not.
You should be careful that you are not taken advantage of. In many states that have what they call "usury" laws. Under these laws, interest rates for a loan over 16% are illegal and may not be enforced by the lender.
you only have one option left == call all the family together and tell than the sad news == starting today we are downsizing and i mean downsizing — no more internet service — hock the compute — cable tv goes along with the cell phones — and instead of school lunches and your three drink lunch hour every one packs a lunch == cut to the bare bone — things are only going to get worst in the markets so do not plan on it rising and helping in the near future == if you do this in a few tough months you should have you act together and be back on track == good luck!!!
No it is not, the vale of the house is always fake, the bank might say 1.5mil, but if you can only get a bit or price of 1.3mil then it is vale is 1.3 mil. If you get 1.7mil then it’s vale is 1.7 mil.
New debt does not solve the problem of old debt.
My suggestion is that you sit down one weekend and schedule out every dollar you spend on a daily basis. Then, categorize that according to absolute musts (i.e., mortgage payment, health costs and food). Then, decide what other things you are spending money on that are not that necessary. Take that money and pay off the old debt.
That’s mess up you know. It causes recession and massive corporate bankruptcies. This country… We got idiot bankers, and greedy executive screwing everything up. Now, they can’t fix it the way it was.
We will be heading dark ages in few years.
Hello, what happens if an identical house is sold for 500k. Could the bank ask for money back (75% of 500k) immediately?
You can't get this policy, it's not yours. And it doesn't matter, because this policy doesn't cover YOU, or YOUR STUFF. It only will pay the MORTAGE company. And THEY won't fix your house with it.
Although you pay for forced placement coverage, it's not your policy, and you are not covered. You are not entitled to a copy of it. You cannot put a claim in on it, and you will not get paid. It's neither replacement value or actual cash value, as it only covers up to the loan balance. If you read the documents on it, you'll most likely see that they all say, "this does not protect you, or your interests". That's why it's NOT a good idea to rely on forced placement coverage.
Yes, you very well could be left with a damaged home, and a monthly mortgage payment. Yes, it's entirely up to the credit union, if their policy is going to reimburse you for repairs, AFTER THEY ARE MADE, or not.
This is how forced placement coverage works. It is NOT a substitute for insurance, for YOU.
what kind of mic are you usings it sounds really good?