If you need to get some work done on your home, you may think about getting a home equity loan. But, you may not be sure as to what a home equity loan is.
When it comes to your home equity, there are a lot of things that go into figuring what it is. Basically, the equity is the difference between the fair market value of your home and the remainder of your mortgage. Each payment that you pay increases your equity. For example, if your house has a fair market value of $400K and your mortgage still has $250K left on it, then you have an equity of $150K in your house. When you are interested in getting a home equity loan, you are going to get a loan for the amount of equity in your house, and your house will be your collateral. It's important that you know that when you take out a home equity loan, you are reducing the amount of equity you have in your house because you are adding in another lien. However, as you pay them down, your equity will start to increase again. There are different kinds of home equity loans that you can take advantage of.
Close Ended Home Equity Loan
A close-ended home equity loan is just like your current loan. You are given the money that you have contracted for all at once so that you can start to use it. Your home equity loan, also called a second mortgage, generally has a shorter period than your mortgage does. You may also be able to get a better interest rate on your home equity loan, especially if you have excellent credit and a good record of paying back your current loan.
Home Equity Line of Credit
A HELOC will also give you the money to get your house worked on or to send your kid to college, but it differs from a close-ended loan in that instead of getting one lump sum payment, you can take out money when and if you need it. It's also similar to your credit card when it comes time to pay it back because you are going to deal with adjustable interest rate and no set payment amounts.
Your home can do a lot of things for you, including helping you to put your family through college or to do work on your house. Contact a company like New Horizons Credit Union for more information and assistance.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.