Home Equity Loans
Home equity loans can in one sense be considered to be any and all types of mortgage. They are, after all, all loans against the equity in a home. This is not, however, how the phrase is usually used. Rather, the everyday meaning of the phrase is that there is some equity (or value) in the house, some value over and above the mortgage that already exists, and the owner would like to have some of that to spend rather than it just sitting there in the walls of the house.
Continue ReadingSyndicate or Share
Think of this example of a home equity loan. Perhaps Joe Six-pack bought a house in California ten years ago for, say, $250,000. He had a standard 80% of value (and thus made a deposit of 20%) mortgage based on a 30 year fixed rate. Excellent - he’s still got 20 years to continue paying this off. Now he will have paid off some of the principal of the loan, but that might not be the interesting thing. Depending upon where in California that house is it might now be worth $600,000, and yet he has still only got a $160,000 mortgage.
So, by using a home equity loan Joe can cash out some of that money. He could refinance the whole thing for a new 30 years at $260,000, or he could have a second mortgage for 20 years for $100,000 or he could make a number of other similar arrangements, all of which would be a home equity loan, taking $100,000 out. The defining feature is that some of the equity value in the property is turned into cash that can be spent upon other things.
Home equity loans commonly have certain restrictions to follow or require good to excellent credit ratings. Some rules could be withdrawing a minimum amount if you use checks attached to your credit line or a requirement such as a reasonable loan-to-value ratio.
Home equity loans are generally referred to as a second mortgage because they are similar to traditional mortgages and you secure the loan against the value of your property. Like first mortgage loans, you will receive funds upon closing and will make monthly payments until your home equity loan is paid off in full.
Resources
Get a Quote
We maintain close ties to many different lenders and hundreds of different home loan programs to make sure you get the best rate and product available.
Rates as of Sunday, September 07, 2008
| Institution | Rate % | APR |
|---|---|---|
 |
5.875 | 5.911 |
 |
5.875 | 6.033 |
 |
5.875 | 6.051 |