The optimum word in ?home equity loan? is equity. Start with the fair market value of a home, subtract the mortgages (first and second) and any liens against the property, and what you have left is the equity. You can use this equity as collateral in order to secure cash in the form of a loan or mortgage.
The amount borrowed is based on a percentage of the appraised value of the home. When it comes to the percentage rate, it can vary from 75% to 125%. Also varying is the length of the financing. Fixed rate loans and adjustable rate loans are the two main types of home equity loans.
Fixed rate loan. Provides a fixed amount of money at a fixed rate of interest, repayable in equal payments over the life of the loan. Fixed rate financing comes at higher interest than adjustable rate loans and it also costs more in set-up fees. However, by staying put and when interest rates go up, then homeowners will be able to save money over comparable adjustable rate loan.
What is adjustable rate loan? Going up or down according to the index upon which it is based is the interest rate. Adjustable rate loans will have a cap on how high the interest rate can go. Usually called ARMs (Adjustable Rate Mortgages), this type of loan has lower up-front costs and starts at a lower interest rate than fixed rate financing. Lower initial monthly payments is what this means.
Putting home equity to good use Here are the top ten reasons for getting a home equity loan.
1. Vacation b) Medical expenses Business expenses 4. Household expenditures e) Investment f) Major purchase Education expenses Automobile purchase i) Home improvement j) Debt consolidation
Debt consolidation is a smart form of financing because of the money it can save and it is the most popular reason people cash out their home equity. Owing about $15,000 on a credit card that charges about 17% interest is one example. You will save over $30,000 if you get a debt consolidation loan at 9% interest and pay it off in five years.
If you owe more than 15% interest on anything, then you should consider a debt consolidation loan. The correct terms could drop your monthly payments by 35% ? 50%, depending on interest rates, origination costs and tax consequences.
It can be a beneficial way to make a fresh start.
If you could jump higher, would that improve your game?
Source: http://mortgages.the-monkey.biz/loans/home-equity-loans-do-they-make-financial-sense/
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