Home Loan Info

Assisting You In Your Home Loan

Home Equity Loan

Many people hear the term home equity loan these days, but don’t really know what one is. Basically it is borrowing the asset money your house has from paying on the mortgage. This can be scary and bad because you are using your house as collateral for this loan. So if you don’t pay back the loan, the bank will take your house. Don’t fret though, it’s not really any different than if you didn’t pay your mortgage loan.

Another way to think of a home equity loan is that it is a second mortgage. It’s good for home improvement, debt consolidation, and college education, but some people use it for other things. These loans are for much shorter periods than a full, first mortgage. Many are five to fifteen years only, but a few will let you pay them back in 30. Once you borrow this money from the bank, you cannot get any more money until the original loan is paid off. And even then you would have to build the equity back up on your house before you could borrow again. Also refinancing will make you lose whatever equity you had in the house from the original loan. There is a second kind of loan called a home equity line of credit. It is similar to a credit card because while you have a certain amount of time to use the money, like fifteen years, you can borrow part of it, start to pay it off, and take more out up to the limit set, at any time needed.

Of course the line of credit has a variable interest rate instead of the fixed that the home equity loan itself has. So you could end up paying much more with a line of credit because the payment varies depending on how much you owe, the interest rate at the time, and if it’s time for the loan to be repaid in full. This is the time when the loan has to be paid off and you can no longer borrow the money. The most important thing to remember is that when you sell your home, you have to pay off the balance first.