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Home Equity Loan Tips
Investing Your Home Equity Loan Wisely
One of the biggest reasons that people take out a home equity loan is to use the funds for other investment opportunities besides their home. This is a smart way to make your money work for you, if you invest wisely. If you are thinking of investing the proceeds from your home equity loan, here are a few tips to ensure that you are making the correct choice. When choosing where to invest your home equity loan, make sure that you weigh the risks involved.
One thing about a home, it is a very steady investment. So, if you are thinking of moving your money to another investment means, you should take a close look at the risk/reward scenarios that come with it. In addition to weighing the risk, also take into account the fact that you will need to repay your home equity loan at the same time the money is invested. Granted, repayment of a home equity loan can be drawn out over several decades if necessary. However, most people find that they do not have that kind of time.
Be sure that your investment of the funds does not impede your ability to promptly pay back the home equity loan. There are many other factors that should come into play when you decide to re-invest your home equity through a home equity loan. Consult with an investment adviser for more answers regarding the choices in front of you.
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Finding a No Closing Cost Home Equity Loan
One of the biggest advantages to a home equity loan is the low costs that are associated with them. With first mortgages, closing costs can often add up to quite a large expense. On the other hand, with an equity loan, you can find options that offer absolutely no closing costs to you. This will make your home equity loan fast and easy and, most importantly, cheap. After all, most people who want to take out a home equity loan are not looking to spend more money; they are looking to get money.
To find a no closing cost home equity loan consult with several mortgage lenders. There will be many that will offer a no closing cost option, but they will each have different rates and terms to offer. Once you have found a no closing cost option, it is up to you to choose the right rate and other options for you.
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Retirement Planning with a Home Equity Line of Credit
For those that are worried about their future today, there are ways that you can take advantage of money you have now to invest it in your future retirement. One of the greatest resources for these types of funds is in home equity. If you have owned your home for some time and it has appreciated as most do over time, you could probably set up a solid retirement plan using only the funds from a home equity line of credit.
A home equity line of credit is a fast, easy, low cost way to get a large amount of money for any reason. Most advisers would tell you that a home equity line of credit should only be used to consolidate other debts or to re-invest. Retirement is one of the best ways for you to re-invest this capital.
If you are wondering what the best form of retirement planning would be for you, there are many financial advisers who would love to discuss your options with you. Most of them can help you draw out your home equity line of credit and re-invest it immediately. It can be so seamless that you almost never can tell that the money was moved. Speak with a financial adviser about the possible retirement planning options that you could take advantage of with you home equity line of credit. Money only works when it is working for you and there are always ways to make it work better and faster.
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Consolidating Your First and Second Mortgages
For various reasons, many people end up carrying a first and second mortgage on their home. Thanks to the growing home market, these same people are finding that they have established enough total equity to refinance and consolidate their two mortgages into a single, fixed loan. This makes the best sense in all aspects.
Short term and long term, consolidating a first and second mortgage is a smart move. To find out about consolidating your first and second mortgage, check out lending resources on the web and in your local neighborhood. You will find a wide variety of options for your consolidation and in the end, the scenario you choose will be based on your particular situation. Just be sure that you get quotes from different places before settling on a loan. You can never know if you are getting the best quote if you only get one.
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Shopping for Equity Loans Online
Equity loans are more popular than ever in light of the low interest rates that are available. If you are interested in finding an equity loan for your home, look to the Web for the biggest selection of mortgage rates, terms, and lenders available. There are more mortgage websites than could be listed in one place, but here are a few ways to find ones on your own.
First, you can visit our sponsors. We feature websites that are known for their commitment to providing the best in mortgages and equity loans to the public. Contact them for more information on how they can help with your specific situation and mortgage scenario.
You can also use Internet directories such as the Open Directory project to find large amounts of websites specializing in equity loans and mortgages. These directories give you links to the websites and short descriptions of what they can offer to you.
There are many other places such as search engines where you can look for equity loans and rate quotes. Take some time to use the Internet and you will open lending doors that you may have never known were available otherwise.
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Renovate Your House with a Home Equity Loan
Here are some suggestions for using your home equity loan:
* Expand or renovate your house.
* Finance your child's education.
* Consolidate debts into one payment, at a lower interest rate.
These are great benefits for American consumers. But before deciding on home equity loans, be an informed consumer as well. The big risk of taking out an equity loan is losing your house, if you get way over your head with debt and fail to meet your monthly payments. A second mortgage, or equity loan, is for big-ticket items that are an investment, not for frivolous spending and purchases you can do without.
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Seek Help with Big Concerns About Your Equity Loan
If you have big concerns about the terms of your equity loan, or you feel you were taken advantage of, there may be recourse. But you have to ask for help. Here's what to do:
* Ask your state bar association to refer you to a low-cost legal agency or lawyers that offer free consultations.
* Call your state Attorney General's office, and speak to someone in the consumer protection division.
* Most every community has fair housing advocates or affordable counseling agencies. Contact them and ask for help.
* Read the federal government's web site for consumers at www.consumer.gov
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Home Improvements? Take a Second Mortgage
If you are looking to add some improvements to your home and are wondering where you can find the money, the answer is all around you. If you have been in your home for a while or if you live in an area where homes have been appreciating, you probably have built up some home equity. This home equity can be drawn out through a second mortgage and can be put right back into your home through home improvements.
Second mortgages are something that scare a lot of people. There is really nothing to be afraid of. A second mortgage does not mean that you have more money invested in your home than it is worth, if you are careful. Most people who take on a second mortgage do it without ever using the funds. Rather, the funds available from the second mortgage rest where they are for that rainy day that may come along.
If you are looking to boost the value of your home through improvements, talk with a mortgage specialist about the possibility of a second mortgage. You can take advantage of extremely low second mortgage rates and fix up your home without having to come out of pocket.
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Shop Around for the Best Home Equity Loan
It pays to shop around for the best home equity loan. Costs and terms differ, so you can save hundreds or thousands of dollars if you do some research first. Here are some tips:
* Contact several lenders, including banks, credit unions and mortgage brokers.
* Get a copy of your credit report and review it before your lender does. Is the information accurate? Are credit problems shown that you have corrected? If so, contact the credit reporting bureau to dispute the report.
* Go online and compare offers. There are hundreds of resources on the web for home equity loans.
* Finally, make sure an equity loan is the best option for you. Questions to ask yourself: Do your purchases demand a big lump sum like an equity loan? Will you be able to keep up with the monthly payments on the equity loan?
Review and consider insurance to cover the payments if something happens. You may or may not need insurance. If you're going to include it in your program, try to pay the premiums monthly – not up front.
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Beware of High-Cost Lenders Offering Equity Loans
The FDIC warns consumers about predatory lenders who may victimize consumers seeking home equity loans. High-cost lenders can sink homeowners more deeply into debt. At risk is your home and security. The lenders can foreclose on your home if you fail to make your payments.
So-called predatory lenders are known for zeroing in on people with credit problems or on low incomes. These lenders may fail to explain fully the terms of the equity loans they offer. Homeowners may wind up with high-cost equity loans they cannot afford to repay. Here are things you can do to avoid problems:
* Talk to several lenders.
* Research the costs and rates for equity loans.
* Learn your legal rights.
* If you have a lot of debt and see an equity loan as the answer, check with your creditors first. Maybe they can put you on a payment plan you can afford.
* Local agencies may be able to help with your energy bills and emergency needs.
* If you have more questions or concerns, call the U.S. Department of Housing and Urban Development, toll-free, at 1-800-569-4287.
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Lenders Feel Safe with Home Equity Loans
If you need to borrow a lot of money or your credit is not so good, think about a home equity loan. With home equity loans, lenders often are more flexible. These loans essentially are a second mortgage. They are considered safe loans to make, because your home is your collateral. Homeowners are likely to work hard to pay off their equity loans because they don't want to jeopardize home security. Here's what you may with an equity loan:
* Lower interest rates;
* Relatively easy qualification standards;
* Tax deduction;
* Large, lump sum of money.
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Interest Only Equity Loans – Quick Cash and Low Payments
If you find yourself in a pinch and need some fast money without knowing how able you will be to make large amounts in repayment, equity loans are probably the best option for you. Because most equity loans are repaid on an interest only basis, you can borrow a large amount and not be burdened with large monthly payments.
With the interest only repayment, you are not required to make payments towards your principal balance. This means that you are only liable, each month, to repay your accrued interest. Without the burden of a large monthly payment, you can get the flexibility that you were looking for in the first place when you started looking at an equity loan.
For more information on interest only equity loans, contact one of our sponsors or a mortgage specialist in your area. The answers that you are looking for are out there from many places and it is up to you to reach out to find them.
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Rate Hikes Help Stabilize Market
The interest rate hikes that began in the third quarter of 2005 seemed to have dampened home sales through the year's end. As sales have begun to increase in 2006's first quarter, it is a good indicator that the market will actually stabilize and result in a "cooling" of some of the reputed "bubble" markets.
What does this mean for homebuyers and sellers? The stable market is a healthier environment for both buyers and sellers. A balanced market offers buyers more homes to choose from and less pressure to purchase immediately. Sellers may experience a marginal increase in market time but there should still be plenty of potential buyers.
Mortgage-seekers will need to be aware of rates through the spring and summer of 2006 as indicators continue to point to additional rate increases.
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Get the Best Lender for a Home Equity Loan
Choose your home equity lender carefully. Contact at least three different lenders to comparison shop, and never deal with anyone who calls you first or appears at your door unsolicited offering to help you secure a home equity loan.
A good way to find a broker or lender you can trust is to ask for referrals from friends and family members. Or look at newspaper ads or ads online. Although your home contractor seems handy with repairs, don't accept offers to arrange for your financing and equity loans. You need to talk with a licensed professional. Have your loan sent to you, not to your contractor.
It's not a bad idea to talk with a mortgage broker, who offers convenience and may have wider access to lenders. Just remember that the broker does not lend you the money. The broker matches you with a lender and arranges for the equity loan. Look at the broker's offer, but also check with a couple of lenders to see if you can get a better deal.
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Home Equity Loan or Line-of-Credit?
While these two loan types really have the same basic rules for approval, they work a bit differently. When you are close a Home Equity Loan, in three days you will be given a bank check for the entire amount of your loan. Three days after you close a Home Equity Line-of-Credit (HELOC), you most often will receive no funds from your lender. You will, however, be given a number of checks from your lender or be allowed to write checks from your own account for amounts up to and including the full amount of your loan.
If you have a specific purpose for the majority of your proceeds, you might be better off with a home equity loan. Like a first mortgage, your payments will have been calculated and a complete amortization schedule will apply. Should you not immediately need all of your proceeds, but plan to disperse these funds over a longer time period, a HELOC may better serve you. You will owe interest only on the amount of your loan you have used instead of the entire amount, which will keep your payments lower than a fully dispersed loan until you have drawn your balance to the maximum. Often a HELOC will only require monthly interest payments, again maintaining minimum cash due each month. For cash flow purposes, this is an obvious advantage to you. However, there is no loan reduction unless you also include principal payments. This can become dangerous and should not become a formal plan of action.
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How a Home Equity Loan Works
Before attempting to figure out your home equity loan amount, you must first determine what your equity level is. You need to determine your home’s fair market value (FMV) through an appraisal. After you learn what your home is worth, subtract the balance of your first mortgage. The difference is your current equity value. The maximum you can borrow will be a per cent of your home’s FMV, depending on which lender you select.
For instance, if your home is worth $300,000, your first mortgage balance is $170,000, and your lender will loan up to 80% of the FMV (minus your first mortgage balance), you could borrow as much as $70,000. {$300,000 x 80% = $240,000 - $170,000 = $70,000}
A credit report, income verification, title examination, mortgage deed and note will be prepared. At the closing of the loan, you will be given a document called the “right of rescission”, which gives you three days to cancel the loan. You must sign and deliver this document to your lender by midnight of the third day after closing if you choose to cancel the loan. If you do nothing, you will receive the entire proceeds of your home equity loan ($70,000 in our example) on the fourth day after closing. You may spend these proceeds however you see fit. You will repay the loan according to a pre-calculated repayment amount, if a fixed rate loan, or a schedule of payments that are constant until the first rate adjustment date.
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How a Home Equity Line-of-Credit Works
Like a straight home equity loan, a home equity line-of-credit (HELOC) allows you to borrow up to a stated percentage of your home’s fair market value (FMV) less the balance of your first mortgage loan. The credit and income verification process remains the same, as will the title examination, mortgage deed and note preparation. The note language, however, will be different. Instead of regular pre-calculated monthly payments according to a stated amortization schedule, this note will require either interest-only payments based on the amount of the loan outstanding at month’s end or interest-only payments plus some computation of a principal payment portion to be included.
After the closing and the rescission period, you will not receive the proceeds from your loan. You then have the opportunity to spend your proceeds in any amount at any time on any purpose you wish, up to your credit line maximum. Excellent for home improvements or having available low interest rate funds for other major purchases or instant cash flow reasons, a HELOC gives you the flexibility to use your proceeds when you want and repay on a schedule that fits your budget.
