Equity Home Loans

How do home equity loans work?

Public Comments

1. Don't do it-you will lose out in the end!
2. you can only get one if your house has gone up in value example you bought your house for 300,000 dollars and its being apraised at 360,000 dollars you have 60 thousand dollars in equity. you can get up to 80 or even sometimes 90 percent of your equity out with a equity loan. you will have to pay some fees upfront like the apraisal of your house and application fees the rest is just taken out of your loan.
3. It works like a line of credit or a credit card. You get approved with a bank for a Home Equity Line of Credit. Just like a credit card, the line starts at 0 balance at first. It's almost like a safety line to have to account for anything life throws at you quick, such as surgery, funeral, or simply your son's college tuition. Go to any big bank to ask for more detail. Since the market is so slow, you can go harass the banker for a good half day without annoying him/ her.
4. You can cash out the equity of your home to use as you wish. Equity is determined by the value of your home minus the balance of your 1st mortgage. You can use online tools like Zillow.com to get an idea of what your home is worth. An equity loan requires a credit application and it is not just based on home values but credit and debt as well. If approved, sometimes you can sign in as little as 1 week or as long as 5 weeks, depending on how difficult the loan is or how fast the processors get all your information back. After you sign, the funds are available for you to do what you will with them. You'll make a monthly payment over a set term-usually 5-15 years to pay it back.
5. It's like a giant credit card but without the super high interest rates. The rate is based on Prime plus 1 or 1.5 or even Prime minus 1. It's up to your credit profile, income, and how big you want the equity line to be. They are interest only payments and you can usually take out as much or as little as you want until you reach your limit. One of the biggest factors now is value. Banks are very conservative when it comes to a homes value today.
6. a home equity loan is a mortgage. when you already have a mortgage, it goes into second position behind the first. meaning that if your home gets foreclosed, the company that you have the first mortgage with gets is money first, and the bank that has the second gets the remaining money. home equity loans/second mortgages tend to have a higher interest rate than first mortgages because that bank is in second position, and therefore is more risky for the bank because there is a higher possibility that they will not get their money back. be sure to do your homework with the bank that you get this with. and be sure that you know what type of loan it is that you are receiving. after you sign the final loan docs, you only have about 3 days to change your mind. also be weary of lines of credit. it works like a savings account, but it also shows on your credit report like a credit card. so if you have line of credit worth $50,000 and you have spent almost all of it, it will show like a credit card that is maxed out at fifty grand. this can hurt your credit. your best bet is to find a small local credit union. they tend to have the best rates, and are less likely to sell your loan to another lender. good luck
7. If your house is worth more than you owe on your loan, then the difference between the two is called equity. The difference between what your house is worth and what you owe on the loan is a personal asset and can be used in several ways. The most common is for a homeowner to refinance the loan and make the new loan amount for the total home value rather than just what is owed and then you get that money as cash to do what you wish (typically, home improvements). The lender will get an appraisal to confirm value and you have to qualify for the new loan, but it's commonly done - esp in past years when the market was growing. The problem with this is that if your house loses value before you move out or payoff the loan, then you owe more than the house is worth and that's the situation so many people are finding themselves in today's real estate market. Another way to tap into your equity a little bit without refinancing (which costs money) is to open an equity line of credit. It's basically a credit card with your lender and the maximum is equal to the equity on your home. You can get money out and pay it back with interest, which is usually high and similar to credit card offers. If you just take a little out at a time and pay it back quickly, then this is a better use of your equity for quick cash needs.
8. their is two types of home equity loans. first is the Home Equity Line Of Credit also known as HELOC in this type of loan the lender will predetermine an amount you can borrow usually max of 90% of the homes value.(in todays market. this was not the case a year ago) this loan is like a huge credit card, the bank gives you a check book that you can use to buy good and sevices. these loans are normaly adjustable rate and can change monthly. however they are tied to the prime index which normally does not move monthly and has been around 6.75 to 8.75% in the last 4 years. the other type is the Fixed Home Eguity Loan. In this type of loan you can only withdraw once at the time of loan funding. the rates on this loan range from 7.00% to 12 % depending on credit, loan to value, and income verification. if you have any other questions or would like to know what you would qualify for call me. Steve Khan Sr Mortgage Specalist Stinson Financial ph:760-471-3777 ext 103 cell 760-201-5660