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. This equity can be used as collateral 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. The percentage rate can vary from 75% to
125%. The length of the financing will also vary. The two main
types of home equity loans are fixed rate loans and adjustable
rate 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 costs more in set-up fees and
comes at higher interest than adjustable rate loans. But if
homeowners stay put and interest rates go up, they will save
money over a comparable adjustable rate loan.
Adjustable rate loan - the interest rate goes up or down
according to the index upon which it is based. 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. This means lower initial monthly
payments.
According to the Consumer Banker Association, the top ten
reasons for getting a home equity loan are:10. Vacation 9.
Medical expenses 8. Business expenses 7. Household expenditures
6. Investment 5. Major purchase 4. Education expenses 3.
Automobile purchase 2. Home improvement 1. Debt consolidation.
Debt consolidation, the most popular reason people cash out
their home equity, is a smart form of financing because of the
money it can save. For example, say you owe $15,000 on a credit
card that charges 17% interest. If you get a debt consolidation
loan at 9% interest and pay it off in five years, you'll save
you over $30,000!
If you're paying more than 15% interest on anything, you should
seriously consider a debt consolidation loan. The right terms
could drop your monthly payments by 35% - 50%, depending on
interest rates, origination costs and tax consequences.
Even for people who have bad credit or who have filed for
bankruptcy, a home equity loan is not out of reach. It can be a
good way to make a fresh start. Websites like
www.easyhomeequitymortgages.com/ help borrowers with bad credit
get the home equity loan that best fits their unique situation.
About the author:
Mike Hamel is Senior Writer for Sales and Marketing LLC
(www.salesandmarketingllc.com), an Internet marketing company
offering everything from website development and optimization to
creating and monitoring cost-effective ad programs. Their
specialty is improving visitor-to-sale conversion rates using
proprietary software and advanced SEM techniques.
Mikehamel@salesandmarketingllc.com.
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