If you are a current homeowner in America you should give thanks that you didn’t miss this valuable information and how you eschew borrowing money from a company you don’t know. It works this way, folks. This home loan will allow a homeowner to borrow money by simply pledging the home as legal collateral.
It’s especially beneficial to the homeowner who wants or needs a large sum of money. Also, if the homeowner doesn’t have the best credit history, they will still be able to pretty much get the funds they need since they have the best collateral available – the home. For those readers who are not familiar with a home equity loan, it’s a type of second mortgage that will stay behind the first mortgage until paid back. Most lenders love lending money when the collateral is the home since the homeowner can’t disappear with the home or hide it. Talk about safety. Other advantages would be a lower interest rate, tax deductible in some cases and large loans.
The HELOC Also Known as a Home Equity Loan Can Be Useful
One good thing about either of these types of loans is that in most cases the bank who holds the first mortgage on your property will not charge you for any application or bank fees and to top-it-off, give you very competitive interest rates.
Here is how the HELOC can be useful for you if you require any of the following:
- Want to access funds now or in the future
- Want to finalize some debt consolidation problems
- Want to plan some home improvements like an addition to the garage or home
- Want to surprise your son or daughter and help pay for their college education
- Like the home equity loan, there is a potential for tax-deductible benefits
- Want to buy another home in the mountains to enjoy the winter.
In either of these loan situations, your lender should offer you several options when it comes to making payments on the loan. Here are a few options for you to ponder:
- Choose between a fully amortized or interest-only payment
- Flexibility to convert all or just a portion of any outstanding line balance to a fixed rate advance
- Make additional payments to pay down your HELOC as long as your account remains open
Understanding How Both Loan Programs Work
If you have done business with banks or other types of lenders in the past, understanding some of the pitfalls of what can happen if you fail to make payments per the prescribed agreement. As mentioned in an earlier paragraph, one of the worse things to be aware of is losing the home used as collateral. Another common pitfall is that some very clever people have found numerous ways to cheat homeowners out of this most valuable asset: your home.Ergo, when you receive the funds which in some case can be a lot of money, if an outside deal smells or some high-pressure salesperson tells you about a quick way to win in the stock market, take a step back and give it some serious thought or talk with some person who’s opinion you value.
Comparing the Home Equity and Equity Line of Credit
If you balance the sheet between the two loan programs, both are worth considering, but in different ways. Of course, you can always shop around and try a variety of various sources – you know like other banks, brokers, and credit unions or even compare offers you get from visiting online websites or even friends and family members to see what they think. Also, keep in mind that there will be a small difference in the terms and conditions of both of the loan programs mentioned in this article. Most conditions are the same, but not all….so beware and do your homework.