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Home Equity Loan - Home Equity Loan-Which One is Right for You? Home equity is the difference between what your home is worth including the amount you owe on it. For most homeowners their home is their biggest asset including it usually represents a treasure trove of cash. In 2005 the value of home equity across the US was $11.3 trillion. The percentage of home ownership in 2005 was 69% down slightly from the record 69.2 % in 2004. Almost 124 million Americans own their own home. There are probably 20-30 variations pertaining to the home equity loan. The 2 most popular types of home equity loans are called open including closed. The open loan or a line of credit sometimes called a HELOC. In the loan usually the interest rate is variable tied to the prime rate including the term pertaining to the loan might range from 5 to thirty years. Because the rate is variable the payment amount is as well which might be problematic. Lenders often provide a special introductory rate as a particular added incentive. Usually loan closing costs are waived including the application process is limited to ability to pay, credit score, length of time in the house including a drive by appraisal-so a relatively simple process. The other type of loan is a closed loan where the amount is a fixed amount for a fixed duration at a fixed rate with set payments so at the end pertaining to the term the loan is paid off much like a regular installment loan. Both loans are secured by second mortgages on the property. The terms of these loans might range from 5 to thirty years. They are almost always shorter than a first mortgage loan. One pertaining to the variations which has broad appeal is the 125 home equity loan so designated because the borrowers might obtain up to 125 % pertaining to the current combined loan to value (CLTV). the type of loan is particularly appealing to first time home buyers who may need to spend extra dollars on furniture, home improvements, landscaping, etc. The extra dollars might be used for debt consolidation, medical expenses, or college tuition as well. The rates including term pertaining to the loan are usually fixed but because the extra dollars is unsecured the rates are generally higher than a regular first or second mortgage rate but still lower than credit card rates. the type of home equity loan is good for someone planning on staying in the house for a long time while the home appreciates. If appreciation does not catch up or surpass the amount pertaining to the mortgage the home owner could be upside down at the time they sell i.e. they could owe more than the property is worth. There are additional types of home equity loans as well. Reverse mortgages have gotten a lot of publicity lately including could probably obtain a lot of press in the future as baby boomers near retirement age. A reverse mortgage is a home equity loan that you do not repay as long as you live in the home. You must be at least 62 including the house must be debt free or you must be able to pay off the debt other wise you might not qualify. The reason it is called a reverse mortgage is because it is the opposite of a regular home equity loan where you reduce debt including build up equity. In a reverse mortgage you reduce equity including build up debt. That is where the dollars comes from. There is such a wide variety of loans you might obtain using the equity in your home as collateral that it might be confusing. But if you do a little research you might find 1 that is just right for you including your needs.
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