Home Equity Loan - All You Need To Know

Home Equity Loan - All You Need To Know

Home Equity Loan - All You Need To Know

A home equity loan is a loan that is secured by the equity in a home. It is sometimes referred to as a second mortgage. If a house owner holds sufficient equity in his house, a home equity loan gives them an amount of cash which they can repay over a period of time. There are basically two types of home equity loans: a fixed-rate loan and a home equity line of credit. Both the types have their own set terms. Usually the time period vary from 5 to 15 years. the fixed-rate loan is the one that involves provision of a lump sum amount of money in exchange of regular expenses upon an agreement and at a specific rate of interest. This interest remains constant throughout the life-cycle of the loan. A home equity line of credit, on the other hand, operates more like a credit card. A borrower who has applied for this kind of home equity loans is granted a pre-approved credit amount. He is allowed to withdraw cash as per his needs. The payment of the loan depends on the amount of money that has been borrowed and also the prime rate index, as fixed by the Federal Reserve. If you are thinking of securing a home equity loan, you must perform a little comparison shopping. Different lender offer different rates of interests, fees and loan terms and conditions. Finding the best possible deal may require you to do a thorough research but the results can be substantial. If you are unwilling to contact a lender personally, you can consider checking on lender through the internet. The documentation process that is involved in a home equity loan is somewhat similar to that of mortgages. Photo identification proof, social security number, income verification, home appraisal, and property insurance proof are some of the requirements of applying for a home equity loan. In case of a home equity line of credit, closing costs are sometimes cancelled. One of the major benefits of home equity loans is that the debt involved is secured by your home. It offers a quick and hassle-free access to ready cash. The amount of interest is tax-deductible. The rate of interest is generally lower than that of regular credit cards.

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