subject: What You Need To Know About Homeowner Loans [print this page] What You Need To Know About Homeowner Loans
Homeowner loans are secured loans that a person borrows against the value of their home. These loans mean that the lender receives a guarantee that you will repay your loan, or they will claim possession of the property regardless of whether or not you own it or it is mortgaged. Homeowner loans are typically paid in one large sum in return for a contract agreement that states the terms and the interest rate. A homeowner loan gives an individual the ability to borrow money based on the current value, or the amount of equity in the home or property.
The amount of the loan cannot exceed the value of or the equity in the property. Interest is assessed and is added to the repayment terms, and is figured on an annual basis (APR). The borrower should be aware of the interest rate, determine if it will be fixed or variable, and make sure it is an amount that can be repaid each month on time. In many cases, the interest rate will be equal to the interest rates given to loans by banks and investment firms. It is always a good idea to check out some websites of local banks and investment firms to find out their current rates before applying for a loan.
Homeowner loans can be used for a wide variety of purposes. General home improvements and debt consolidation are two of the most common reasons a homeowner takes out this type of loan. Before any type of homeowner loan is issued, there are a few key elements that the borrower should verify and be aware of. Here are a few questions to ask:
1. How do I get the best rates?
2. How much can I borrow?
3. How long will it take until I receive the money?
4. What is the time period that my loan payments will be spread out across?
5. What happens if I miss a payment?
6. Will my loan affect my credit score?
7. What if I need to borrow more money later on?
8. Can I repay the loan before the end of the contract without penalty?
9. What are all the associated fees?
10. What if I am unsure about the terms after the loan goes through?
Take this list of questions to different lending sources and compare the answers you receive. When you feel as though you are content with the answers, you can then go ahead and fill out an application. When filing an application, make sure you have all of the documentation you will need. You will need documentation as to your home's worth, the equity you have invested, and any current mortgages. You will also need: pay stubs, w-2s, bank statements, and any other proof of income for repayment.
Homeowner loans often offer a bit of flexibility in regard to repayment time periods. Loans can be issued for as few as three years, all the way up to thirty-five years. Loan amounts can also vary greatly and can be as little as $5,000 all the way up to $1,000,000; of course this amount is based completely upon the home value and equity. When filling out a loan application, state clearly how much money you want to borrow. The financial firm will assess this request and verify if the amount is viable.
It is important to note that homeowner loans are a specific type of loan that is set aside only for homeowners. The home is used as the main source of collateral, which poses a potential risk for the borrower. If you fall on hard times, and you become unable to pay the loan, your home is at risk, and could be taken and sold.
