subject: Two Types Of Home Equity Loans [print this page] Home equity loans come in two types: Home equity loans come in two types:
1. Home Equity Term which is a fixed rate
2. Home Equity Line of Credit which is variable.
Most loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios. These loans and lines of credit are usually, but not always, for a shorter term than first mortgages. It can be used as a person's main mortgage in place of a tradition mortgage; however they are at a higher rate.
There is a specific difference between a loan and a home equity line of credit (HELOC). A HELOC is a line of revolving credit with an adjustable interest rate whereas a house equity loan is a onetime lump-sum loan. This is a revolving credit loan, also referred to as a home equity line of credit, where the borrower can choose when and how often to borrow against the equity in the property, with the lender setting an initial limit to the credit line based on criteria similar to those used for closed-end loans. Like the closed-end loan, it may be possible to borrow up to 90% of the value of a home, less any liens. These lines of credit are available up to 30 years, usually at a variable interest rate. The minimum monthly payment can be as low as only the interest that is due.
A brief list of fees that may apply for home equity loans:
Appraisal fees
Originator fees
Title fees
Stamp duties
Arrangement fees
Closing fees
Early pay-off fee
Conveyor or valuation fees may also apply to loans but some may be waived. Most loans will have fees of some sort, so make sure you read and ask several questions about the fees that are charged.
Tips to Making Your Home Loan More Manageable
1. Pay a lump sum amount toward your home loan
2. Pay less interest by consolidating your debts
3. Fix part or all of your home loan
4. Is your current home loan the most suitable for your situation
5. Refinancing extra repayments out of the property loan to reduce loan amount
6. Save more funds, having a larger deposit to buy the property can save you thousands!
7. Honeymoon loan rates
8. Consider contingencies
9. Take a longer loan repayment period to reduce your loan repayments
