There are two major kinds of loans that homeowners know. The first is a mortgage. A mortgage or a mortgage loan is given to a person, by a bank, to finance the purchase of a home. The 2016 median home price in the United States is approximately $188,000. Few Americans have enough money to buy a house outright, though. The need for a mortgage loan gives people the opportunity to purchase a house to live in. There are various terms for a loan, such as a fixed term of 30 years to pay the loan back, for example.
However, there’s also another kind of loan that homeowners seek out. That’s a home equity loan, and that’s what I’d specifically like to speak with you about today. Here is some home equity loans information for 2016 and 2017:
1. Your Home is Collateral
Buying a home is a good investment. It allows for you to use the equity you’ve earned as a means of obtaining a loan. A home equity loan is where you borrow money with the equity of your home as collateral. Equity is the difference between the worth of your home and the amount you owe on the mortgage.
2. Not Paying Back A Home Equity Loan Means Losing Your Home
Collateral is what a lender receives to ensure that the loan will be covered. If you fail to pay a home equity loan back to the lender, the lender can take your home as collateral. That means you lose your home. Therefore, paying back a home equity loan is important.
3. There are Home Equity Loans and Home Equity Lines of Credit
A home equity loan is a fixed amount that you pay back every month. The amount of the loan depends on a lot of factors, including your credit history, your income, etc.
A home equity line of credit or HELOC is a revolving credit line. As with a home equity loan, the amount of the loan depends on your credit history, income, etc. Therefore, you borrow what you need and make payments back on what you’ve borrowed. In this case as well, your home is collateral. As with a home equity loan, if you fail to make the payments, you can lose your home. Also, if you are late with your payments you put your home at risk. If you sell your home, in most cases you are required to pay off the entire loan.
4. How To Find A Home Equity Loan
The thing to do is to shop around for the best interest rate on the home equity loan. For example, Credit Unions often give good rates for these types of loans. You do not need to get your home equity loan from the same bank who gave you a mortgage loan unless the interest rate offered is one you don’t want to pass on. Sometimes a lender of a mortgage loan will provide a special rate for home equity loans.
Also, check for any conditions on the home equity loan. This is one of the most important factors for home equity loans. For example, are you required to withdraw money whether you want to or not? Or, are you penalized severely for paying the loan back entirely after you decide you don’t want it? Always check the conditions so you know what you’re getting into.