ur life you may need some extra money. Some
people get home equity loans. Equity is the difference between
what you owe on your mortgage and the market value of your
home. You build equity as that difference grows. As you repay
the mortgage principal to decrease the amount you owe or when
your home’s value increases, you build up equity. You can
borrow against it by making a home equity loan or establishing
a line of credit. Both have much lower interest rates than
credit cards and personal loans. The interest you pay on a home
equity loan or line of credit is usually tax-deductible.
A home equity loan provides you with a lump sum amount of cash.
The terms are simple. You repay the loan over a specified time
at a fixed interest rate. The payment rate is set at the time
of the loan and it never changes. If the value of the loan is
not greater than the value of the house, you may be able to
deduct the interest on the loan.
A debt consolidation loan, another type of home equity loan,
lets you combine all your debts into one loan. Having to make
just one payment a month, you can better manage your debt. If
you’re consolidating credit card bills, don’t use them after
you get the loan. Cut them up and destroy them. Better still,
contact the financial institutions that issued the cards and
close the accounts. Otherwise, you might be tempted to
overspend, which is what got you in trouble in the first place.
A home equity line of credit has some advantages over
installment loans. There is a specified amount of money you can
draw upon as you need it for up to 10 years. You only pay on the
amount of credit that you use. Payments are based on the amount
you borrow and the interest has a variable rate. As you repay
the loan, you have more money you can borrow against. Interest
rates for lines of credit and payment amounts are adjustable
over time.
Today you can apply for a home equity loan or line of credit
online. The minimum amount you can borrow is $5,000, although
some online companies have set the minimum at $10,000. The
amount of your loan is determined by the relationship of the
amount of the loan to your home’s value. This is called the LTV
(loan to value) ratio. Loans of $100-500,000 are not uncommon.
You can usually qualify for a loan or line of credit providing
that you meet the following criteria. You have built a credit
history involving credit cards, auto loans, or a mortgage. You
usually pay your bills on time (some exceptions may apply). You
have had no more than two or three late payments reported to a
credit bureau within the last 7 years. There have been no
bankruptcies or judgments against you with a discharge date of
less than 5 years before you apply for the loan. You have not
had bills reported to a collection agency within the last 10
years.
The online process is usually very simple and takes little
time. You’ll be asked some basic questions about yourself, your
income and the mortgage property. Next, a copy of your credit
report is obtained electronically. You’ll be asked which of
your loans are related to the property being mortgaged. There
will also be an electronic appraisal of your home’s value. Once
the online company reviews all your financial data, it’s just a
matter of seconds or minutes until they approve or decline your
loan.
About The Author: Read more from this author at:
http://www.investing-magazine.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid#98295
##################