refinance home equity loans equity line of credit

 

Advice And Tips For Home Equity Loans And Home Equity Lines Of Credit

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A home equity loan or a home equity line of credit may not always be the best way of making your home work for you.  At certain times, a cash-out refinance may be the better choice.  Rates can differ with a home refinancing over a home equity loan / home equity line of credit (HELOC).  So, find the loan type that will be smoother, easier, less-hassle, and cheaper for you.  We offer both home equity loans and cash-out refinance loans.  When contacted by us, kindly ask our loan professional which type of loan makes more sense for you.  They will be more than happy to get you the best loan for your particular circumstance.  Remember, all loans don't fit all people; if you need a mortgage loan, we'll find the right one for you.

Please note that Peak Home Loans are experts at getting our clients the hassle-free, low cost, easy approval on the home equity or HELOC loan they desire.  Another thing to remember, most people have better credit than they think, at least Fair Credit, keep this in mind while filling out our online form.

If as a home owner you are running into large costs like post secondary tuition, medical expenses or starting a small business a home equity line of credit may also work to your advantage.

In some situations, a home equity loan or a home equity line of credit makes more sense than refinancing.   If you are a home owner who has built up equity with a substantial down payment, has paid down a large part of your mortgage principal and/or has seen an increase in property's you can reap the benefits of a home equity loan by borrowing against the equity you have in your home.  Let the equity in your home work for you, a home equity loan or line of credit's much cheaper than a credit card.

What You Need To Know About Home Equity Loans

You can do a lot with home equity loans, says Wells Fargo.  You can use the money for home improvements, consolidate debt, pay for college, build an addition to your current home, and pay the balance on your credit cards.   Home equity loans can be used for a variety of uses along those same lines.  Other possible uses include:

  • Post-secondary tuition.
  • Starting a small business.
  • Medical expenses.

How Much Can I Borrow?

The amount of your home equity loan will be based on a certain percentage of your property's appraised value, not including the balance you owe to your lender. As a well-qualified consumer, you may be able to get more than that, because your ability to pay on a line of credit's part of the loan consideration.

Home Equity Loan Rate?

The loan rate will vary based on your credit history.   It is usually a variable rate, and 1 to 3 points above the prime rate.   You can claim the interest from your home equity loan, according to bankrate.com, just like the interest on your mortgage on your taxes.  Terms are similar, usually to 10 to 30 years.  There are fees that apply to home equity loans as well plus other expenses such as application costs, the fee for an appraisal, credit check and points.

home equity loan

Types Of Home Equity Loans

1.)  Equity seconds.   This is essentially a second mortgage.  The equity you have now is the collateral for the loan.  You get a better rate with this type of loan because you have possession of the property.

2.)  Over-equity seconds.   This is like an equity second, only you borrow more than the value of the equity in your home.  You only need an appraisal if you are borrowing over $35,000.  Sometimes referred to as "125's" or "115's", they allow you to borrow 115% or 125% of your home's value.

3.)  HELOC, or a home equity line of credit.  This has a shorter term, but increased flexibility.  It gives you a specific credit limit, and you only pay interest on the amount that you use, much like a credit card.   Depending on the line of credit type that you get, there may be guidelines, minimum draw amounts or other requirement to which you should pay attention.

4.)  Debt consolidation loans.  These are different for those that own a home than those that don't.  This loan is not a personal loan, but a loan secured with the equity you have in your home, used for the express purpose of paying off credit cards etc.

5.)  Home improvement loans.   Another common use for a home equity loan, these are used for items anywhere from major repairs to major refurbishing.  You can add on an addition or improve the exterior of your home.  A condition of this type of loan may include the lender requiring the money to go directly to the contractor, and for you to provide an estimate from a contractor when applying for an amount.

Do Not Make These Mistakes - Others Often Do

These are common missteps taken by home owners looking for a home equity loan.  Home equity loans may sound easy to get and a quick solution to some financial problems or needs.  While this true, you still need to exercise due diligence in your pursuit.

  • Wrong lender for the wrong reason.  You still need to choose a lender for the right reasons.  Your current lender may not offer you the best loan, and someone with the lowest rate might not be the way to go.  You need to take a look at the complete package to make sure this is the right way for you to go.
  • Get it in writing.  It is as important to get the deal and details in writing in a home equity loan as in any other major purchase.   If they give you a guarantee, get them to put it on paper.
  • HELOC or home equity loan?  Make sure you understand the difference, know which one you want, and stick to your plan.   You may be surprised on how many lenders will offer you all the alternatives with a presentation bent toward one or the other.
  • Know the value of your home.  Many home owners don't know their exact home value.  This can cause problems and confusion when determining the amount of your loan, which in turn can affect your rates and terms.  Be informed.
  • Do the math.  Depending on rates and terms, a home equity loan can be better than a second mortgage.  Also, only take a loan out for as much as you need, not as much as you can.  The interest you pay on the unused amount could exceed what it earns for you sitting in your checking or savings account.

Peak Home Loans can help you obtain all types of loans associated with your home equity loan, home equity line of credit, or second mortgage.  We can help you regardless of your credit status.  The amount depends on several factors, but the rate may be lower than you think.  Peak Home Loans is here to help.