Home Equity Loan Cashing In On Your Equity

This is a type of loan under which a property owner uses his residence as
collateral security and can get prearranged amount against the property. The
loan allows you to use into your home's built-up equity. Home equity is the
actual difference between the amount your home could be sold for and the
amount that you already owe on the mortgage. Assume that the market value of
your home is $200,000 and you owe $70,000 on your mortgage, then you have
$130,000 equity available on your home.
Remember that if you have more than one mortgage taken on your property,
then all of them have to be considered for calculating the outstanding dues.

A home-equity loan is a good way to borrow money for two main
reasons:

.The interest rate is one of the lowest loan rates a borrower can get.

. The interest you pay on the loan is tax-deductible. Thus it is sometimes
recommended by many to replace other consumer loans whose interest is not
tax-deductible, such as auto loans, credit card debt, and medical debt with
the Home Equity Loan.

Caution: If you don't repay the debt, you can risk losing the home and be
forced to move out.

There Are Two Types of Home Equity Loans

1.The standard home equity loan,
2.The home equity line of credit (HELOC's)

In a standard home equity loan, a pre specified amount of money is loaned in
a lump sum for a specified period of time and the same amount of interest is
paid every month. It is also called a term loan, a closed-end loan or a
second mortgage installment loan.

HELOC works similar to a credit card because it has a revolving balance. A
HELOC allows you to borrow up to a certain fixed amount for a specified
period of the loan which is set by the lender. During that time period, you
can withdraw as much money as you need. As you clear the principal, you can
use the credit again, like a credit card.

These loans are repaid in a shorter period of time than the first mortgages.
They often have a repayment period of 5 to15 years.

The loan could be either a fixed interest rate or a variable interest rate.

Homeowners often use a home-equity loan for home improvements or debt
consolidation or to pay for a new car or to finance their child's college
education.

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