Home Equity Home Loans
A home equity loan allows the borrower to use the equity in their home as collateral. The funds drawn down on the loan can be used for home renovations, income suppliments or further education. A home equity loan
then obviously in turn reduces actual home equity.
Usually you will need at least 20% equity in your home for you to take advantage of a home equity loan. Home equity loans will require great credit history, and reasonable loan-to-value and combined loan-to-value ratios.
Equity loans are usually referred to as second mortgages, because they are secured against the value of the property, just like a traditional mortgage. These loans are usually taken for a shorter time than a traditional mortgage.Loan Terms
The loan terms will vary from lender to lender and for what purpose you need the funds, but generally the terms are for a short period of a few months to a few years. Repayments
These loans generally do not require a monthly repayment as long as they are operated within the approved limit, inclusive of monthly interest capitalization. However, by making any extra payments to your home equity loan you’re not only reducing your debt, but you'll also be reducing your monthly interest payments at the same time. Another benefit to this is that as your loan balance reduces, you are able to re-use that same equity again.Features of the Loan
With a home equity loan
you tap into your equity and use it for a range of purposes: upgrading to a bigger home, investing in property, buying shares, purchasing a new car, paying school fees or simply improving your lifestyle. It lets you act on your investment or lifestyle plans immediately.Interest Rates
Some lenders charge a higher interest rate and/or service fee to have this account and undisciplined borrowers may fail to stick to a mortgage reduction program and never pay out the debt. For this reason, consider whether a home equity loan is suitable for you carefully.
Want to find out if you qualify for a home equity mortgage? Call today and talk to your local mortgage broker on 1300 787 665.