As the owner of your own home, you have a very important resource available to help you weather many financial storms including the current global credit crunch. With the credit crunch in the news on a daily basis, it’s a good time to take a look at the equity tide up in your biggest asset – your home. A home equity loan or home equity line of credit (HELOC) is a loan, which is basically granted using your house’s value as collateral. The size of the loan will depend on the difference between your current mortgage value and the current value of your home.
A fixed rate home equity loan is a great way of freeing extra cash which you can use for a variety of purposes including debt consolidation, wealth creation through good sound investment of capital, education, home improvement etc.
But before you decide on a fixed rate home equity loan or on a variable rate home equity loan its best to compare the pro’s and cons of each type so that you can make the right decision for you.
With your home equity loan being one of the biggest long term financial decisions you’ll make, its best to get the decision right from the very beginning. Getting it wrong could literally cost you thousands.
The question is whether to consider fixed rate home equity loan or a variable rate home equity loan.
Fixed Rate home equity loan
A fixed rate home equity loan is a loan where the interest and thus the repayment are fixed at a certain interest rate for a certain period. The period varies but can be anything from two to five years to the length of the loan. The pros of a fixed rate home equity loan are:
- They provide certainty with regards to payments
- You can budget easily if you sign up for a fixed rate mortgage
- Even if the interest rate climbs, your payments remain constant
Cons of a fixed rate home equity loan include:
- Your payments do not decrease if the rate decreases
- You cannot take advantage of market up and downs
- Initial rates on the fixed rate mortgages are usually higher than variable rate deals.
A fixed rate home equity loan can help to cap your payments and they make it easier to budget. The best time to take advantage of a fixed rate home equity loan is when the rates dip a little. You can then refinance your home equity loan with fixed rate home equity loan and take advantage of the fact that rates will climb.
Variable Rate home equity loan
As opposed to fixed rate home equity loan, the interest on a variable rate home equity loan changes all the time. This means that when interest rates climb, so does your home equity loan repayment.
The pros of this type of home equity loan is that if rates fall, so does your repayments, but unlike fixed rate home equity loan, it is very difficult to budget for payments which fluctuate. This type does however allow you to take advantage of changing market conditions.
If the current rates are high, then its best to go for a variable interest rate loan and then once the rates fall, to try to change it to fixed rate home equity loan.
For more information please visit http://www.low-rate-payday-equity-home-loans.com for more information
Watch the video related to equity loans
While the credit crunch has made borrowing for… or against… your home more difficult, home equity loans and lines of credit remain popular for those with equity. Stacy Johnson explains what these loans do and if you should consider them.
Help answer the question about equity loans
More than one home equity loans at a time?I want to know if I can get more than one home equity loans at a time for a single house from different banks. Because I've applied for a home equity loan from a bank, but it seems to be not enough for me to do what I want to do with the money. So I thought I can apply for another equity loan from a different bank to double the amount. Is it possible?
Lenders rarely change the terms of a loan but inquire. Probably you will have to refinance to a fixed rate mortgage.
There are a number of factors that go in to the scoring model and on time payments is a major one, but not the only one.
Having a new account can be a risk factor all by itself. Since it is a closed end loan, the balance is near the limit and it has probably only just started reporting.
I wouldn't freak out or anything. A 740 is still pretty darn good. My scores boucne around with little rhyme or reason.
Sometimes opening a new account can have a positive affect. I went to Home Depot to buy $300 worth of windows and walked out with 20K in new credit. Having the additional available credit had a very favorable affect on my scores. I don't have to use the credit if I don't need to.
Also, if you have a balance on a credit card that is more than 50% of the limit, you may want to pay it down or transfer some of the balance to another account so that none of your balances are over 50% of the limits.
Again, a 740 is a great score so you really don't need to be worried about anything and it will probably go back up in a month or two once the new loan is a little more seasoned.
Forget the tax. The Home equity loan is a VARIABLE rate. The rate WILL go up. The ONLY tax implication is that interest on BOTH loans is deductible. Paying more interest for a larger deduction nets LESS money in your pocket.
Hello, what happens if an identical house is sold for 500k. Could the bank ask for money back (75% of 500k) immediately?
what kind of mic are you usings it sounds really good?
This site has some of the best companies
http://homeequity-linecredit.com/
Its best to compare a few, checking rates, terms etc..
That’s mess up you know. It causes recession and massive corporate bankruptcies. This country… We got idiot bankers, and greedy executive screwing everything up. Now, they can’t fix it the way it was.
We will be heading dark ages in few years.
(That’s because you don’t ACTUALLY have that 1.5 mil yet, you have it when you sell the house) No you won’t because u can not know its price untill someone pays you a price.
ya but schooling should have no base on if you get a lone or not.
Maybe. You would have to refinance you existing mortage, then pay off you HELOC. Unless you can get a loan with NO closing costs at the same or lesser interest rate, ti doesn't make sense. It might take you 10 years to break even. Since you can use the interest from both loans as a deduction on your taxes, it doesn't make sense to me.
what is the title of the previous part and the title after this part….kindly answer…
No it is not, the vale of the house is always fake, the bank might say 1.5mil, but if you can only get a bit or price of 1.3mil then it is vale is 1.3 mil. If you get 1.7mil then it’s vale is 1.7 mil.
Yes, if you can find a fixed rate equity loan. Most are ARM, interst only, or prime plus 2 when you lock in.
I just refinanced and got 4.875
Pay on the credit card debt. The interest on your home eq is tax deductible, so it helps with your IRS taxes at the end of the year. The credit card is not.
BANK OF AMERICA IS THE MOST CORRUPT BANK IN THE COUNTRY!. Bank of America harassed me, ruined my credit, charged me over $800 in fees over a 10 day period, tried to humiliate me, and never stopped calling my house- all because of $50 overdraft!!
In one day I was charged over $250 in overdraft fees because of a company that took advantage of my bank account- BofA charges more fees than any bank in the World!
Question:
bank says you can borrow up to 75% of home’s worth=$1.25m
but in this case, you can only borrow $375k because of mortgage?
If you did not have mortgage, would you have $1.125m is cash and liability?
NO. get the 6% fixed
Even if rates do drop a bit they arent going to drop by much maybe .25 – .5 in the short term future. (speculation for .25 at next fed meeting). So your adjustable will sill be 8.5 or so. Thats quite a big different in interest vs 6%, should be enough to cover closing costs.
Just take an approximate closing costs vs the added cost of 2 -3% extra interest. If closing costs are higher keep the adjustable otherwise take the fixed