HOME EQUITY LOANS – VERY RELIABLE SOURCE OF FUNDS FOR VARIOUS FINANCIAL REQUIREMENTS

2007-03-08 10:33:40

( Financial )



The home equity line of credit is a very reliable source of funds for your various financial needs. One requirement is to use your home as collateral for equity loans. If you are delinquent in your monthly payments this may imperil your home as the huge unpaid amount at the end of the loan will require you to borrow more money to pay the loan off and will also put your home at risk if you are not approved for refinancing.

Loanable amount and interest rate on your home equity line

Based on your creditworthiness (credit rating and income) and the balance on the loan, you are allowed to borrow up to 85% of the difference of the appraised value of the home and the balance on the first mortgage. You should know the minimum or maximum withdrawable amount upon opening of the equity loans as well as the manner by which you can access your credit. You can access your equity loan in several ways – by check, by credit or both.

Interest rates vary with different lenders. Use the annual percentage rate (APR), which is the cost of credit based on annual equity loan rates as your basis of comparison. Initially, variable interest rates may offer a lower equity line of credit rate, but may increase during the rest of the repayment period. You can have the payments on your equity loans fixed at a locked-in amount if it has fixed interest rates although it could be a little bit higher than the equity loan payments with variable interest rates. However, equity loans with a locked-in monthly payment amount is more advisable because the amount is predictable and you will be able to set aside a specific amount for your payment each month.

Repayment terms and safeguards

Upon approval of the loan, you should know the amount and the frequency of the payment change and whether the payments will be applied to the interest only, to the principal only or to both the interest and principal. If your equity release loan has a variable interest rate, the monthly payment amount may change each month

Lenders should inform you about the terms and conditions of the loan during application period. You should also be informed of the APR, payment terms, the fees that will be charged to open or use the account such as an appraisal, credit report or attorney’s fees; as well as of the changes in the terms and conditions of the account before it is opened. Should you want to cancel the loan, you are given 3 days to inform the lender in writing. Consequently, your home equity line of credit must be cancelled and all fees paid must be returned to you accordingly.


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