A home equity loan can be ideal if you need money for your education, paying your medical bills, or even for the renovation of your home. It is a loan in which the borrower makes use of the equity in his home as collateral against the money lent to him. There are two types of home equity home loans: the closed end home equity loans and the open end equity loans. 

The closed end home equity loan is more of a traditional loan. You can also call it a “second mortgage”. By virtue of the closed end home equity loan, the borrower receives the full loan amount at the time of the closing of the loan. The loan is then meant to be paid back by the borrower in monthly payments in fixed installments. The loan has to be paid back in full by a certain stipulated period of time, like 10 or 15 years.

The open end home equity loan is considered by people who desire flexibility in paying back the lender. In this type of home equity loan, the borrower gets a line of credit instead of the entire amount. The borrower can choose how much money he can borrow against the equity of his home. The borrower has the flexibility to choose the time in which he can borrow the money. These kinds of loans generally have a variable interest rate.

When you shop for a home equity loan, it is important to do enough research. Be wary of lenders who try to take advantage of you and give you a loan which you may not possibly be able to pay back.  It is better to pick a lender of repute or the one which a knowledgeable person recommends.




By: Ken Charnly

 

The choice to refinance home loan is a major decision for most people.  There can be many reasons for restructuring the home mortgage–the details are unique to each individual borrower.  Certain common things apply to all home loans–refinanced or original loans.  These aspects of the prospective loan should be review and thoroughly understood by the borrower and should be made clear by the lender or broker who is handling the details of the loan. Look for answers to these questions and make certain to get them answered satisfactorily before proceeding with the refinance.

 

What can the proceeds of the loan be used for?

 

If you arrange for cash out when you refinance home loan, the cash can be used for any legal purpose.  Homeowners often decide to do extensive remodeling or renovation to the home.  The funds may be used to send a child to college, or to pay heavy medical expenses.  Sometimes cash is used to reduce the amount of unsecured debt, particularly debt with high interest rates attached. Funds have been used to start a business or to invest in interest bearing vehicles that will yield enough income to offset the cost of the loan interest and fees.

 

How long does the processing take?

 

The length of time to allow for the home loan refinance to be completed can range from days to weeks.  Generally speaking, the longer it takes to process the loan, the less likelihood of the loan going through.  Sometimes less than scrupulous lenders will drag out the process for an inordinate period of time so that they will be able to collect the loan finder’s fee.  The important thing is to try to prepare as thoroughly as possible before beginning the process.  This can include researching lenders, correcting a credit report and assembling needed documentation.

 

How much can I borrow?

 

The amount that you can borrow depends on the market value of the house, the type of loan that you apply for and the equity that is available.  The refinance home loan amount can also be affected by your credit score, the general economy of the region and the nation and by other factors beyond your control. It is true that almost anyone can be financed these days, but the question remains whether you want or should borrow as much as you are eligible to borrow.

Borrowing more than 80% of the value of the home can result in you being charged Private Mortgage Insurance (PMI) as a higher risk loan.

 

How do I find a lender?

 

Dozens of lenders for refinance home loan can be found in any large telephone directory and even more if you look online.  It is important to be cautious about selecting a lender.  Look for one that is experienced and knowledgeable in the type of loan that you will be requesting.  A lender that has a good reputation with other clients and with professional organizations such as the Better Business Bureau is a good choice in many instances. If you get a referral from a family member that you trust, that is also a great recommendation.

  




By: Alan Lim