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Why Choose A Home Equity Loan?
By: John Mussi
There are many reasons for choosing a home equity loan. A home equity loan
allows homeowners to obtain a loan in addition to their original loan using the
equity in their home. Home equity loans are generally a second mortgage, and are
used for personal use.
Home equity loans are also known as equity release schemes. Home equity loans
are aimed mainly at those homeowners that have paid their mortgages off. They
can receive a cash lump sum or some income by unlocking that capital.
People take out a home equity loan for a variety of reasons. Some people do it
in order to finance home improvements, buy a new car, consolidate their debts or
go on holiday. Others may want to receive a regular income source so that they
can pay for residential care, or just the cost of care.
Home equity loans have fixed rates with longer terms, over a fixed period of
time. Home equity loans can be ideal for longer-term financial goals because you
receive the amount of money you borrow in one lump sum. A home equity line of
credit is similar to a credit card, where you may regularly use it up to your
credit limit.
One of the premium features of a home equity line of credit is that the interest
rate is typically lower than that of a credit card.
A Home Equity Loan will usually mean that you get better interest rates, but you
should always remember that your house is at risk if you fail to repay the Home
Equity Loan.
The amount you can borrow with a Home Equity Loan depends on the amount of
equity in your property. Equity is the market value of your property minus any
outstanding mortgage or loans you have on it.
People with poor credit ratings will find a Home Equity Loan more easily
accessible to them because the lender is taking a lot less risk themselves. Home
equity loans are also beneficial for people with a poor credit rating. A lot of
traditional lenders categorise such people as "high-risk". Home equity loans for
such borrowers don't pose any risk as in case the borrower defaults on the
repayments, the lender can sell the house to reclaim the money from the
available equity.
Here are some of the benefits of a home equity loan:
A Home Equity Loan is an easy and manageable route to generating extra cash.
Using Home Equity Loan for debt consolidation means that with one single payment
each month, you have more control over your monthly budget.
With a remortgage you have the same expenses you do when taking on a mortgage:
surveys, valuation, mortgage indemnity and solicitors fees to pay. With Home
Equity Loan you have none of this, making it easier to arrange.
Repayment period on Home Equity Loan can be anything from 5 - 25 years.
You can use Home Equity Loan for any purpose - for example, debt consolidation,
home improvements, buying a car or going on holiday.
Protected payment plans for Home Equity Loan can provide extra peace of mind.
Always consider your options carefully, as your home is at risk if you do not
keep up repayments on a mortgage or other loans secured on it.
About the Author:
John Mussi is the founder of Direct Online Loans who help UK homeowners find the
best available loans via the www.directonlineloans.co.uk website. |
