Home Equity Line of Credit
Get cash using the value in your home
Home equity release is a way to access cash using the value which is ‘tied up’ in your house. It’s a line of credit that is available to homeowners over a certain age who have paid of some or all of their mortgage and want to continue living in their own home.
It is a complicated area of finance and before you enter into any agreement, carry out thorough research on the lender you are considering dealing with and also research the different types of loan available as well as ensuring you’re being offered a reasonable interest rate.
Who is eligible?
People over a certain age (usually from 50 years) HomeownersHow does it work?
Broadly speaking, there are two types of home equity loan; a home reversion plan and a lifetime mortgage. Within these loan types there are many variations and Interest rates. Repayment terms and other conditions will vary between different lenders. Here is a brief overview of how these schemes work:
Lifetime mortgage:
Continue to live in your home Receive a cash lump sum, regular income or both Make monthly interest payments on the loan Repay a pre-agreed amount when your house is sold Home reversion plan:
Continue to live in your own home Sell all or part of your home Receive a cash lump sum Pay little or no rent while you continue to live in your home Your loan is paid off when your house is eventually soldShould you take out a home equity loan?
Like any financial product, that decision depends on your individual circumstances and requirements. A home equity release scheme is a serious financial undertaking and it is absolutely vital that you thoroughly research all your options for raising funds before you commit to this type of financial arrangement:
Can you sell your current home and downsize? Are there any other assets you can sell?Always seek independent financial advice
Learn about the different types of home equity loan (we have covered only the basics here) and thoroughly research any lender you are considering doing business with. Don’t rush into any agreement, it’s important to be armed with all the information you need to make an informed decision and get the best deal available.
By: Maz Grundy
Archive for September 18th, 2009
Home Equity Release
Sep 18
If you need a way to free up the cash equity in your home one way to do so is through a 100% home equity loan. With interest rates as low as they are currently the home equity loan has been a very popular option for getting more cash and a 100% home equity loan takes that even one step further. This type of home equity loan might not be right for you, but you can decide by asking yourself a few easy questions.
How Low is the Interest Rate?
You always want to get a low interest rate on any loan, but this is especially true of a 100% home equity loan. Make sure you can’t get a better rate by getting a personal loan or tapping your credit cards. It’s highly likely that the interest rate on your home equity loan will be the lowest you can find, but it never hurts to check first and make sure. Go online and request quotes from a variety of online lenders to get a good idea of what their current home equity rates would be for you.
You should also know that by borrowing against 100% of your homes’ value you won’t qualify for the lowest rates, but the rate should still be lower than that on credit cards and even personal loans. In addition you get a tax savings by taking a home equity loan, so factor that into your decision as well.
What are the Benefits of a Home Equity Loan?
Your personal benefits will be determined by what you use the cash for. If you’re paying off high interest credit cards or making home improvements that will boost the value of your home then by all means you should consider a home equity loan. On the other hand, if you want to use the cash to finance a trip around the world or to go on a huge shopping spree then you should probably reconsider. Basically, as long as you’ll be improving your financial standing with the proceeds of your home equity loan then it makes good sense for you. If there is no financial benefit then you should forgo the equity loan and simply save for that purchase.
How Long Will You Stay in Your Home?
The length of time you plan on living in the same house can make a big difference in whether or not you want to consider getting a home equity loan. By taking all of the cash out of your home now you are ensuring that there won’t be much left if you sell the house in the next few years. Especially with the declining house values you could actually end up owing more than the home is worth.
While it can make sense for some, you should consider carefully before taking a 100% home equity loan. Once you’ve taken all the cash out of your home equity you no longer have that cushion and you might end up missing it should you have an emergency or even a good opportunity that you would need cash for later. If you’re benefiting financially then it could be a good move. In any case you’ll want to get quotes from several lenders before agreeing to any home equity loan.
By: Steven Walters