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
Posts Tagged Interest Rates
Experience has shown it’s essential you review your finances regularly. Equity release schemes are no exception.
Who would have thought that 8 years ago, with essentially a handful of providers; namely Norwich Union, Northern Rock, Hodge & Mortgage Express were the only companies in the market. How times have changed!
The equity release market now has over 20 companies competing for business. This has proved a healthy scenario given the inflexibility & higher interest rates of the earlier plans & enabled such schemes to develop towards the more flexible & competitive plans they are today. But complacency must not prevail.
Competition with the equity release providers has developed new strategies of releasing equity & consequently driven interest rates lower.
It is one of these former companies; Mortgage Express that is of concern.
Customers of Mortgage Express who have equity release schemes with them have received communication over the past months detailing an interesting scenario.
Mortgage Express were one of the earlier companies to recently suffer from the credit crunch after mainly being caught out in the buy-to-let market of which they were a major player. They are a subsiduary of the Bradford & Bingley.
Due to the lending difficulties they have experienced they have now closed to new business & consequently have written to its mortgagors including holders of its equity release schemes. They are willing to release these mortgages, without penalty to a new equity release company of your choice.
For plan holders of the aforementioned it is a big decision to make as some of their schemes have interest rates as low as 5.99%, but some as high as 8%.
So would it be worth remortgaging?
The answer lies in the following factors; current property value, age, interest rate at inception & the increased balance of the equity release plan. This is where independent financial advice is essential.
Analysis can show where any break even point is. This will confirm whether there would be any benefit in transferring your Mortgage Express scheme to a new lender. Research is conducted from the whole of the market & dependent on your requirements, a recommendation can be made from a panel of over 20 companies.
Costs are an important factor in the equation as they can detract any obvious gains of moving to a lower interest rate. This is where specialist deals with lenders are of assistance, as the lower the transfer costs are, the earlier the break even point is for justifying a remortgage.
The lowest interest rate at the time of writing is 5.79% with LV=, hence for some people major savings can be made, however this rate is not available to everybody & independent advice must always be sought
By: Mark Greggs
If you’ve been making regular payments on your mortgage, you’ll find that in addition to repaying your loan you’ve also been building up the equity in your home… and if you want, you can use this equity as a means to secure a loan for a variety of different purposes. A low interest home equity loan can be just the thing to pay for home improvements, debt consolidation, vacation planning, or most other expenses that you can think of. If you’re interested in applying for a low interest home equity loan but aren’t sure how to ensure that you’ll get the best interest rate that you’re eligible for, consider the following.
How Equity Works
Though it’s a popular subject in loan advertisements, many people aren’t sure exactly what equity is or how a low interest home equity loan actually works. Equity is actually a measure of how much money you’ve paid toward your outstanding mortgage, and is calculated as the value of your house minus the amount remaining on your mortgage. This gives you a representative figure of how much you’ve paid toward your house, or how much of it you actually “own”. This feature of equity figures largely into how it is used for a low interest home equity loan.
Equity as Collateral
When you apply for a low interest home equity loan, the lender is going to calculate the equity that you have and compare it to the amount that you wish to borrow. Equity works well as collateral, since it can be easily figured and it is very easy for lenders to process it. An equity loan gives the new lender a claim on your house, which would be settled after the mortgage is cleared should either lender be forced to take possession and place the house on the market to reclaim their money. Though this creates more risk than some individuals would prefer, using equity as collateral opens people of all credit ratings up to interest rates that they might not have been eligible for otherwise.
Lowering Interest Rates
Since equity is generally higher in value than many forms of collateral, lenders are much more likely to offer you a lower interest rate than they might with collateral of a lower value. This means that instead of having to settle for the interest rates that you’re used to getting, you might be able to get a rate much closer to those that individuals with excellent credit receive. If you have a low interest home equity loan, you might also find that loan payments are more manageable due to the lower amount that’s added on to each payment from the accrued interest.
Equity Loans and Bad Credit
A low interest home equity loan can be very beneficial to individuals with poor or bad credit, since it allows them to get a loan when many other lenders wouldn’t be willing to offer one as well as opening up interest rates that they probably haven’t been able to get in a while. Additionally, by making on-time payments to the lender these individuals can actually begin improving their credit score without trying. The payments are reported to the credit bureaus as being on time and in full, and these positive reports gradually begin to outweigh the negative reports that have dragged their credit down in the first place. As the negative reports begin to expire after 5 to 7 years, the positive reports will then begin to have an even larger influence.
By: Paul Rogers