Principles In Homeowner Loans
submitted: May 13th 2008 |
by: ChrisChanning |
Total views: 3 |
Word Count: 548 |
| 
When a borrower uses the equity in their home as collateral it is known as a home equity loan. Home equity loans are generally used to help finance expensive things such as medical bills, major home repairs, and college education. A lien is created through a home equity loan. A lien is a form of security interest over an item of property to secure a payment. The lien in a home equity loan is created against the borrower's house, and reduces home equity.
Home equity loans can be first, second, or third position liens. They are generally second position liens. Good to excellent credit history is commonly required when trying to get a home equity loan. Reasonable loan-to-value and combined loan-to-value ratios are also something you may need to get a home equity loan.
Closed end and open end are the two forms of home equity loans. Generally the both of these are referred to as second mortgages. The reason is because they are secured against the value of the property, like a traditional mortgage. Home equity loans may have a longer term than first mortgages but generally they have shorter terms.
Closed End Loan
The act of a borrower receiving a lump sum at the time of the closing and being unable to borrow more is known as a closed end home equity loan. Appraised value of collateral, credit history, and income can have an effect on the maximum amount of money that you can be borrow. It is quite normal that you may be able to borrow up to 100% of the appraised value of the home. It is also possible that some lenders that will allow you to borrow over 100% with an over-equity loan. There may be a limit on how much you can borrow in some states though.
Open End Loan
A borrower chooses when and how often they borrow against the equity in the property through an open end home equity loan. Also the lender sets an initial limit to the credit line bases on factors such as income and credit history. Another name for an open end home equity loan is a home equity line of credit. It is possible that you can borrow up to 100% of the value of the home, much like with a closed end loan. Your monthly payment can be as low as the interest. The interest rate is normally based on a prime rate plus a margin.
There are several fees that can come with a home equity loan. There are appraisal fees, originator fees, title fees, arrangement fees, stamp duties, closing fees, early pay-off, and other costs are often included in loans. There are also surveyor and conveyor or valuation fees, but they may be waived. It is possible to reduce the costs of this fee by finding your own licensed surveyor to inspect the property.
In conclusion a home equity loan can be used for things such as a repair on your house. It is possible to get up to 100% or over of the value of the home. There are closed end and open end home equity loans. Your credit history and your income are major factors in determining how much you can borrow. There are also a number of fees that may be associated with your home equity loan.
About the Author
Learn more about best refinance loans and mortgages.
Comments
No comments posted.
You do not have permission to comment. If you log in, you may be able to comment.
