Home Equity

7 Smart Ways to Maximize Home Equity Loans

Home equity loans take advantage of the equity in the borrower's home; equity is the difference between the fair market value of the home minus the current mortgages on the property. The loans may take different forms, a home equity line of credit in which case the money is available but no interest is charged until the money is used. Another choice is a home equity loan where all the funds are released up front at the time of closing. The loans may be for a fixed period of time at a fixed rate or an adjustable rate (ARM). With a fixed rate mortgage, the interest is the same rate for the period of the loan. Adjustable rate loans usually have a lower initial rate but are tied into an index (prime interest rate) plus a point or two after the initial lock in rate period.

1- They can be used to consolidate high interest credit card debt. The maximum rate on adjustable home equity loans are usually below the credit card rates. Credit cards can have interest rates as high as 21%. The maximum on ARM home equity loans is between 11% and 12%.

2- The funds can be used to reduce or pay-off the balances of negative amortization interest only second mortgages. In a negative amortization the minimum payment of interest is less than that earned by the lender and the unpaid interest is added to the mortgage.

3- The home equity loan, if used to consolidate bills, will provide lower monthly payments.

4- The interest rate on a home equity loans is usually less then the rate on an unsecured equity loan. In an unsecured home equity loan, the total loan exceeds the fair market value of the property. The lender will require a higher credit score and interest rate.

5- Home equity loans can be used to pay off revolving credit debt.

6- The borrower can access cash which may be used for any purpose, home improvements, education, vacations, etc.

7- The interest on home equity loans is almost always tax deductible. The amount of the tax deduction depends on the borrower's tax bracket. A tax professional should be consulted to determine whether or not the loan is deductible.

When you compare home equity loans make sure you are comparing fixed rate loans with fixed rate terms. And if you are comparing home equity credit lines, then remember to compare the prime rate margin after the introductory period. Keeping your loan shopping on fair playing grounds for the brokers and lenders will help you get a great loan within a reasonable time-frame.

Mary is published web author for many mortgage and real estate articles. She writes articles for people all across the country in an effort to increase their awareness for home finances. You can read more of her home equity lending articles online at BD Second Mortgage & Home Equity Loans. To get more equity loan advice & finance tips, please contact the loan team to learn more about program updates and the approval process for home equity lines of credit and 125% home equity loans.

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Home equity loans drying up for some - Business - Personal finance ...
Like many homeowners during the housing boom, Lynnette Madden and her husband decided to open a home equity line of credit about a year and a half ago as ...
Americans' home equity near a record low - Business - Real estate ...
WASHINGTON ? Falling U.S. home prices have shrunk equity so much that the proportion of their homes that Americans actually own is near its lowest point ...
Home equity lines have dried up across U.S. - Business - Personal ...
Home equity lines have dried up across U.S. As home prices collapse, banks cut off credit, further souring the economy Below:
Late payments for home equity loans rise - Business - Real estate ...
WASHINGTON ? Late payments on home equity loans climbed to a 1½-year high in the opening quarter of this year, while delinquencies on credit card bills ...
Retirees no longer count on home equity - Business - Personal ...
Many Americans have recently found themselves changing retirement plans after losing a substantial amount of home equity as the housing market and the ...
Equity in Americans? homes falls to historic low - Business ...
NEW YORK ? The equity Americans have in their most important asset ? their homes ? has dropped to its lowest level since the end of World War II ...
Students get creative to pay off loans - Business - Personal ...
Lines of credit typically work like a credit card, with a limit and a revolving balance: the average home-equity line of credit currently has an interest rate ...
Use of home equity hits a four-year low - Business - Real estate ...
Use of home equity hits a four-year low Freddie Mac report cites falling residence values, stricter lending standards Below:
Ford, Toyota are pinning their hopes on China - Business - Autos ...
NEW YORK ? Ford Motor Co. plans to build a new assembly plant in China ... $30K home equity loan FICO: 5.75%
Cities sue, invest to stop foreclosures - Business - Real estate ...
These stem from lost tax revenue and jobs as well as slower consumer spending that come with home equity declines, and don?t even include the financial toll ...

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