Home equity loan is a loan that is borrowed by a person for clearing the financial debts or to meet some financial need. The loan money borrowed against a home equity loan may be used for getting rid of the debts, or to pay for some medical services availed. These are one of the frequently used loans for consolidating the debts or to make urgent payments.
This type of a loan can also be availed to pay for the educational institutions and education related bills. There are a number of people who avail this equity to make renovations or for the money required for some big home repair work.
For a person to apply for a home equity loan, the loan history carried by him must be good. When a home equity loan is applied the borrower’s credit history is checked thoroughly before the loan money is sanctioned. These loans are some what similar to mortgages and hence are sometimes referred to as 2nd mortgages.
What Are The Different Types Of Home Equity Loans?
The second question that may pop up regarding home equity is the type of home equity loans that are available. At present the home equity loans are categorized into two main categories. One type of the home equity loan known as the open end loan is a flexible loan.
In the open end equity loan a borrower can change the borrowings as required from time to time. This type of Home equity loan is also known as H.E.L.O.C, which is an abbreviation for home eq. line Credit. The borrower sets up an initial borrowing amount and depending on the value of the equity against the house, the borrower can increase or decrease the amount of loan amount.
The second type of home equity loan is the closed end loan, where the loan amount is fixed. The advantage of this type of a loan is that if the value of the equity depreciates
The value of loan offered is not affected. And on the other hand one may get less loan amount if the equity appreciates. In the closed end loan the borrower is assigned a fixed loan and this loan amount cannot be changed once assigned.
The fixed loan amount that is assigned to a borrower is dependant on a various factors. The various factors that govern the loan amount include the loan history of the applicant and the earnings that an applicant makes in a year. The other factor that decides the share of the loan amount is the appreciation of the equity, against which the loan is sanctioned.
What Are The Fees For Applying?
The borrower is charged nominal fees which are categorized under different names. Firstly fees known as the appraisal fee may be charged. Stamp duties can also be charged from the applicant. Other than that the closing fees which is a nominal fees is also charged. The fees mentioned May or may not be applicable and varies with the plan opted for.
Author: This article is the property of LoanGuru.org and HomeEquityLoanStore.org – professional financial services with free quotes form multiple lenders: home equity loans, debt consolidation loans, mortgage refinance loans, and other types of loans for any individual’s financial needs.