Home Equity Loans
Get That Home Improvement You've Been Dreaming About
Equity in your home can be used for home renovations and improvements. Perhaps you want to add a pool. Maybe a new roof or additional bedroom has been needed for quite some time. If your home has equity in it, you can use it to help make your dreams a reality.
Improving your home with the equity you have already built is a great way to increase the overall value in your home; thereby, providing additional equity for future use.
Home equity can be used for any purpose you desire. Even if you do not want to immediately invest back into your home, the funds can be used for that long deserved vacation, new business or to simply consolidate debts and open up your monthly cash flow.
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Applying for a Home Equity Loan
The most important things to consider when applying for a home equity loan or Line include your credit score, desired loan amount, appraised value and combined loan to value (1st mortgage + new 2nd mortgage in relation to your appraised value).
Home equity loans can be in one lump sum or as a home equity line. Most home equity loans have a fixed rate and come as one lump sum whereas the majority of home equity lines are adjustable mortgages. Home equity lines allow you to draw from the loan as needed and use it like a credit card. Products are constantly changing and we are now seeing some additional variations with home equity terms.
2nd mortgage rates and payments tend to be very dependent on credit scores, more so than most 1st mortgage products. The better the credit score and lower the combined loan to value ratio lead to better rates, lower fees and more favorable monthly payments. Some lenders give rate incentives for higher loan amounts on 2nd mortgages. Weigh the rate and payment difference between a higher CLTV and higher loan amount to a lower CLTV and lower loan size.
Be wary of equity loans of 100% CLTV and higher. You could go negative on your loan if the market drops leading to higher foreclosure probability.
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Opening your Options with a Home Equity Loan/Line
- Consolidating debt with a home equity loan or line of credit may help improve your credit score, especially if your debts are over 50% of your credit limit on the credit cards or loans. The likelihood of missing a payment is reduced as you do not have as many payments to make each month.
- You are likely to have much more favorable tax deductions by consolidating your current debt into a home equity loan or line of credit. Mortgage interest is tax deductible whereas a lot of other debt is typically not deductible. Consult your tax advisor for information.
- Once credit scores are higher or you have more cash flow, your overall financial situation can improve allowing you many more financing options and complete ability to manage your financial decisions. A home equity loan or line might just be the step for you to further your step toward financial freedom. Apply with the Finance Box today to have various quality lenders vie for your business and provide you with additional information.
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