Home Equity Loans Questions
Home equity loan questions are usually obvious for homeowners, especially for those who have financial needs. One might have heard about home equity loans and just want to know more about them. Home equity loans are very popular among homeowners, mainly for one reason. They can borrow a good sum of money through home equity loans. Most frequently asked home equity loan questions are as follows: 1) What is a home equity loan? 2) What is home equity? 3) What is the difference between home equity loans & home equity lines of credit (HELOC) 4) What can one use a home equity loan for? 5) How much can one borrow? 6) How quickly can one get a loan approved? These are some among the many home equity loan questions that a homeowner usually asks. Here is an attempt to answer a few of the questions in simple terms. A home equity loan is a second mortgage that allows one to borrow large amounts of money against the equity he has built up in his home at very competitive interest rates. Home equity is calculated as the difference between the home's appraised value (current market value) and the total amount one owes on the mortgage. Say, your home is worth $100,000 and you owe $40,000, then you have $60,000 in home equity. Home equity loans & home equity lines of credit are the two types of home equity loans. Although both let one tap into the value one has built up in his home, they are different. Home equity loans are a second mortgage where one gets the money in a lump sum and pays it off over an agreed term, say 5 to 30 years. Having got the money once, you can't borrow any more, as the total monthly payment is based on total loan amount and interest can be tax deductible. Home equity lines of credit allow one to borrow money as one needs it and pay the interest on the outstanding amount. The monthly payment depends on the amount used and one can re-use the funds as they are paid off, up to the credit limit. One can access the credit line by using checks as many times as he wishes during the draw period up to his credit limit (may be tax deductible). HELOC can be used for numerous things including college tuition, hospital bills, etc. Since one's home is on line, you will want to use it wisely Loan approval time varies from 10 to 14 days. But even before it's approved, one can determine the possible amount one can borrow. The total borrow-able amount depends on the percentage set by lenders, one's ability to repay, debts plus other financial obligations etc. For instance, Your home's current market value = $100,000 Percentage * 80% Percentage of appraised value=$80,000 Minus the amount owed on mortgage= -$40,000 Potential amount you can borrow= $40,000 These are some of the many home equity loan questions. To get the best deal offered, do an extensive home equity loan rate comparison.