Home Loan Resources

Monday, October 09, 2006

Things You Need to Know About Home Equity

By Jay Moncliff

Taking advantage of existing equity in your home through an equity loan might seem an intelligent choice, especially in times of low interest rates. However, before you take a home equity loan to pay for children's education, buy a car or just pay off credit cards, you should educate yourself about the risks associated with this type of finance, and whether it can work for you.

In essence, a home equity loan uses the current equity you have in your home as collateral for a second mortgage. The more equity you have, the more you can borrow. As with all finance provided against security such as property, if you do not maintain your payments, you run the risk of foreclosure on your home. This fact comes as sobering news for many, so you must consider your ability to repay the loan before you borrow against the equity in your home.

Many people like the sound of this type of loan, but neither understand the concept of existing equity, or know if they actually have any in their home. Equity is how much of your initial home loan you have actually paid back. A rule of thumb to determine how much equity you might have, take your home's current value and subtract it from the outstanding loan amount. The remainder is your equity, and amongst other things will be used to determine how much you can afford to borrow. For example, if your home is currently worth $400,000 and you have $280,000 outstanding on your mortgage, your existing equity is $120,000.

This information is the starting point for any home equity loan application. Educating yourself about interest rates, home equity and the application process in general places you in a better position should you decide to apply, and negotiating a home equity loan, the more knowledge you hold at the start of negotiations, the better rate you are likely to receive

Jay Moncliff is the founder of http://www.loansreviews.info a website specialized on Equity Home Loan, resources and articles. This site provides updated information on Equity Home Loan. For more info visit his site: Equity Home Loan

Article Source: http://EzineArticles.com/?expert=Jay_Moncliff

1 Comments:

  • At 7:55 PM, Blogger sabrina said…

    Great explaination. Once you have copies of your reports, take a close look at all the information contained on it. Make sure there are no errors or inaccuracies. When trying to get home loans, you want to make sure that everything contained on the reports are completely and totally accurate. Thanks! Click here Home Loan: Information You Must Know

     

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