If you are a homeowner in need of cash for any reason, you might consider borrowing against equity in your home. Equity in your home is an excellent source of secured credit; here are the basics of how home equity loans work.
If you borrow against equity in your home there are no limitations on what you can or cannot do with the money. You can use the cash to pay for your child's college, remodel your home, or pay off your bills. You can even take a European vacation. Needless to say, some uses are better than others, but it is after all, your money…sort of.
While you do own a portion of your home referred to as equity, the lender is loaning you money against this equity. You get equity in two ways: by paying down the balance of your mortgage, or by appreciation you realize in the value of your home in a rising housing market.
A home equity loan is simply a second mortgage secured by your property. If you default on this loan, just like your first mortgage, the lender will foreclose and take your home. Home equity loans come in several flavors: second mortgage loans that pay a lump sum, and equity lines of credit that you can write checks or use a debit card against. Both types of loans have their pros and cons; you must choose the type of home equity loan most appropriate for your situation.
There are expenses involved when taking out a home equity loan. You may be required to pay an application fee, lender fees, title search, appraisal, points, and closing costs. Because of these expenses it pays to shop around and compare fees from a variety of lenders. To learn more about equity and your mortgage, register for a free mortgage guidebook.
To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
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