Mortgage Money Expert

Article by John Elton

HEL as it is often called is nothing but Home Equity Loan. It is a type of loan in which the equity in home is used by the borrower as collateral. Home Equity loans basically come into use for people who want to carry out house repairs, pay medical bills etc. A prerogative against the borrower’s house is made by the loan. This leads to a decrease in the actual home equity. These loans are mostly used in the form of second hand dibs. Thus, first and third hand case is very rare. But there a few criteria which need to be fulfilled in order to acquire a home equity loan. Two of them are reasonable loan-to-value ratios and good credit history. Two types of home equity loans exist in the market- open end and closed end. Second Mortgage is the second name given to these mortgages. This is because they are secured against the value of the property, similar to traditional mortgages. So the period of these loans is shorter as compared to first loans. In the US, home equity loans are deducted as personal tax.Closed end equity loan is the one where the borrower gets a lump sum amount at the time of closing. Hence, further borrowing of money is not possible. Also, there are certain conditions on which it is determined the amount of loan that can be borrowed. Borrowers can borrow hundred percent of the appraised value of the house but sometimes lenders are known to lend more than this amount. These are known as Over-Equity loans. State laws also have an influence on the amount of money borrowed. For example, in Texas, only eighty percent of the appraised value is allowed to be borrowed as money. Realization period for closed end loans is upto a maximum of 15 years and the interest rates are fixed. Hence, a huge payment has to be made by the borrower at the end of the loan term.Open end home equity loan is also known as Home Equity Line of Credit (HELOC). In this type of loan, the borrower is given the liberty to decide the amount of loan he wants to borrow as well as the number of times he wants to borrow it. But the lender sets an initial limit to the credit. Hundred percent of appraised value of the house can be drawn as a loan. These loans have variable interest rates and the maximum loan period is of 30 years. The interest rate is determined by the addition of the Prime rate and margin.Certain fees are also associated with home equity loans. Some of the fees are Closing fees, Arrangement fees, Stamp fees, Early pay-offs, Title fees, Appraisal fees, Origination fees, etc. Sometimes Valuation fees may be levied. Many times these fees are waived off depending on certain situations. Hence, the borrower must make proper note of these.

About the Author

Jon Elton owns and operates a Car Home Life Insurance Quotes website to help while making decision about insurance. He also operates a Cheap Car Auto Insurance site to help taking decision about auto Insurance.

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