Home equity loans are used in a variety of circumstances. Some home owners take advantage of the low interest rates and monthly payments that come along with home equity loans to pay off the remaining balance of a first mortgage. Others even use home equity loans to purchase a new, separate home. The most common use of one of these loans is home improvement, which is an excellent investment. The homeowner may take on extra debt as a result of the loan but in the process he or she generally raises the value of his or her home.
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Home equity loans come with fixed or adjustable rates depending on the type a borrower qualifies for. A straight-forward second mortgage comes with a fixed rate and a lump- sum advance of money. A home equity line of credit has an adjustable rate and uses the amount of equity much like a credit card. In this case the homeowner can borrow up to the amount of equity or simply take as much as he or she needs. This way if the home improvement project or college tuition turns out to be less than expected, the home owner can choose to take less. This way there is less to pay interest on and less to pay back.
Another option is a reverse mortgage, though this option is only available to home owners 62 years of age or older who owe little or nothing on their homes. A reverse mortgage is much like the home equity line of credit in that it has an adjustable rate and it can also work like a credit card. Homeowners also have the option of collecting the whole sum at once or in monthly advances. Through this loan, homeowners can arrange to receive a fixed sum every month for the rest of their life, even if the market value of their home depreciates. If the homeowner lives longer than is expected or if his home does not increase in value as expected, he or she may actually wind up with more money than the home is worth. Also, that loan is paid only after the life of the owner or if the house is sold, so at no point does the borrower feel the stress of monthly payments.
Home equity loans give homeowners the opportunity to enhance the quality of their lives through improving their homes and by continuing their education. Apply for a home equity loan today.
There are a variety of loans based on the equity of a home that are available. Home equity loans, home equity lines of credit, and reverse mortgages are a few. A home equity loan, or second mortgage, is a secured fixed rate loan that uses property as collateral. This type of loan is given in a lump sum to be repaid monthly by the owner and is perfect for home owners wanting to fund home improvement or purchase a new car.