“Types of Home Equity Loans”

In order to obtain the most advantageous home equity loan, you need to know what your options are. Here is a list of the three most common types of home equity loans with a brief explanation of each to help you make the right choice:

1. HELOC

The Home Equity Line of Credit (HELOC) is one option where a lender will offer you a credit line up to a certain amount of your home’s equity. You then have the ability to draw money out as you need it, making payments on what you have taken. This type of loan is perfect for long-term home improvement plans where you will be buying materials in installments and do not need all of the money at one time. One major negative with this type of home equity loan is that the rates are generally adjustable and can fluctuate quite a bit.

2. Fixed Term Second Mortgages

Unlike home equity lines of credit, this type of home equity loan is given to borrowers in one lump sum. Although the money can be used for anything, these loans are often used for debt consolidating because borrowers can often save hundreds of dollars per month by paying off high-interest credit card debt and placing it in one of these mortgages at fixed terms of 10, 15, 20, or 30 years.

3. The Over Equity Mortgage

Even if you find yourself in a situation where you have no equity, you might still be able to get a home equity loan. Today, there are several lenders who will offer you a second mortgage up to 125% of your home’s value. Although these loans generally feature higher interest rates to compensate for increased lender risk, they still offer a solid alternative for those in need of extreme debt consolidation. Also, homeowners looking to add smart, value-boosting improvements to their homes can use this route instead of hard-to-obtain, unsecured personal loans.

Hopefully, this explanation will help you choose the home equity loan that is right for you. If you would like to discuss home equity loans in more detail, or any other mortgage related topic, please call us today at 1-888-383-5363or simply fill out the question box below. We will be glad to help you in any way we can. There is never any obligation, and there are no fees associated with simply answering your questions.