Home equity is the difference between the value of the home deducted by the remaining mortgage and other home costs. Home Equity accumulates over a period of time as the borrow pays down the mortgage and/or as the value of the home rises. Home equity loans are usually a line of credit granted to the borrower by a lender against the equity of the home.
These loans are usually very competitive and cheap. It usually takes two weeks to complete the loan process. Some lenders guarantee home equity loans within days, but tend to charge higher interest and/or fees. Because home equity loans are competitive it is smart to check with more than one lender when shopping for an equity loan.
There are a few reasons to consider taking on an equity loan. You can use the loan to pay off other higher interest loans, to consolidate debt, especially that of credit cards, to do major home repairs, maintenance, or improvements, or to finance education or major medical expenses.
When considering an equity loan you should determine how much equity you have in the home and how much you intend to borrow. Some lenders lend up to 85% of the value of the home. You should also consider the effects of fixed and variable interest rates and enquire about fees and costs and make sure there are no hidden fees. And most importantly you should develop a plan on repaying the loan.
To qualify for a home equity loan, lenders typically consider your current employment and the duration and stability of that employment, the stability and conditions of your current residence, the home owner must exhibit a good credit background, be in good standing with other lenders, and exhibit the ability to repay the equity loan.
