Home Equity

Overview

If you are planning to refinance your home loan, a home equity loan is your best option. Home equity loans are available to homeowners and mortgage payers, as it is based upon the remaining value of your property. It is considered a secured personal loan because the lender has guaranteed collateral. Compared with other types of loans, home equity loans normally offer lower interest rates. In brief, a home equity loan is a low interest loan to refinance your home.

Home equity is simply your home’s current value less any money that you owe on it. For example, if your home is worth £150,000 and the balance of your mortgage is £90,000, then your equity is worth £60,000.

Home equity loans are sometimes known as home equity refinancing, meaning that a borrower can pay off an existing mortgage with the funds from the new loan, using the same property (usually your house) as collateral. It is, in effect, a second mortgage. Finance companies offer a good loan based on the available equity on your home, and it is not normally difficult to secure a home refinance loan.

There are many reasons for borrowers to choose a home equity loan. These are mostly used for personal reasons such as financing home improvements, education, holidays, car purchases, raising capital, and so on.

Home Equity Loan Characteristics

Some lenders will offer you a home equity loan regardless of whether your mortgage is fully repaid, but some lenders are stricter in this area. In order for you not to waste time, you will have to enquire first as many companies require you to fill out several loan form applications.

Borrowers who worry about bad credit will find a home equity loan much more accessible to them, as the lender is taking a lower risk when a borrower has a home.

Home equity loans typically have fixed rates with longer terms, over a fixed period of time. Repayment periods range from 5 to 25 years. If you are interested in long-term financial goals, a home equity loan is ideal because you receive the funds in one lump sum. In many areas, a home equity line is similar to a credit card because you can use it up to the limit of your credit.

Online Loans

Looking online for a home refinancing loan is considered a borrower’s advantage because it is where you will find the most competitive deals. Many sites will offer comparisons in order to help you get a leg up on all the information.

Most online lenders have made applying simpler, because potential borrowers can simply fill out a loan enquiry form and have a reply within the day. If you are looking for a home loan refinance online, lenders typically offer this service as well.

Benefits

Here are some benefits in choosing a home equity loan:

• It is an easy to generate extra funds and you can use it for any purpose.

• If you use a home equity loan for debt consolidation, you will only have to pay a single monthly payment, making it easier to manage your funds.

• A home equity loan will have none of the expenses associated with a remortgage, such as solicitor fees, mortgage indemnity, valuation, etc.

• Going for a home equity loan will qualify the interest you pay as tax-deductible.

Types of Home Equity Release

Some UK homeowners are unaware that there are ways to release the equity on their home. Equity release is a way of releasing funds if there is capital tied to your home or property. Generally, there are three types:

Home income plans – These will generate a monthly income from a loan that is invested in an annuity. The annuity will pay both the income and the loan interest. In order to get a guaranteed income, a borrower must choose a fixed interest rate. Note, though, that home income plans are usually restricted to people 75 years old and above.

Loans or mortgages - These will use the equity of your home for you to borrow a percentage of its value. Borrowers agree an on interest rate and the loan period, plus terms of repayment.

Home reversion - This is a plan wherein you sell your home and receive a regular income, a lump sum, or both, from the proceeds of the sale. You can continue living in your property in exchange for rent.

Home A Loan
Demand for secured loans declines as house market slows down, as well bankruptcies and home repossessions rising

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