Home Equity Loan

Simple Home Equity Research

The first step to an equity loan or line of credit is to figure out how much equity capital you actually have. This will normally reflect on your LTV (or Loan to Value). To determine your specific LTV, take your total loan amount (Including: 1st Mortgage, 2nd Mortgage, and/or HELOC) and divide it by your home’s current market value.

An Example of finding a loan to value would be:

To ensure the most competitive current mortgage rate available, it is advisable to stay under 80% LTV. With good credit, good mortgage payment history and an LTV under 80%, you will normally be able to get the best mortgage rate available.

If you are concerned that your credit is less than perfect or that your LTV is too high, there is no need to worry because there are plenty of mortgage options available to you. Some of these alternative mortgage loan programs may carry a shorter term or a higher rate, which can actually benefit you in many ways. For example, you can make use of a shorter loan term to consolidate bills at a lower monthly payment to help you become current with any outstanding debts; you may even be able to pay down the balances on your accounts. By paying your bills on time and not overdrawing accounts, you can drastically improve your credit rating, which will enable you to qualify for a much better loan in the future.

A HELOC can be a great debt consolidation solution. The most common home equity loan is a Home Equity Line of Credit (or H.E.L.O.C.), which is a form of revolving credit where your home would serve as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major purchases such as education costs, home improvement costs, medical bills, or to pay off an auto loan.

Depending on the loan program and how you choose to qualify for it, your home equity loan rate can be very low, and typically it will be a type of interest only loan for 10-years. Interest only programs can usually offer the lowest mortgage rate available.

With a home equity line of credit, you will be approved for a specific amount of credit (or your credit limit). This credit limit is the maximum amount you can borrow at any one time while you have the plan. You can access the monies at your discretion, taking out some here and there to help out with emergencies or unexpected expenses; you can even draw it all at once.
Apply online today to see what you qualify for!

The most common uses of a HELOC are paying off
• Personal Loan
• Auto Loan
• College Loan or Student Loan
• Credit Card Debt Consolidation Loan
• Medical Bills
• Or Even for Home Improvement Remodeling
In determining your actual credit line, the lender will consider your ability to repay by looking at your debt to income ratio, loan to value, and other financial obligations, as well as your credit history.

Interest Rate and Plan Features

Home equity plans typically involve variable interest rates rather than fixed rates. A variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate will change, mirroring fluctuations in the index. To establish the interest rate that you will pay, most lenders add a margin, such as 2 percentage points, to the index value. Because the cost of borrowing is tied directly to the index rate, it is important to consider which index and margin each lender uses, how often the index changes, and how high it has risen in the past.

Sometimes lenders advertise a temporarily discounted rate for home equity lines - a rate that is unusually low and often lasts only for an introductory period of six months for example. There are many ways to structure a beneficial home equity loan, so make sure that you examine all of your options when reviewing the mortgage quotes you receive after you apply online.

Variable rate plans secured by a dwelling must have a ceiling (or cap) on how high your interest rate can climb over the life of the loan. Some variable rate plans limit how much your payment may increase, and also how low your interest rate may fall if interest rates drop. Some lenders may permit you to convert a variable rate to a fixed interest rate during the life of the loan, or to convert all or a portion of your loan to a fixed-term installment loan. Agreements will generally depend on the lender you choose to fund your loan.