Who is taking out home equity loans?
While the practice of taking out second mortgages has skyrocketed in popularity, many homeowners don't understand what home equity loans are. In a recent survey of homeowners, only 20% of the respondents said, correctly, “Home equity loans and second mortgages are two names for the same thing.” The other 80% said, incorrectly, that a home equity loan and a second mortgage are different things.
What are home equity loans?
A home equity loan is a loan secured by the portion of your home's value you own outright. That’s defined as the difference between your primary residence’s appraised value and your current mortgage balance. Because homes generally hold or grow in value over time, home equity loan rates tend to be very low. They’re always lower than credit cards and most consumer loans.
Where can I find a quote for second mortgages?
LoanShopUSA.com is the leading online marketplace for home equity loans. With more than 1000 participating lenders in our network, we can help you locate one who can help meet your needs. Click here to get your Second Mortgages Quote. This is a free service.
When should I consider a home equity loan?
Banks often recommend a home equity loan or line of credit as an alternative to education loans. They argue that the interest rates are competitive with education loans and the interest is usually fully deductible.
Why should I consider a second mortgage?
Why should you consider applying for a second mortgage? In many cases, the interest rate you pay on your mortgage is lower than many other types of loans. Interest is also frequently tax deductible for a first or second mortgage, but not necessarily for a car loan or a credit card. Consult your tax advisor for more information on tax deductibility and home loans.
How do I repay a home equity loan?
The rate of interest applied to equity loans is much lower than that applied to unsecured loans, such as credit card debt. Many lending institutions require the borrower to repay only an interest component of the loan each month – calculated daily, and compounded to the loan once each month. The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day forward. Some loan products also allow the possibility to redraw cash up to the original loan-to-value, potentially perpetuating the life of the loan beyond the original loan term.
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