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What is a Home Equity Loan?
Sometimes abbreviated HEL, a home Equity Loan allows homeowners to access the sitting equity in their present place of residence without having to sell there house. Equity can be described in the following equation; Present Value of Home- Purchase Value of Home= Home Equity.
The present value of the home is the result o the mortgage payments made against the mortgage, and also the appreciation/depreciation. Appreciation alone can easily amount to substantial home equity in a short period of time.
Financial lenders normally give favorable finance rates on real estate since it is perceived as a safe and stable investment.
A Home Equity Loan is not the same as a Home Equity Line of Credit, abbreviated as HELOC, which normally involve an adjustable interest rate,whereas a traditional home Equity Loan normally comes with a fixed interest rate.
Home equity loans usually include the following fees :
- appraisal
- originator
- title
- stamp duties
- arrangement
- closing
There may also be some hidden fees not disclosed here.
Good credit is not as necessary to obtain a Home Equity Loan since there is valuable collateral.
Speaking with banks and individuals in similar life situations is the best route to go to find out whether a HEL is beneficial to an individuals finances.
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