Home equity loans are often believed to be the solution to so many things — giving you access to money for home repairs or renovations, a way to reduce debt, covering a sudden family emergency, or even beginning a portfolio of investments. Equity Loan Calculator Advisor Near By is an excellent resource for this. But, before you go and sign up for the first home equity loan you see there’s a lot to think about.
A home equity loan is just like a second home mortgage. If your house is currently worth $130,000, and you have a $70,000 mortgage against it, then you’ve got $60,000 of equity. Most home equity loans may allow you to borrow up to 80 percent of the value of your house, others may go up in special circumstances. In this case, you might borrow another $34,000 as a home equity loan and still borrow just 80%.
So, the first move is to get a reasonably good idea of what is worth your home on the market. Your friendly realtor can help with this, but be mindful that, in the hope of getting your company, sometimes they can inflate the value. You can also see what price identical homes nearby sell for. Or you can pay a professional valuer for your home valuation.
Now you’ve got a starting point, you can work out how much equity you have in home. The other important figure you’ll need to sort out is how much you need for whatever reason you find. Hopefully this turns out to be less than the available equity! It’s even better if less than 80 per cent of the available equity is available.
It’s crucial to not get carried off at this stage. Okay, I have $50,000 available and I really only need $30,000 to complete the repairs so why not borrow $40,000 and blow the rest on a vacation? Note-the more you borrow, the more the repayments will cost you. Borrowing too much is very convenient, only to find yourself struggling to meet the payments and probably even losing your home.
You must also determine which form of house equity loan you want. There are two major types of loans-a closed end loan and a credit line. A closed end loan is exactly the same as a standard home mortgage-you borrow the amount over a set period of time, then make payments over time to pay off the balance slowly.
In comparison, a credit line is like having a large-limit credit card. Some banks require you to make minimum payments each month, while others require payments only if you are at your maximum. This way, the loan will only be for a set period of time, and you will either have to extend the period or refinance the loan with another lender at the end of that period. If you are careful with your money, this form of facility can be useful, but if you’re the type of person whose credit cards are always at their limits, it may not be a good idea to have ready access to such a large amount of credit.
Next, you have to figure out how long you want the money to borrow for. This will vary depending on how much money you borrow, how much home equity loan you can afford to pay. There are lots of good online mortgage calculators that can help you make this work out. When borrowing the money for a closed end loan for 5 years means that you will not be able to meet the payments, then see if extending the loan over 10 years will become more manageable for you. In the long run you’re going to pay more but at least you’re not going to default on your loan.
It’s time to go and find it, when you know what you want! Starting with banks recommended to you by friends and family may be worthwhile-at least they can give feedback on their experiences. You can also go shopping around online, seeking the best price.
Finally, do two more things when you have selected the loan you want, and are ready to proceed. Check for fees first. Banks are mindful of the need for competition, and for that reason will often avoid charging up front fees. It’s amazing though what can be concealed in a contract’s fine print. So read thoroughly before signing any loan documents. If you can, get your legal adviser to clarify the deal.