The homeowner should know that the equity in his home can play a major role in saving the house from foreclosure. This is another popular method of utilizing the equity one has in his home to pay off the mortgage loan and stay away from foreclosure and this method is known as home equity line of credit or HELOC. As mentioned earlier in Home Equity Line of Credit the homeowner is lent an amount of money by the lenders by keeping the home itself as collateral. The money lent is the equity stored in one’s home or in other words the actual value of the home that exceeds beyond the mortgage loan that the homeowner owes to the lenders. This is why Home Equity Line of Credit or Home Equity loan taps into the equity in one’s home and lends an amount that is more than what one owes on the mortgage loan.
How much HELOC Mortgage Rates to Offer?
The HELOC Mortgage Rates to be lent to the homeowner is decided by finding out the difference between the actual home value or equity and the outstanding balance owed on the mortgage loan. The difference between the two is estimated to be the value of the home and then the borrower’s provide 75 to 80% of the equity in the home. However, before lending anything it is important for the lenders to determine the repayment capacity of the homeowners just like any other loan as without a stable source of income or employment the money lent can never be expected to be returned and this is why the lenders check the income, debt and credit score of the homeowners before ascertaining the worth of the homeowners.
Here are a few features of the Home Equity loans that might clarify many things for the borrower:
· A Home Equity Line of Credit loan is normally fixed for a 10 years period within which the lender is issued a checks or credit cards or debit cards for using the money. After the 10 years period the borrower can renew the HELOC or home equity loan but most of the lenders do not offer renewal of the loan after the draw period of 10 years ends.
· There are many lenders who might want you to draw only that much amount that is required by you and will charge interest only on that amount whereas there may be other who might ask you to maintain a minimum balance in the home equity loan.
· Before opting to refinance Home Equity Line of Credit loan it is preferable to check the total costs involved such as the appraisal fee, request fee, points, attorney’s fees, title search fees, mortgage preparation fees, filing fees, belongings, title insurance and taxes. All these costs need to be considered before taking up HELOC loan the first time or before opting to refinance home equity line of credit loan.
· The Annual percentage rate on home equity loans is usually variable and is based on two index that is the LIBOR and the U.S. Treasury bill rate.
A Home Equity Line of Credit loan is really helpful to the homeowners as it only helps in paying off the entire first mortgage rates but also reduces the loan amount for the homeowners that can be repaid easily without much effort. The equity in one’s home is all that is needed to avail this loan and so homeowners must always keep a keen eye and updates regarding the value of the home in the market.
