Tips for Getting a Home Equity Mortgage Loan
Home equity can provide funds for home improvement, debt consolidation,or unexpected expenses. Although current mortgage rates are low, home equity loans and lines of credit typically command higher rates.
- Home equity loan: A home equity loan is also called a second mortgage. It is a loan made for a specific amount, to be repaid in monthly installments. A home equity loan can help when you need a largeer amount of money for debt consolidation, home improvement, or a one-time expense.
- Home equity line of credit: A HELOC is structured like a credit card your lender approves a credit limit, and you can access funds as needed through a debit card or checks. HELOCs are handy for unexpected expenses or paying for goods and services as needed. You only pay interest on the amount used, and repayment terms can vary.
- They are mortgage loans: A home equity loan or HELOC is a mortgage loan that is secured by your home. Failure to make payments can lead to foreclosure; your home equity lender can also foreclose if you fall behind on your first mortgage.
- Getting the best mortgage rates and terms: Shopping for home equity loans allows you to compare rates and terms before selecting a lender. Review all loan terms for each home equity loan you're considering to find your winning combination of current low rates and mortgage loan terms.
- Local real estate trends: Deciding to use home equity financing depends in part on home value trends in your area. Declining property values lead to less home equity and the risk of owing more on your home than it's worth.
The Washington Post recently reported a record increase in defaulted home equity loans. Shop and compare mortgage rates and products to avoid problems later.
