A Home Equity Loan
A home equity loan is a finance facility that supplies funds against home or some other kind of property collaterals. Borrower can use the funds provided under home equity loans for any personal aspect like home improvement, debt consolidation to spend vacation and for purchase of property.
Here under this category of loan, home is treated as collateral that work as a security against the repayment of the approved amounts. A problem under home equity loan is that, borrower may lose his property if he doesn’t perform the set repayment schedules on time. The repayment period of home equity loans usually fall between five to fifteen years.
There are two main branches of home equity loan called first rate loan and variable rate loan. A first rate home equity loans supply the asked amount in a single installment and borrower has to repay the amount on a regular set of equal installments over a set period of time. Interest rates charged under first rate loans remain same through out the deal.
On the other hand, a variable rate loan is a class of home equity loan where borrower enjoy more flexibilities that first rate loans. Interest rates charged under variable loans are usually of fluctuating nature and the loan works like a credit card. The loan institutions set a credit limit for every home equity loan account and borrower can use amounts up to that limits.
A home equity loan originally holds the same costs as a first mortgage loan include and chief costs to be paid under a home equity loans are appraisal fee, and application fee. These are also known as opening costs and on other hand closing costs include attorney charges, mortgage preparation charges and filing fees.
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Submitted by admin on Tue, 2006-12-05 05:08.