Articles About Finance And Refinancing

How To Get A Home Equity Loan Without Losing Your Shirt

Obviously, the title here suggests that you can lose your shirt - or get ripped off with some home equity loans. Here is a common sense approach on how to get and use a home equity loan wisely.

Who Should Get A Home Equity Loan?

In most cases, not nearly as many people should get one as are currently applying for it. Oftentimes, it simply is the result of people who want something - and they want it now. A wise use of your home's equity, though, is to leave it right where it is - building up even more equity that come will come in real handy when you sell it.

A home equity loan, however, is really a loan taken out against your own home. This means that your home itself is the instrument that secures the loan. Your house has now become the guarantee that you will keep on paying your loan. Stopping payments for any reason - you lose it.

What Is A Home Equity Loan?

A home equity loan is typically a second mortgage. As such, it has a higher interest rate than a first mortgage, and a shorter time period to pay it back - up to 15 years.

What Are The Advantages?

A home equity loan can be used for any purpose. It has the best value, though, when used for renovations or improvements on your home. Besides adding to the value of your home (increasing equity even more), the portion used for your home improvement is usually tax deductible, too. This brings down the interest rate more when used for this purpose.

A home equity loan can also be obtained in two different ways. You can get them either as an adjustable rate mortgage, or as a fixed rate mortgage. This makes it most convenient, and gives you the flexibility of choice - based on the economy and your situation.

Is There Anything Better Than A Home Equity Loan?

The best deal you can get is to refinance your first mortgage with a cash out mortgage. This gives you new terms on your mortgage, can be used to combine two mortgages (or three), and gives you the lowest interest rate out there. It also gives you access to your equity by simply adding the amount of equity you want onto the loan. You should be planning on staying in that home, though, for at least the next five years to make it worthwhile.

What Should You Watch Out For?

When you go to apply for your home equity loan, you need to take the time to get several quotes and compare them. Lenders have different fees, and other things that they attach to a loan. Some will attach more than others - making their prices higher. By comparing carefully, you can come away with the deal you want. By not paying attention to what you are getting ? you could lose your shirt. You could pay thousands of dollars more with one lender than with another. Real savings come to those who pay attention.

Also watch out for a lender who tries to give you a loan / equity with a total of more than 80% of the value of your home. You do not need a 125% equity loan ? that creates negative equity and will keep you there a long time.

How Can You Get Better Terms?

Lenders base their financial decisions largely on your credit score. You need to get a copy of your credit report and make sure it is accurate. Also, if you reduce your debt beforehand and make corrections on your credit report, it can help you to get a better interest rate and other more acceptable terms.

Joe Kenny writes for http://www.creditcardsweb.co.uk/ for UK credit cards and also http://www.iloanapplication.com/ for the best in online personal loans.

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