In home equity mortgage, the owner takes out a loan using the home as security. Home equity is the balance of the home?s market value less any debts or liens on the property. It is some sort of a second mortgage in that the loan proceeds can be used for improvements that will increase the value of the home.
Like regular home mortgages, home equity mortgages also use the property as the security. If the debtor fails in his payments, the creditor has the option to foreclose the property. There are many advantages of taking a home equity loan. Payment terms would be easier on the assumption that rates are lower. The available funds can liquidate other high interest debts such as credit cards. On occasions, home equity mortgages may result in tax savings. They can be used to exchange the present mortgage for a shorter term mortgage. Other advantages include lower closing costs, and faster closing.
Home equity mortgages are ideal for people who are planning to use their home equity to finance something else. Because of the lower interest in short term equity loans, it will be to the advantage of the homeowner should he choose to sell his house. Equity mortgages are preferable when the loan amount is smaller. Generally, equity mortgage rates are higher than first mortgage rates. There is also more risk involved due to their second position liens. The U.S. prime rate serves as the index in imposing the home equity mortgage rates. The rule is that the longer the term of the home equity loan is, the higher is the interest, and even higher than the fixed rate mortgages.
High real estate prices motivate people to explore the option of getting a home equity mortgage. Lenders are also cashing in by offering incentive laden equity mortgages. Most lenders require good credit history in order to qualify for a home equity mortgage loan. You may access the internet where you can get not only the current rates but everything about equity mortgage. Alternatively, you can access the websites of lenders for more detailed information. The prevailing rate for the day is also posted in the site. Their sites also have easy-to-use home equity mortgage calculators that give all information, including payments to be made each month and the tax advantages, with the single click of a button. There are also finance professionals available for consultation online or by phone.