Equity home loan mortgage
Using the equity buildup in a home to finance purchases is an alternative to refinancing. Home equity loans are a source of funds for homeowners to use for a variety of financial needs . It helps to finance the purchase of expensive items, to consolidate existing installment loans credit card debt and to pay medical, education, home improvement, or other expenses .
The original mortgage loan remains in place; the home equity loan is junior to the original lien . If the homeowner completely refinances, the original mortgage loan and the home equity loan are paid off and replaced by a new loan . This strategy is an alternative way to borrow the equity and is not really a home equity loan .
A home equity loan can be taken out as a fixed loan amount or as an equity line of credit. With the home equity line of credit, the lender extends a line of credit that the borrower can use whenever he or she wants . The borrower receives the money by a check sent to him, by deposits made in a checking or savings account, or by a book of drafts the borrower can use up to his credit limit .
The home owner must consider a number of factors before deciding on a home equity loan, like the costs involved in obtaining a new mortgage loan or a home equity loan, current interest rates, total monthly payments, and income tax consequences . Once the equity home loan process has reached the point at which the borrowers financial capability has been approved, the collaterals appraisal value is acceptable, and the legal title is clear, the home equity loan is approved.
In the case of most consumer credit transactions, the borrower has three days in which to rescind the transaction by merely notifying the lender. This right of rescission does not apply to owner-occupied residential purchase-money or first mortgage or deed of trust loans. It does, however, apply to refinancing a home mortgage or to a home equity loan . In an emergency, the right to rescind may be waived in writing to prevent a delay in funding .
Even though most equity home mortgage loans are originated for a term of 25 to 30 years, few borrowers keep the loan for more than 5 to 10 years. In many cases, mortgages are paid off when the home is sold . However, many home owners refinance their loans, for many reasons . A key advantage of being a mortgage borrower is the ability to change financing as conditions change .
Refinance when you need to raise money for some purpose. Over time, you accumulate equity in your home. Equity is the difference between the value of the home and how much you owe on the mortgage . Essentially, your home equity loan is a form of personal wealth, just like stocks and bonds . Equity of your home increases as the value of your home rises . It also increases as you gradually pay off the principal of the mortgage equity home loan .
Often, until you sell the home, this equity is locked in. Fortunately, you can access equity by refinancing the old equity home loan for one with a higher principal or by getting an additional mortgage on the home. You may find that a loan secured by your home equity is less expensive than other types of consumer loans . Both the interest rate and repayment term are more favorable than other types of borrowing . There are also tax advantages to using a equity home loan, as compared to other types of borrowing .
The collection of data for reverse mortgages was introduced in 2001. In addition, new mortgage questions were added and modifications were made to existing mortgage questions to more clearly delineate home equity loans from regular mortgages, as well as to clearly differentiate between home equity lump-sum loans and home equity lines of credit . In addition, more detailed information was collected on home equity lump-sum loans than in the past .
In 1997 through 1999, respondents were asked if they had a regular mortgage, other than a home equity. If they answered yes, they were asked hoe many regular mortgages they had . Respondents were also asked if they had a home equity loan . If they answered yes, they were asked hoe many hoe equity loans they had.
Detailed characteristics were collected on the first three regular mortgages. One of the regular mortgages was determined to be the primary mortgage . Data were also collected on the first three home equity loans ; although, not as much detail was collected on home equity loans as was collected on regular mortgages . One of the home equity loan questions was if the home equity loan was a lump-sum line-of-credit .
In 2001, separate counts of lump-sum home equity loans and line-of-credit home equity loans were obtained. As in 1997 through 1999, respondents were asked if they had a regular mortgage and if yes, how many. Next they were asked if they had a lump-sum home equity loan and if yes, how many . Finally, they were asked if they had a home equity line-of-credit and if yes, how many.
Detailed characteristics were collected for both regular mortgages and lump-sum home equity loans in 2001. The detailed characteristics continued to be collected on the first three mortgage loans with regular mortgages having priority over lump-sum home equity loans. For example, if the respondent had two regular mortgages and two lump-sum home equity loans, the detailed data were collected on the two regular mortgages, and the first lump-sum home equity loan reported. In addition, regular mortgages also took priority in being designated the primary mortgage. For example, if the respondent reported one regular mortgages and one lump-sum home equity loam, the regular mortgage was considered to be the primary mortgages . If, however, the respondent only reported having a lump-sum home equity loan, the lump-sum home equity loan was designated the primary mortgage . The date collected for home equity lines-of-credit loans remained the same in 2001 as in 1997 through 1999.
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