What is Equity Loan or Home Equity Loan?

What is Equity Loan or Home Equity Loan?:- Mortgage is a common part of our life. We can borrow money by mortgaging anything worthy. Equity loan is a term of real estate business. Equity is the difference between the market value of the home minus the amount of total liens or mortgages against the property. So equity loan is a mortgage on real estate in exchange of cash to the borrower. Many mortgage institutions need the borrower to repay an interest component of the total borrowed money. The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day onwards. Some mortgage products allow borrowing money again depending on its LTV, potentially perpetuating the life of the loan beyond the original loan term. It is a kind of fixed rate loan. So somebody calls it Home Equity Loan (HEL).

As we all have a residence, so some of us have a home to live in. When there is no source of money, that time we have to mortgage our house. A home equity loan (or “HEL”) is a cash loan against a home’s equity, paid in one lump sum. House is the perfect thing for the equity loan. Because the mortgage institutions can use the house as an apartment for rent. By this way the borrower can reduce the monthly interest rate. Also the mortgage institutions are interested to provide loans against home because loans are secured against a valuable property like home. If the borrower defaulted any of his/her installments, the lender has a right to foreclose on the borrower’s home and sell it. On the other hand usually value of the home is always rising. So Loan Provider Company never will be in loss.

Who can have equity loan? People who have a home can apply for this loan anytime for any reason. People take this loan for many reasons such as investing something more valuable than the home, buying a car, pay of college, upgrade or modify his home, pay medical facilities, have a ready-to-use safety net for financial emergencies etc. People can use it for his own purposes.

There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are sometimes referred to as second mortgages, because they are secured by your property, just like the original or primary, mortgage. Equity loans and lines of credit often have a repayment period of 15 years, although it might be as short as five and as long as 30 years. Home equity loan is usually paid within a shorter time then the first mortgage needs. A parson can highly get 85% equity loan against his valuable product. For example, a parson has a house which value is 100000$. Then he can highly get 85000$ loan against this house.

There are many features and facilities on home equity loan. Firstly it is fixed interest rate. So you can enjoy a great loan. Secondly you have to pay a fixed monthly payment. Also you can reduce the monthly rate by deploying your house as for rent. It takes a little time to refund. Mortgage company are always provides this type of loan without any question. The great thing is it may be tax deductible. So you do not pay any tax against the loan.