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Home Equity Loan
[h3]Home Equity Loan: Make Your Home Work For You[/h3] When it comes to being a homeowner, many prospective homebuyers assume that most of the financial costs come when purchasing a home.
After all, a real estate investment requires a substantial one time cost when buying a home followed by regular home mortgage payments. However, as most homeowners will attest to, there are times when you suddenly need some extra financing. In these cases, you can use your home to tap into your real estate investing funds to help you out. Known as a home equity loan, a home equity loan allows homeowners to use their home’s built-up equity as collateral.
As a result, the homeowner is able to borrow the remaining value of the home’s value minus the remaining mortgage debt. In return from the home equity loan, the home mortgage lender is able to claim the home in instances when the borrower is unable to repay the payments of a home equity loan. For homeowners, a home equity loan is a good option to pay for unexpected expenses. Many homeowners use a home equity loan to pay for a college education, a new car, or for home improvements. While it may sound risky, a home equity loan is actually a great investment. The advantages of a home equity loan are primarily financial based. Usually, a home equity loan comes with lower loan rates compared to other loan plans. Additionally, a home equity loan has a tax benefit, as its interest rates are usually tax deductible. It is important that you check to see how your local government classifies home equity loans for tax purposes before you decide that this is the best recourse for you. One of the most common questions from homeowners who are interested in obtaining a home equity loan is the type of home equity loan that they should obtain.
This all depends on your circumstances. For those homeowners who are looking at significant one time expenses, then the best option for you may be a closed end home equity loan. A closed end home equity loan is a one time loan in which the homeowner is unable to make any further borrowing. Generally, a homeowner is able to obtain the full value of the appraised value of their home, although in instances of over-equity loans, they are able to receive a loan that provides more than the value of the home. For individuals who expect to have a steady stream of expenses, than the best option for you may be an open end home equity loan. Commonly referred to as a home equity line of credit (HELOC), an open end home equity loan allows homeowners to borrow money from a home mortgage lender a number of times, up to a limit that the borrower sets.