Home equity loan also known as second mortgage allows you to borrow loans against the equity of your home. People consider taking equity loan when they require funds for large expenses. But before considering applying for the loan makes sure it is right choice to fulfill your needs. Educate yourself thoroughly with the type of loan.
Home equity loans come in two types-
- Fixed rate loans– In this, the loan is repaid with the interest rate that remains same over the lifetime of the loan.
- Line of credit-It is a variable rate loan. Borrowers are given a certain spending limit and withdraw the money whenever they need it via credit card. In this, interest rate fluctuates over the time.
Here are some of the important things you need to consider when getting a Home equity loan.
- You need to have equity– Equity refers to difference between assets and liabilities. For instance you own a home worth $50,000 but owe $15000 on that home, then your home represents $35000 equity. It is obvious that for getting a home equity loan, you need to own a certain percentage of your home.
- You can receive fixed or variable rate- Interest plays an important role in the type of equity loan you choose. It is important to know well in advance whether you are receiving a fixed rate or variable rate on your loan amount. When the market rates are low, it’s better to go for a fixed rate loan. Otherwise go for a variable interest rate loan.
- A good credit score– For obtaining any type of home equity loan, you need to have a good credit score. Lenders provide loans to the applicants with good credit score. With good credit position, you can get loans at low interest rates.
- Chances of loss of home– Always keep in mind that apply for the home if you have a capability to repay the loan amount back. Most of the borrowers buy the loan with home as collateral and are unable to pay back. This could result in loss of your home.
- Cancellation rule– There’s exist a cancellation rule which states that according to the Federal Trade Commission after signing the home equity loan agreement, you have right to cancel the loan within 3 days of your sign without any charge of penalty. This may occur due to change in your mindset or due to change in your circumstances.
If thinking to apply for home equity loan, get in touch with All Florida Title. We are one of the best companies in Lake Mary, Florida for providing you loans at the most affordable rates. We assure you of quality services. Contact our customer representative for more information.