Don"t Get Taken Advantage of Next Time You Apply For a Home Equity Loan
You might have heard a lot about home equity home loans from friends or office mates, but not sure what it is and how it works? I wonder...
who the heck really can figure out all that math! All jokes aside, what exactly is a home equity loan? To understand what it is and how it works, you first have to understand what a home equity is.
In order for you to actually have equity, of course, you need to own a home.
Your home, for all you know, can be your best asset.
And, no matter how much money you are making at present, time will come that you will need a considerable amount of money- not just extra but big amount of money.
And never say never...
because we never really know what the future has in store for us.
Having equity in your home is the difference between the current market value (appraised value) of your home and the outstanding mortgage balance.
Therefore, if: Your home's appraised value is: $ 100, 000 Your outstanding mortgage balance is: $ 50, 000 Your home equity is: $ 50,000 Now that you know what it means, it's time for you to ask "what is a home equity loan?" There are two major types of loans; the actual home equity "loan" and home equity "line of credit".
A loan or a line of credit allows you to borrow money using your home's equity as collateral.
Both types actually put your home in the hands of the lenders.
If you are not able to pay your dues, this could mean the loss of your home.
So, be very careful (I mean extremely careful) in dealing with this kind of loan.
To compute for your potential credit, most lenders set a percentage of your home's appraised value minus the balance owed on mortgage.
The exact amount in which you can borrow also depends on some factors like your ability to pay, debts, and other financial obligation.
Given the above example: Your home's appraised value: $ 100, 000 Percentage: x 80 % Percentage of appraised value: = $ 80, 000 Less balance owed on mortgage: - $ 50, 000 Your potential credit is: $ 30, 000 Hopefully you got a basic understanding of how all this stuff works...
So, the next thing you should be asking is, what is the best option for you? To know what is the best for you, determine the purpose of your loan and how long you want to pay it, in terms of year.
In order for you not to get hooked-up on debt for a long time, borrow only the amount you need for its purpose only.
who the heck really can figure out all that math! All jokes aside, what exactly is a home equity loan? To understand what it is and how it works, you first have to understand what a home equity is.
In order for you to actually have equity, of course, you need to own a home.
Your home, for all you know, can be your best asset.
And, no matter how much money you are making at present, time will come that you will need a considerable amount of money- not just extra but big amount of money.
And never say never...
because we never really know what the future has in store for us.
Having equity in your home is the difference between the current market value (appraised value) of your home and the outstanding mortgage balance.
Therefore, if: Your home's appraised value is: $ 100, 000 Your outstanding mortgage balance is: $ 50, 000 Your home equity is: $ 50,000 Now that you know what it means, it's time for you to ask "what is a home equity loan?" There are two major types of loans; the actual home equity "loan" and home equity "line of credit".
A loan or a line of credit allows you to borrow money using your home's equity as collateral.
Both types actually put your home in the hands of the lenders.
If you are not able to pay your dues, this could mean the loss of your home.
So, be very careful (I mean extremely careful) in dealing with this kind of loan.
To compute for your potential credit, most lenders set a percentage of your home's appraised value minus the balance owed on mortgage.
The exact amount in which you can borrow also depends on some factors like your ability to pay, debts, and other financial obligation.
Given the above example: Your home's appraised value: $ 100, 000 Percentage: x 80 % Percentage of appraised value: = $ 80, 000 Less balance owed on mortgage: - $ 50, 000 Your potential credit is: $ 30, 000 Hopefully you got a basic understanding of how all this stuff works...
So, the next thing you should be asking is, what is the best option for you? To know what is the best for you, determine the purpose of your loan and how long you want to pay it, in terms of year.
In order for you not to get hooked-up on debt for a long time, borrow only the amount you need for its purpose only.
Source...