Equity Home Loan

Equity home loans are granted to homeowners in exchange for a lien on the equity they have in their property. This type of funding usually requires an amount equal to the loan amount requested. Some loans will be approved based on 125% of the equity in the home. Unlike a refinance mortgage, an equity home loan does not pay off the original mortgage. It acts more like a second mortgage in that it is also secured by the property, but has a distinctly different and separate mortgage agreement. Although this type of program may provide assistance, ideally a borrower will want to have no debt with their creditors. After all, the Bible says in Romans 13:8 "owe no man anything".

This form of assistance can be offered by mortgage brokerages, or traditional lending institutions such as banks or credit unions. There are mortgage brokerages that specialize in equity home loans. These brokerages may offer lower rates or more options in terms of length or type of equity home loan. The most common types are lines of credit. Basically, this is an advance, with disbursements controlled by the borrower as they need them. The interest is usually paid monthly, with the balance being paid after a deferment period.

Many individuals fund vacations, education or home improvements with a line of credit of this nature. Equity home loans are also tax deductible if an individual itemizes on their federal tax return. As with a traditional first mortgage, the interest paid can be written off. This makes funding of this type appealing for homeowners who need funding for a car, boat or any other reason. Receiving an item specific loan will not enable them to receive the tax write off. In addition to tax benefits, an equity home loan is typically offered at much lower interest rates than any other forms of assistance, including mortgages.

If a borrower is interested in receiving the lowest interest rate possible, they should know their FICO score. This is their credit report score and directly influences the interest rate they will be offered by any mortgage brokerage or lending institution. It is advised that borrowers obtain a copy of their credit report before applying for equity home loans to ensure accuracy of information and scores. If a credit score needs to be improved, the fastest way is to pay down the credit card balances to less than 20% of their limit.

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