Home Equity Loans

Home equity loans are granted to a homeowner who desires to pledge the equity in their house as collateral for a second mortgage or revolving line of credit. This funding has become commonplace in the last two decades due to the sky rocketing housing costs, bringing tremendous equity into most houses in the state. Homeowners find themselves with double, or triple the amount, and are cashing out on that without selling their homes. A homeowner can get a home equity loan quickly and easily, and there is no need to have perfect credit for the approval.

Receiving assistance of this nature provides the resident with a way to afford items that do not have loan specific options, such as luxury items, vacations, appliances and household repair. The borrower can spend the funds on whatever they desire. Many home equity loans only require that interest be paid for a deferment period, which can last anywhere from three months to five years. If the owner sells the house, they must first payoff the first mortgage, then repay the lender.

Interest rates on these agreements are much lower than conventional first mortgage rates. Sometimes these rates can be as much as two to three percent lower. The home equity loan line of credit allows the borrower to only pay interest on the money actually used. This acts much like a credit card account. There is a limit, and as it is paid, more of the limit becomes available for use. Borrowers seeking the lowest interest rate should have a higher credit score. A credit report and score can be obtained from any three of the nationally recognized credit reporting agencies.

The three credit reporting agencies are Equifax, Experian, and TransUnion. All borrowers seeking copies of their credit reports can receive them free of charge. Once the credit report is retrieved, it should be checked for inaccuracies that may be lowering the score. If all the information is correct, and the score is still lower, it is recommended that a borrower pay down all balances on their credit cards to at least 20% of their limit before applying for any home equity loans. This can raise a credit score up to 30 points in as little as 30 days. Experts advise speaking with a financial counselor for alternative credit score raising methods to achieve the best rate on a home equity loan. "Blessed are all they that put their trust in him." (Psalm 2:12) Faith in God and prayer for guidance can also be helpful in finding the best lending company and interest rates.

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