Home Equity Loan vs Refinancing
Alan Lim asked:
Home equity loan and refinancing are two excellent ways that can help you manage your finances. However, it may prove difficult to choose one from the other and should depend on what your financial goals are. You can opt for the lower payment schemes of cash-out refinancing, or you can choose the great tax benefits offered by a home equity loan. The choice, however, does not prove to be as simple as this. Here is a comparison of these two types of loans to help you see which one is right for you.
Cash-out refinance simply means that you are refinancing your existing mortgage in order to lower your monthly payment and/or your current interest rate, and get some additional cash for other pressing reasons such as for home improvement, renovation, and the likes. If you are lucky to choose the right timing, you may be able to get all these with cash-out refinancing. Say, your home is valued at $300,000 and your existing mortgage balance is $200,000, your home equity remains at $100,000. You are free to borrow the remaining equity as you deem necessary.
Home equity loans are usually provided in two kinds: the home equity line of credit and the home equity installment loan. A home equity line of credit line means that you are borrowing against the value of your home; your home is your collateral to the credit. Home equity plans are usually set at a fixed time; say 10 years but with variable loan rates. Your interest rate and the annual percentage rate of your mortgage can move up and down depending on the market trends. During the specified time, you are free to obtain the cash when you need it, and pay only for what you happen to spend. Some mortgages are offered with payment of full outstanding balance, while others allow repayment over a fixed time.
On the other hand, an installment loan is a loan that has a fixed rate that stays the same all throughout the rest of your home equity loan terms. Also called the closed end home equity loan, you amortize your loan for periods lasting up to about 15 years. In this kind of loan, you usually receive a lump sum at closing depending on your home value, and you can not borrow further afterwards.
Which is better?
Remember that interest rates do not usually behave normally, much as you want them to. When this happens, home equity loans may actually prove cheaper than refinancing, although they are potentially riskier. Choosing what is better between the two should depend on individual circumstances. For example, if you plan to pay off your mortgage and do not need as much money, you can go for a home equity loan to get lower rates and shorter terms. On the other side of the fence, with cash-out refinancing, you can get all your money up front and simply pay off interest and principal on a lowered monthly basis as agreed upon, with no frills. Weigh carefully based on what your financial objectives are and choose one which you think will give you a fairer deal.
Anita
Home equity loan and refinancing are two excellent ways that can help you manage your finances. However, it may prove difficult to choose one from the other and should depend on what your financial goals are. You can opt for the lower payment schemes of cash-out refinancing, or you can choose the great tax benefits offered by a home equity loan. The choice, however, does not prove to be as simple as this. Here is a comparison of these two types of loans to help you see which one is right for you.
Cash-out refinance simply means that you are refinancing your existing mortgage in order to lower your monthly payment and/or your current interest rate, and get some additional cash for other pressing reasons such as for home improvement, renovation, and the likes. If you are lucky to choose the right timing, you may be able to get all these with cash-out refinancing. Say, your home is valued at $300,000 and your existing mortgage balance is $200,000, your home equity remains at $100,000. You are free to borrow the remaining equity as you deem necessary.
Home equity loans are usually provided in two kinds: the home equity line of credit and the home equity installment loan. A home equity line of credit line means that you are borrowing against the value of your home; your home is your collateral to the credit. Home equity plans are usually set at a fixed time; say 10 years but with variable loan rates. Your interest rate and the annual percentage rate of your mortgage can move up and down depending on the market trends. During the specified time, you are free to obtain the cash when you need it, and pay only for what you happen to spend. Some mortgages are offered with payment of full outstanding balance, while others allow repayment over a fixed time.
On the other hand, an installment loan is a loan that has a fixed rate that stays the same all throughout the rest of your home equity loan terms. Also called the closed end home equity loan, you amortize your loan for periods lasting up to about 15 years. In this kind of loan, you usually receive a lump sum at closing depending on your home value, and you can not borrow further afterwards.
Which is better?
Remember that interest rates do not usually behave normally, much as you want them to. When this happens, home equity loans may actually prove cheaper than refinancing, although they are potentially riskier. Choosing what is better between the two should depend on individual circumstances. For example, if you plan to pay off your mortgage and do not need as much money, you can go for a home equity loan to get lower rates and shorter terms. On the other side of the fence, with cash-out refinancing, you can get all your money up front and simply pay off interest and principal on a lowered monthly basis as agreed upon, with no frills. Weigh carefully based on what your financial objectives are and choose one which you think will give you a fairer deal.
Anita
No Doc Equity Loans – What Exactly Are They?
Gressly Stevens asked:
A no doc equity loan is basically a home loan against your home that does not require any documents on your part. Usually you would submit income documents, job verification documents, have your credit checked, and there might be some other documents that they need, but with a no doc equity loan you don’t worry about any of those documents.
The mortgage company will check your credit and as long as your credit is good enough and you have enough equity, then you get the loan. This can be a good loan for certain situations, but is not a loan for everybody.
If you are self employed, then a no doc equity loan might be for you. You won’t have to prove income, which can be difficult for some businesses. You won’t have to verify your job, which can also be difficult for self employed individuals. You will, however, have to pay a higher rate with this type of loan and you might not be able to get as much of a loan as if you prove income and job.
If you work as an independent contractor, then a no document equity loan might be for you. Independent contractors often have trouble proving their real income and they can have some trouble verifying their job so this type of loan can work wonders for them.
Servers, Bartenders, and all others that have trouble proving their real income can benefit from an equity loan with no documents. If you have been working at the same job for over 2 years and have a strong income, then you should avoid this loan.
If you have trouble proving income or verifying your job then you should check out no doc equity loans because you can benefit from them.
Melanie
A no doc equity loan is basically a home loan against your home that does not require any documents on your part. Usually you would submit income documents, job verification documents, have your credit checked, and there might be some other documents that they need, but with a no doc equity loan you don’t worry about any of those documents.
The mortgage company will check your credit and as long as your credit is good enough and you have enough equity, then you get the loan. This can be a good loan for certain situations, but is not a loan for everybody.
If you are self employed, then a no doc equity loan might be for you. You won’t have to prove income, which can be difficult for some businesses. You won’t have to verify your job, which can also be difficult for self employed individuals. You will, however, have to pay a higher rate with this type of loan and you might not be able to get as much of a loan as if you prove income and job.
If you work as an independent contractor, then a no document equity loan might be for you. Independent contractors often have trouble proving their real income and they can have some trouble verifying their job so this type of loan can work wonders for them.
Servers, Bartenders, and all others that have trouble proving their real income can benefit from an equity loan with no documents. If you have been working at the same job for over 2 years and have a strong income, then you should avoid this loan.
If you have trouble proving income or verifying your job then you should check out no doc equity loans because you can benefit from them.
Melanie
Does anyone know how to start career as a traveling notary for title/loan companies?
Goddess asked:
I am currently a notary in Maryland. I know that many title companies and loan companies use local notaries to meet with clients to close on equity loans, new home and refinance loans, etc. Anyone know any companies or contacts for this? Any ideas on how to start? THANKS!
Doris
I am currently a notary in Maryland. I know that many title companies and loan companies use local notaries to meet with clients to close on equity loans, new home and refinance loans, etc. Anyone know any companies or contacts for this? Any ideas on how to start? THANKS!
Doris
Does anyone have any information on being sued for not being able to pay a home equity loan when you don’t own
drowning in debt asked:
I had to sell my home on short sale after it being on the market for a year and a half and I simply couldn’t afford it any longer. I had the original mortgage and two home equity loans. The first mortgage was paid off and the two home equity loans removed the lien but still wanted me to pay all the money I owed them. I now rent and am unable to keep up all the payments. The home equity loans are now threatening to sue me. They want a big lump sum and there is no way I can come up with it and they say it is too late to make regular payments. What can I do? What can I expect if they take me to court? How reliable are debt relief company’s. I would really appreciate any advice anyone can give.
Melvin
I had to sell my home on short sale after it being on the market for a year and a half and I simply couldn’t afford it any longer. I had the original mortgage and two home equity loans. The first mortgage was paid off and the two home equity loans removed the lien but still wanted me to pay all the money I owed them. I now rent and am unable to keep up all the payments. The home equity loans are now threatening to sue me. They want a big lump sum and there is no way I can come up with it and they say it is too late to make regular payments. What can I do? What can I expect if they take me to court? How reliable are debt relief company’s. I would really appreciate any advice anyone can give.
Melvin
Can I get an Equity Loan when there are No Mortgages (i.e.100% equity)?
Robin Banks asked:
I inherited a home from my parent’s estate that I have 1/3 ownership. I would like to buy out my sister and brother, and there are No Mortgages on the home. It seems I should be able to get an equity loan or line of credit to purchase their 2/3 interests. Can anyone help me?
Matthew
I inherited a home from my parent’s estate that I have 1/3 ownership. I would like to buy out my sister and brother, and there are No Mortgages on the home. It seems I should be able to get an equity loan or line of credit to purchase their 2/3 interests. Can anyone help me?
Matthew
Refinance vs. home equity line: pros and cons?
bergkamp asked:
So if you refinance, you get a fixed amount upfront, whereas home equity line offers more flexibility, I get that. Any other differences?
So if you refinance, you get a fixed amount upfront, whereas home equity line offers more flexibility, I get that. Any other differences?
In terms of interest, closing costs, max loan amounts, and speed with which the loan can be obtained? Also, is home equity loan and home equity line the same thing? WA state.
Christina
Fixed Rate Home Equity Loan Versus Adjustable HELOC: Comparing 2nd Mortgage Loans
Maria Ny asked:
Many people think of a second mortgage as a fixed interest, lump sum loan. However, that is only one form of a second mortgage. A second mortgage is actually ANY secondary lien on your home–secured loan with your home pledged as collateral. Second mortgages are typically categorized as fixed mortgage rate home equity installment loans (HELs), also known as home equity loans, and home equity lines of credit (HELOCs) which are adjustable rate mortgages.
The Federal Reserve states that the home equity line of credit annual percentage rate (APR) is a variable rate loan based solely on a publicly available index (such as the prime rate published in the Wall Street Journal or a U.S. Treasury bill rate). The APR does not include points or other finance charges. The monthly payment amount will adjust as your loan balance and interest rate changes. Loan terms can be anywhere from 15 to 30 years.
HELOCs have a draw period, typically occurring in the first 10-15 years, with the remaining term on the loan referred to as the repayment period. During the draw period, you can draw out money on a revolving basis similar to a credit card without applying for a new loan, as long as the amount does not exceed the total amount of the original HELOC. During the repayment period you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the draw period ends. Interest is paid only on the amount of equity you use.
A Home Equity Installment Loan (HEL) is a fixed mortgage rate loan, which means the annual percentage rate (APR) and monthly payment will stay the same for the life of your loan. The APR for a HEL takes into account the interest rate charged plus points and other finance charges. Loan terms can be anywhere from 5 to 30 years, but are typically 15 to 20 years. Unlike a HELOC, you get a lump sum for which you immediately start paying principal and interest. If you decide later that you need additional funds, mortgage refinancing or getting an additional loan with additional closing costs are your only options.
Which type of loan you choose depends on your financial needs. A HELOC may be best if you have a recurring need for money (e.g., home improvements or a home repair project that has anticipated additional expenses). The security of a fixed-rate 2nd mortgage will probably provide much-needed relief for a large one-time expense (e.g., debt consolidation).
Arnold
Many people think of a second mortgage as a fixed interest, lump sum loan. However, that is only one form of a second mortgage. A second mortgage is actually ANY secondary lien on your home–secured loan with your home pledged as collateral. Second mortgages are typically categorized as fixed mortgage rate home equity installment loans (HELs), also known as home equity loans, and home equity lines of credit (HELOCs) which are adjustable rate mortgages.
The Federal Reserve states that the home equity line of credit annual percentage rate (APR) is a variable rate loan based solely on a publicly available index (such as the prime rate published in the Wall Street Journal or a U.S. Treasury bill rate). The APR does not include points or other finance charges. The monthly payment amount will adjust as your loan balance and interest rate changes. Loan terms can be anywhere from 15 to 30 years.
HELOCs have a draw period, typically occurring in the first 10-15 years, with the remaining term on the loan referred to as the repayment period. During the draw period, you can draw out money on a revolving basis similar to a credit card without applying for a new loan, as long as the amount does not exceed the total amount of the original HELOC. During the repayment period you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the draw period ends. Interest is paid only on the amount of equity you use.
A Home Equity Installment Loan (HEL) is a fixed mortgage rate loan, which means the annual percentage rate (APR) and monthly payment will stay the same for the life of your loan. The APR for a HEL takes into account the interest rate charged plus points and other finance charges. Loan terms can be anywhere from 5 to 30 years, but are typically 15 to 20 years. Unlike a HELOC, you get a lump sum for which you immediately start paying principal and interest. If you decide later that you need additional funds, mortgage refinancing or getting an additional loan with additional closing costs are your only options.
Which type of loan you choose depends on your financial needs. A HELOC may be best if you have a recurring need for money (e.g., home improvements or a home repair project that has anticipated additional expenses). The security of a fixed-rate 2nd mortgage will probably provide much-needed relief for a large one-time expense (e.g., debt consolidation).
Arnold
Second Mortgage Loans Vs Home Equity Loans
Amy Shan asked:
It’s not surprising that some homeowners confuse the terms “second mortgage” and “home equity loan.” After all, a second mortgage is a type of home equity loan. But more often than not, home equity loan is used to describe a home equity line of credit, or HELOC. If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.
Make a list of what you want to know, what you need to know, and what you already know about this subject.
Before agreeing which might be better for your purposes, let’s look at some of the basics of each. A second mortgage pays out a permanent sum of money to be reclaimed on a set schedule, like your opening mortgage. Different refinancing, the second mortgage does not supplant the first mortgage. Moment mortgages are typically 15- to 30-year loans with a permanent ratio of profit. Like the opening loan, the ratio of profit and points (if any) will be based on your credit chronicle, the estimate of the home, and the flow profit ratio. While the profit ratio on a second mortgage may be a little advanced, the fees are normally poorer. Should You Pay Points?
A HELOC, however, is parallel to a credit license, and it may even involve a credit license to make purchases. Like credit licenses, profit is emotional, and the quantity you can sponge is based on your creditworthiness.
To shape the perimeter of your HELOC, lenders will look at the appraised appraise of your home and begin their calculations at 75 percent of that appraise. They then withhold the outstanding tally allocated on the mortgage. If your home was appraised at $200,000, the lender would typically look at a greatest of $150,000 or 75 percent. If you had salaried off $100,000 of your $180,000 loan, the lender would then withhold the lasting $80,000, which would mean you would have a greatest of $70,000 offered on a HELOC if you had a very good credit chronicle. Learn how to Evaluate Your Creditworthiness.
As we take a closer look, keep in mind all of the useful and important information that we have learned so far.
Your flow fiscal desires will help shape which type of loan is right for you. If you need money for a one-time price, such as edifice a new deck or paying for a wedding, you would doubtless opt for the permanent-ratio second mortgage.
But if you forecast a habitual need for further money, such as teaching payments, you may favor a HELOC. A line of credit allows you to sponge when you need the money and, if you pay back the quantities you sponge rapidly, you can store money over a second mortgage. You also need to respect your expenses routine. If having another credit license in your wallet would tempt you to waste more often, then you are not a good contender for a HELOC.
Once you make an opening determination about which loan might be right for you, you will need to argue the niceties with your lender. While second mortgages typically operation in the same mode as your opening mortgage, ranks of credit are different. Because they aspect monthly payments, you will need to analysis the keen typeset charily.
There is no famine of lenders and offers for loans and ranks of credit. Deem your desires, then store around for a lender you can faith.
If you have found our database of information on this subject useful, read some of our other topics as well.
Kenneth
It’s not surprising that some homeowners confuse the terms “second mortgage” and “home equity loan.” After all, a second mortgage is a type of home equity loan. But more often than not, home equity loan is used to describe a home equity line of credit, or HELOC. If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.
Make a list of what you want to know, what you need to know, and what you already know about this subject.
Before agreeing which might be better for your purposes, let’s look at some of the basics of each. A second mortgage pays out a permanent sum of money to be reclaimed on a set schedule, like your opening mortgage. Different refinancing, the second mortgage does not supplant the first mortgage. Moment mortgages are typically 15- to 30-year loans with a permanent ratio of profit. Like the opening loan, the ratio of profit and points (if any) will be based on your credit chronicle, the estimate of the home, and the flow profit ratio. While the profit ratio on a second mortgage may be a little advanced, the fees are normally poorer. Should You Pay Points?
A HELOC, however, is parallel to a credit license, and it may even involve a credit license to make purchases. Like credit licenses, profit is emotional, and the quantity you can sponge is based on your creditworthiness.
To shape the perimeter of your HELOC, lenders will look at the appraised appraise of your home and begin their calculations at 75 percent of that appraise. They then withhold the outstanding tally allocated on the mortgage. If your home was appraised at $200,000, the lender would typically look at a greatest of $150,000 or 75 percent. If you had salaried off $100,000 of your $180,000 loan, the lender would then withhold the lasting $80,000, which would mean you would have a greatest of $70,000 offered on a HELOC if you had a very good credit chronicle. Learn how to Evaluate Your Creditworthiness.
As we take a closer look, keep in mind all of the useful and important information that we have learned so far.
Your flow fiscal desires will help shape which type of loan is right for you. If you need money for a one-time price, such as edifice a new deck or paying for a wedding, you would doubtless opt for the permanent-ratio second mortgage.
But if you forecast a habitual need for further money, such as teaching payments, you may favor a HELOC. A line of credit allows you to sponge when you need the money and, if you pay back the quantities you sponge rapidly, you can store money over a second mortgage. You also need to respect your expenses routine. If having another credit license in your wallet would tempt you to waste more often, then you are not a good contender for a HELOC.
Once you make an opening determination about which loan might be right for you, you will need to argue the niceties with your lender. While second mortgages typically operation in the same mode as your opening mortgage, ranks of credit are different. Because they aspect monthly payments, you will need to analysis the keen typeset charily.
There is no famine of lenders and offers for loans and ranks of credit. Deem your desires, then store around for a lender you can faith.
If you have found our database of information on this subject useful, read some of our other topics as well.
Kenneth
Can the bank apply a payment for mortgage to another loan?
ittytrex asked:
We have (2) loans, our mortgage and a line of credit on our home equity. My husband lost his job and we were trying to keep up the payments on our mortgage. When he paid a payment he used a payment coupon for the mortgage loan. Instead of applying the whole payment to our mortgage, the bank put some of the payment towards (1) month of the mortgage loan and the rest towards the home equity loan. So now we are still (1) month behind on our mortgage payment and the home equity loan is paid for about (4) months ahead of time. We are trying our best to keep this house.
Yes my husband used a payment coupon with the loan number on it and he received a receipt for the amount and the loan number was on the receipt also.
Brenda
We have (2) loans, our mortgage and a line of credit on our home equity. My husband lost his job and we were trying to keep up the payments on our mortgage. When he paid a payment he used a payment coupon for the mortgage loan. Instead of applying the whole payment to our mortgage, the bank put some of the payment towards (1) month of the mortgage loan and the rest towards the home equity loan. So now we are still (1) month behind on our mortgage payment and the home equity loan is paid for about (4) months ahead of time. We are trying our best to keep this house.
Yes my husband used a payment coupon with the loan number on it and he received a receipt for the amount and the loan number was on the receipt also.
Brenda