Are you considering making some expensive improvements to your home? Are
you searching for options on how to pay for your child’s college
tuition? If so, you may want to look into applying for a home-equity loan.
With home-equity financing, you can use up to 85% of the equity in your
home as collateral for a loan or line of credit. Equity is the difference
between your home’s value and the amount of money you still owe
on your mortgage. In many cases, home-equity loans are only available
to borrowers with good credit histories.
What Are the Different Types of Home-Equity Financing?
Home-equity financing can either be set up as an “open end”
line of credit in which funds can be withdrawn over time as needed, or
as a “closed end,” lump-sum loan from a bank, credit union,
or mortgage company. Both of these types of loans typically have terms
ranging from five to fifteen years and must be repaid in full in the event
that the home that is borrowed against is sold. Fixed-rate, closed end
loans are typically used to cover one massive expense such as purchasing
a new roof for a home, while credit lines make more sense as a means of
paying for short-term, recurring costs such as tuition payments.
These types of loans often have a fixed monthly payment structure for an
agreed upon amount of time. Just like a mortgage, if you do not repay
your home-equity loan according to the terms of your agreement, the lender
can foreclose on your home. In order to reap the benefits of a home-equity
loan and protect yourself against
foreclosure, it is best to only consider home-equity financing if you have a steady
income and are confident in your ability to adhere to a loan’s repayment plan.
How Do Home-Equity Loans Help Consumers?
Using your home’s equity to back an advance on funds can be an easy
and relatively quick way to gain access to a source of cash. While the
interest rates on home-equity loans are often greater than those of a
person’s mortgage, it is often lower in comparison to those of most
other forms of loans and credit cards. Due to these lower rates, many
borrowers turn to home-equity loans as a means of paying off credit card
balances. Any interest a borrower pays on a home-equity loan is tax deductible.
How Do Home-Equity Loans Help Lenders?
Home-equity loans are beneficial for lenders in that they are secured loans
and allow lenders to collect interest and fees on top of borrower’s
initial mortgage. Lenders assume very little risk, as they can claim their
borrower’s property if they should default. After foreclosure, the
lender can always resell the home and restart the lending cycle with a
Top-Rated Bankruptcy Advocacy in Fort Worth
If you have defaulted on a home-equity loan, a knowledgeable
Fort Worth bankruptcy lawyer from The Pritchard Law Firm can protect your interests and guide you towards
a financially secure future. Having represented countless debtors and
consumer lenders since 1989, we know your rights and we know how to get
the results you need.
To find out more about how we can help you find a solution to your debt,
contact our office online or call (817) 285-8017 today.