Taking a loan using your home or property as collateral is called home equity loan. It is also called a line of credit. It is actually a second mortgage. Your property is the collateral. This will be the guarantee to prevent you from defaulting in repayments on time. The lender has every right to acquire your property and sell it, in the case of irregular or inefficient repayments. The terms and conditions in the deal should be well read before going in for home equity loans. The money acquired through home equity loans are can be used for any valid purpose like higher education and repair of the existing home or any other property.
There are no fixed interest rates in a home equity loan. The monthly payments will change according to the balance in the money borrowed. The repaid amount is spared from the interest and only the remaining amount is chargeable with an interest. Home equity loan is offered only after certain details are cleared. The lender will have to clear doubts on many factors like the borrower's income, debts, credit history, ability to repay the loan and financial obligations.
The loan can be acquired by many means. Checks are the most common way to get the loan. Banks give home equity loans to the borrower on direct visits. Some lenders offer cards and ATM. Many people opt for home equity loans to improve their already existing home. This increases the real estate value of the home. Renovating an old home with latest developments and additions increases the real estate value of the home. Many times the real estate value is higher than the home equity loan and actually is profitable.
Refinancing a home with a home equity loan is also not uncommon. Refinancing can be tax-deductible. A good, trustworthy lender has to be contacted first.