Home Equity Loan Online – Money On Basis Of Equity
Home equity loan online makes large amounts of money to be made available to the borrowers just by pledging the equity of their home with the lender. These are secured loans borrowed with a long amortization. An online application gets low rates, saves you time and hastens the process of being approved for a home equity loan.
Most home loans were the home is used as security for the loan has a long amortization with 15, 20 or 25 years. In a few cases amortizations can even run up to 30 and 35 years. The impact of a long amortization reduces the monthly payment significantly and the equity in your home also ensures that you are provided with low interest rates. Consumers who take this approach benefit from low monthly payments, however they should also realize that they are paying much more interest than a client who has a shorter amortization and they are paying only a small amount of principle with each monthly payment.
What does Amortization and Term mean Relative to Loans Online
Amortization is the length of the mortgage, i.e. when the mortgage or loan will be fully paid out. This can be as long as 35 years as previously mentioned. The term of the mortgage is the length of time that a mortgage or loan will guarantee the interest rate. Terms of loans are 1 month to 5 years typically while mortgages can be as long as 7 years in some cases. At the end of the term the interest rate is set at the prevailing rate for the next term. Fixed interest rate mortgages will have a fixed rate for the term of the mortgage and it can change to higher or lower levels at the end of the term. Variable rate mortgages allow the interest rate to vary based on various factors such as the bank rate.
Consumers should be aware that loans and mortgages with terms that are longer, for example 7 years, will generally have higher interest rates than shorter terms. Lenders do this because they are unsure about how interest rates will change over the long term so they make the rates higher to provide some protection. The buyer pays more, but then they have a fixed monthly payment for a long period of time making budgeting much easier. The buyer knows that his mortgage payment will not change for the term of the mortgage.
Home Equity Loans Online Save Money
Not only will the monthly payment be lower due to the longer amortization, it will also be lower due to the lower interest rate. Rates for home equity loans are generally lower when consumers use their homes equity to guarantee the mortgage or loan. The interest rate can be a percent or two less and over the term of the loan, consumers can save a lot of money over the life of the mortgage. Always negotiate for as low an interest rate as possible over the longest term as possible if you are looking for a fixed rate mortgage monthly payment that is not going to change.
This is really a secured home equity loan and if for some reason the consumer is unable to make their monthly payments they risk the home being sold by the lender to collect what is owed to the lender. This situation seldom happens, however in the interest of providing clear information to the reader; we felt that we should include this comment. During the past five years from 2008 on, many homeowners have lost their homes due to loss of income and not being able to meet their monthly payments for their mortgages. Unfortunately this situation arose because the housing prices dropped and people lost their jobs, creating a very difficult situation for everyone.
Applying for Home Equity Loans Online
Now consumers can apply online for these loans from the comfort of their homes or even from the office at work. There is no need to go into the banks office to meet the lender and all information can be passed along to your lawyer for signature once approved. Once you apply for the home equity loan, and preliminary approval provided, some additional information will be needed.
Most lenders will want to have the home that is being used as equity appraised to confirm the value of the home and confirm that there is sufficient equity room available to support this loan. In addition the lawyer will also confirm that there are no other liens against the home and that you have ownership that is free and clear. Once these items have been verified, the home equity loan will have final approval and the final arrangements can be completed with your money forwarded to your bank account as specified in your application.
Prospective home owners and consumers looking to refinance their mortgages should be aware that lenders vary in the amount of down payment required and the amount of equity they are willing to finance for a mortgage. For buyers of homes, some lenders will approve mortgages with 10% down and a 90% mortgage. For larger mortgages that are in the half million range and larger, lenders tend to look for larger down payments. Some will ask for down payments of at least 25% and then they are willing to provide financing for the remainder.
Before consumers get concerned about these high requirements for down payments, we want to recommend that they consider the size of the monthly payment for home equity loans obtained online or in person. A 25% down payment requirement will have a significantly lower monthly payment than one that only requires 10% as a down payment. In addition, lenders will want to ensure that you have the income on a monthly basis to support these payments. One rule of thumb is that the home equity loan monthly payment plus taxes is no larger than 35% of your gross monthly income. Consumers can quickly figure out if they can afford a home or not by doing this calculation using the monthly payment, the estimated monthly property tax payment and their monthly salary before taxes are calculated.
If this all seems complex to you, ask your lender or broker that you are dealing with to review all of the numbers with you. If you are buying a new home and apply for a home equity loan online use one of the calculators provided to help figure out these ratios. You may need to make adjustments to the amount of your mortgage, your down payment or the amount that you are paying for a home.