An equity loan is a mortgage loan. The borrower receives cash under the equity loan. The loan is secured by real estate that the borrower already owns.
Home equity is the percentage of the home you own. It is the difference between the current value of the home and the amount you still owe on your mortgage.
There are two types of home equity debt: home equity loans and home equity lines of credit, also called HELOCs. Both are sometimes called mortgages because they are secured by your property, just like the original, or primary, mortgage.
With a home equity loan, you receive the entire loan amount upfront. You have predictable, consistent monthly payments.
Under the home equity line of credit, you can use your available credit anytime during the draw period. You have low interest-only payment options on the funds you use. Your principal comes down only if you make voluntary principal payments during the interest-only period.
Home equity loans and lines of credit are usually repaid in a shorter period than first mortgages. Most commonly, mortgages are set up to be repaid over 30 years. Equity loans and lines of credit often have a repayment period of 15 years. It could be as short as five and as long as 30 years.
The rate of interest applied to equity loans is lower than that applied to unsecured loans like credit card debt. The reason is that equity loans are secured by collaterals whereas credit card debts are not secured at all.
The average home equity line of credit or HELOC rose to 5.55 percent as of August 4, 2010. Meanwhile, home equity loan rates fell to 7.2 percent, the lowest rate since September 2005.
The following are the top ten sources for home equity loans:
1. Wells Fargo Mortgage Rates
2. Chase Mortgage
3. Citibank Mortgage
4. Countrywide Home Loans
5. National City Mortgage
6. GMAC Mortgage
7. Downey Savings
8. PenFed Credit Union
10. Best Possible Mortgage
© Newsmax. All rights reserved.