We have all heard of home equity loans. But to handle them wisely we need to know their ins and outs.
The recession that took place a few years ago almost put the kibosh on housing equity loans. But now with the economy recovering from the shock waves of that crisis, lending for residential purposes is back with a vengeance. The whole business showed growth during the first three quarters of 2013.
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Go back a year from that time period and you will find nothing of the sort. And while it hasn’t reached its pre-crash level funds of $430 billion, it has risen to $60 billion which is still a substantial exponential growth figure.
The stability of society’s house of cards means that lending and borrowing can begin once again. And if you happen to be seeking a home equity loan then here are some points that can be counted on the four fingers of your right hand:
• E is for Equity: The only thing that is yours is equity. Never forget that. Calculate the equity you own on any amount of value and mortgage you have to deal with. The 80/20 rule applies in this case. The smaller ratio of 20% is the equity that goes straight in your pocket. And the larger amount of 80% is the value. You will have to show the lenders if you have the equity to buy a home.
• A Tale of Two Varieties: The loans arrive in two garden varieties. The standard version allows you to borrow in the form of a large amount at once. The other version lets you to take small and fixed amounts time after time. The choice is yours to make so decide wisely and with prudence.
• Size does Matter: No lender wants to lend a pittance. He would rather believe a person who has the guts and confidence to ask for a large amount. The least amount that you can go for if you are really one stingy miser is $10,000. And as far as the limits are concerned they depend upon the thickness of your wallet. You may even borrow $100,000 if you have the economic clout.
• Mortgages are Mortgages: One thing to remember is that even though it’s called a loan, in fact it is a mortgage. Some time sooner or later interest will have to be paid on the amount you received from the lender. It is all about trust. So make sure you pay up when the time comes otherwise you will risk losing your hard-won property.
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