Low Mortgage Rates for Smart Loan Shoppers
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Low Mortgage Rates for Smart Loan Shoppers |
The ABCs of Home Equity LoansBy JJ SinghCalifornia Mortgage Rate Columnist Do you ever feel like everyone around you knows about home equity except for you? Have no fear, home equity is your friend and it can help you get the cash you need. What is Home Equity?Home equity is the difference between what your house is worth and what you owe the bank. Let's say you live in a home that is worth $300,000 and the balance of your mortgage is $250,000. You have $50,000 in equity.In other words, if you sold your house today, how much would get after you paid the bank? That amount is your equity. What is This About a Home Equity Loan?Many homeowners use home equity to pay for home remodeling projects, their children's tuition, or even a lavish wedding. But if home equity is cash in your hands only if you sold your home, is there any way to get that money now? You bet. That's where a home equity loan comes in.Lenders assume that your home's value will stay the same or increase over time. That means your equity is bound to go up the longer you own your home. As such, lenders are willing to use your home and your equity as collateral in case you default on your loan. How Much Will It Cost?The home equity loan rate depends on what type of loan you obtain. You can choose either a one-time home equity loan or a home equity line of credit (sort of like a home equity credit card). The line of credit is likely to carry a higher interest rate, one that varies over time. A home equity loan however, has a lower, fixed interest rate.No matter which you choose, it's important to always know that home equity is your friend - the more of it you have, the better. Sources: www.bankrate.com About the Author JJ Singh is a returned Peace Corps Volunteer, formerly stationed in Bolivia. Previously, he has worked as a consultant for an international development bank and as an interpreter and docent at a historic site in Virginia. JJ has a degree in economics from the University of Virginia and studied part-time at the University of Valencia in Spain. © 2006 CMR. All rights reserved. |