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Equity home loans 101

Author: Mel C

Equity home loan is a familiar phrase for most home-owners as this is a form of credit that is available to them. This type of loan enables the homeowner to borrow money by offering their home’s equity as collateral. Equity is computed by subtracting the mortgage from the current value of the home.

Equity home loan is considered as a second mortgage that allows the homeowner to turn their equity into cash. Most homeowners use this money for home improvements, college tuition or loan consolidation. Equity home loan is structured to be paid off in a shorter period of time than the original mortgage. They may either be a home equity loan or a home equity line of credit. The home equity loan is in the form of a lump-sum that is structured to be paid off over a pre-determined time.

It has a fixed interest rate and is paid in equal installments. The home equity line of credit has a revolving balance where the lender sets an amount that can be borrowed during the course of the loan and homeowners can borrow money when they need it. As the principal amount is paid off, the borrower can use the credit over and over again like a credit card. The mortgage industry is highly competitive and this ensures the availability of lenders for equity home loan. A quick search online will yield several choices that offer pretty much the same deal. The packages are straightforward and simple, and easy enough to understand, so that a lot of homeowners opt to use this credit facility to improve their personal financial situation.

Article Source: http://www.articlesbase.com/loans-articles/equity-home-loans-101-1092427.html

About the Author

Mel writes about getting an equity home loan, and other finance topics.

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