Three Uses For Your Home Equity Loan

The home equity loan has become one of the most popular lending choices available to consumers. Remember that equity refers to the difference between what is owed in on the property and its value. If you’ve made a good investment, you could have a boatload of equity in your home but the question is how to wisely use that home equity loan.

Use #1 – Consolidate Debt

Probably the most common way to use a home equity loan is for debt consolidation. Most of the time, these loans have lower interest rates than other types of debt. For example, the average credit card interest rate is around 16%. If you are struggling to pay back all of those smaller examples of debt, you can use the funds from home equity loans to pay them all off and free up some cash. You’ll end up with a lower interest rate and a better debt to income ratio in some cases.

The biggest problem with taking this route is that if you’re the type of person who runs up a lot of debt, you may end up repeating the process once your credit cards are freed up thanks to the home equity loan. These actions could lead you down a financially disastrous road.

Use #2 – Children’s Education

If you have kids going to college, you may also consider using a home equity loan to pay for that education. College costs are increasing every year so this could be a wise choice and could help prevent your child from starting out in life with too much debt. While this is an idea worth considering, there are some drawbacks.

First, you also have to consider whether or not you’ll need to access your home’s equity during your own retirement. These two life milestones tend to go hand in hand and this might be a good time to put your own needs first, especially if your child has other funding options. Be sure that he or she explores all options, including federal grants, federal student loans, and scholarships. Another idea is for you to take out a federal PLUS loan using your home as collateral.

Use #3 – Fixing Up the Home

The second most common use for a home equity loan is repairs and improvements to the property. The basic idea is that the changes will actually improve the value of the home which means more equity. Plus, if there are major repairs needed and you can’t afford them in any other way, this is definitely a resort you can choose.

Be aware though that not all of the changes you add are going to boost the value of your home. You also need to realize that your home’s value is also closely tied to the neighborhood in which you live. If you are going to do repairs, consider focusing on the kitchens and bathrooms because these changes are the most likely to increase value.


Do you need additional good ideas on how to use the funds from a Home Equity Loan? You’ll find more ideas by visiting http://www.homemortgageloan-refinance.com/Home-Equity-Loan-Best-Deals.php.

Guide to Equity Release

Very simply, equity release is a scheme that allows elderly homeowners to free up some or all of the value (the equity) tied up in their place of residence. Despite their indisputable popularity, the Consumers' Association magazine Which? Has branded the schemes as expensive and inflexible, to be used only as a last resort.

Although there are currently more than 40 variants of equity release schemes, they all fall into one or other of two broad categories - "lifetime mortgages" and "home reversion" schemes. In the former, the owner is offered a mortgage secured against the property for the term of his lifetime. This is repaid by rolling up all the interest payments which fall due either when the owner dies or when the property is sold. The mortgage comes with a guarantee that this repayment figure will never be greater than the market value of the home and such lifetime mortgages are subject to regulation by the Financial Services Authority.

With a home reversion scheme, the homeowner sells part or whole of his property to a finance company, for a cash sum or an annuity, but continues to enjoy lifetime enjoyment of his home (or until he moves out), more or less as a rent-free tenant. When the occupier dies or moves out, the finance company sells the property to recover its outlay and passes on any remaining proceeds to the occupier's estate. Currently, such home reversion schemes are not subject to regulation by the Financial Services Authority.

So, what is wrong with either of these schemes, both of which give elderly homeowners the chance to enjoy the considerable amount of equity likely to be tied up in their home (when most properties are likely to have doubled in value since as recently as the 1990s)?

The answer - as is usually the case with all financial services products - is that there is nothing at all wrong in principle; it's all down to the detail of cost and benefit. In other words, it's absolutely imperative to do the sums, consider all the alternatives, and judge whether the amount being offered by way of a lifetime mortgage or home reversion fairly represents the present and future value of the property. Critics have described the schemes as "expensive" because of the generally "high" rates of interest attached to lifetime mortgages and the generally "low" prices offered to homeowners in home reversion schemes.

But the terms "high" and "low" are of course relative. Competition with the market and the proliferation of products to suit different needs means that "fair" is whatever the market will sustain.

Given the particular nature of these types of scheme, it makes sense to discuss any interest in equity release not only with a trusted independent financial adviser, but also with members of your own family. Clearly, many such schemes will affect any expectations of inheriting the "family home" that other family-members might have. Similarly, any younger partner, relative or friend who might be sharing your home with you at present might (depending on the terms of the particular scheme) be obliged to find other housing if you die.

So, here's what to remember about Equity Release schemes:

* Suited for older homeowners who may have a lot of equity tied up in their home

* There are two types: lifetime mortgages and home reversion schemes

* This type of borrowing has attracted a lot of negative press due to high costs, so always thoroughly research the product before signing up

* If you sign up to an Equity Release scheme and have friends or relatives living with you, check out what their rights to the property would be when you die to ensure they are not without a roof over their head.


Find out more about equity release at http://www.confused.com/mortgages

Home Mortgage Refinancing – How Rates and Terms Affect Overall Cost

When looking at home mortgage refinancing, rates and terms of the loan are critical. The rate is the amount of interest that you will be applied to the unpaid principal during each loan payment period, while the term is the length of time before the loan is paid off. It is important to understand how various combinations of these two factors affect the total cost of your loan. Make certain that you have a complete understanding of not only the monthly payment that will be your obligation, but the cost of the entire loan over the course of the loan.

Definitions

There are some common buzz words associated with obtaining home refinancing. It is important that you understand the meaning of the terms as the loan broker or the lender defines them. If the definition is not standard usage as you understand the term, you may find yourself with some very wrong assumptions about the mortgage documents that you signed. For example, you should at a minimum define adjustable rate mortgage, mortgage term, Option ARM and negative amortization. Be aware of alternative terms used in the documents and be certain that you understand the impact these words and clauses will have on the length and cost of the mortgage loan.

ARM

An adjustable rate mortgage grew in popularity during the 70s and 80s when fixed rate mortgages were climbing sky high. The adjustable rate mortgage allowed more home buyers to qualify for a loan, because the interest rate and thus the initial payment amount was lower. If you select the ARM for your home mortgage refinancing, you will typically pay less for 6 to 24 months after which your rate will increase at a rate tied to some outside index. There may or may not be a cap on how high the adjusted rate can go and how often it can be adjusted.

Fixed Rate

A fixed rate is quite common when searching for home mortgage refinancing. This type of rate benefits those who have a stable income, plan to stay in the same home for at least 3 years, and who need to be able to plan ahead for expenses in the foreseeable future. The fixed mortgage rate is set at the onset of the loan term and does not change during the term. It tends to be somewhat higher than an adjustable rate mortgage since the lender has a slightly higher risk of loss with this type of loan.

Negative Equity

Negative equity loans are more likely to be seen in new home mortgages than in home mortgage refinancing loans, since the concept is relatively new. Essentially, the negative amortization loan adds the unmet portion of interest and principal payments each month to the principal balance. This means that at the end of the grace period which can be only a few months, the borrower ends up owing more in principal than was on the original loan. A few individuals can take advantage of this type of loan but it requires self-discipline and an understanding of strict budgeting.

Guest Post by To get the latest, most accurate and complete information about Home Mortgage Refinancing or Home Mortgage, be sure to visit the web site located at http://www.homemortgageloan-refinance.com.