What are Equity Home Loans?
Equity home loans are a type of loan that involves a borrower using the equity in their house as a means of collateral.
Equity home loans can be useful in helping home owners finance huge or major house expenses like medical bills, college education or house repairs.
Equity home loans or otherwise known as home equity loan creates a form of a lien against loaner’s home and therefore slash or decrease the actual equity home.
Also lenders and other lending institutions feels much safer with equity home loans because with your house being collateral you can’t easily hide and disappear as your home won’t vanished.
That means the lender has a much better chance of ensuring the borrower pays any mortgage owed.
Also lenders have a better chance of getting back collateral in the form of a house in case borrower wasn’t able to meet and follow provisions of mortgage contract.
Equity home loans may be referred as second tier liens or second trust deed, but they can still be assumed in first or a third position.
A lot of equity home loans needs a very good credit history or acceptable combined value from loan and reasonable value from loan rations. It also comes in dual types namely the open end and closed end.
In Australia, some equity home loans interest are deducted from an individual’s personal rate of their income taxes.
Here are some advantages of using equity home loans from the other kinds of home mortgage set ups because equity home loans remain an attractive option for many borrowers for these simple reasons:
- Usually have a much lower APR or interest rate
- Can be quicker to get even if you have a bad credit history
- Payments made on equity home loans may become tax deductible
- Borrowers have more chances of availing themselves a much bigger loan amount with this kind of loan.
Some tips to maximize your equity home loans:
To have this deal ending up working to your benefit, make sure it is the correct kind of loan to fit your financial structure.
What if an equity home loan makes better sense to meet your financial needs compared to lets say a credit card account? If yes, this may be the right kind of loan to utilise.
More importantly plan all your existing budget right away, make sure any loan you will avail will not put more burden in yourself.
Paying the premiums every month and not totally up front will also help you take advantage of equity home loans.