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What is a Home Equity Loan?
With all of the talk on the television and the internet about a home equity loan, Oklahoma homeowners may wonder if this type of mortgage loan is right for them. Basically, a home equity loan is a type of loan in which the applicant is requesting that the equity built up in their home be used for collateral for the loan financing transaction. The result is that a lien is created against the borrower’s home, reducing the actual equity.
Sometimes a home equity loan is referred to as a second mortgage, because they use the value of the property as security like a traditional mortgage. A home equity loan is different from a home equity line of credit, however; as an equity line of credit is revolving and includes an adjustable interest rate. Home equity loans are normally a one-time lump sum that is repaid with a fixed interest rate.
Who Should Consider a Home Equity Loan?
Home equity loans are definitely not appropriate (or even available) for all Oklahoma homeowners. There are certain situations in which this type of loan financing is a viable option:
Applicants with good credit. Generally, home equity loans are available only to applicants with a good credit history. This means that even those borrowers who may qualify for other types of mortgage loan lending may not be candidates for equity loans.
Individuals who plan on staying in their homes for an extended period of time. Since the equity in the home will be all but completely lost once the individual secures the home equity loan, Oklahoma homeowners should make sure they plan on staying in their homes for some time after the loan is obtained. It usually takes a few years for the borrowers to pay off the equity loan and build up the value of their home once again; so homeowners who are not sure how long they will stay in their home may want to consider other loan financing options. Homeowners who need cash for remodeling, college expenses or other one time lump sums. Remember that the loan does not have to be taken out for the entire amount of the equity; but many borrowers plan on taking out as much as possible for such one-time expenses as their children’s educations or a remodeling project. It is best to obtain a loan for the smallest amount necessary in order to build the home’s equity back up as quickly as possible.
Decide whether or not it is right for you to get a home equity loan, Oklahoma residents can contact the professionals at Angelo Christian for assistance. We are ready to help Oklahoma homeowners make strong financial decisions that help them meet their goals for the future.
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