Home Loans

Using a credit line to borrow against the equity in your house has become a very popular source of consumer credit and lenders are able to offer home equity credit lines in a variety of ways. It is certainly one way for you to get a relatively cheap loan.

You will find that most home equity loans come with variable interest rates, with some companies offering attractive low introductory rates, and some having fixed rates. You will also find that most home equity loans have relatively large one-time upfront "arrangement" fees, others have closing costs, and some have ongoing costs, such as annual fees. You will find some home equity line of credit loans have large balloon payments at the end of the loan, and others with no end of term balloons but instead they have higher monthly payments.

Each loan is different for each home owner. The way forward to ensure that you get the loan you want is to contact different lenders, compare options, and select the home loan that is best tailored to your needs.

How much money can you borrow?

Depending on your credit worthiness (which is based upon a number of factors including your income, your previous borrowing history, your credit rating and other values) and the amount of your outstanding debt, home equity lenders may lend you up to 85% of the value of your home minus the amount you still owe on your main mortgage. You will need to ask your mortgage lender about the length of the home equity loan, whether there is a minimum withdrawal requirement when you start your loan, and whether there are minimum or maximum withdrawal requirements once your account is opened. Make sure you enquire as to how you can gain access to your credit line to work out the likelihood of getting a loan approved. All these elements are necessary to work out how much you can borrow.

It is also important that you find out if your home equity loan sets a fixed time when you can make withdrawals from your account. Once this time period expires, you may be able to renew your credit line. If you cannot do this, you will not be permitted to borrow additional money and you may need to take out loans elsewhere to get more money. Be careful. Continual borrowing can end up costing you a lot. With some cheap loans plans, you may have to pay your full outstanding balance on your loan. In others, you will need to repay the loan balance over a fixed time.