A home equity loan is one that you get using your home or another piece of real estate as security. This loan is normally given as a registered mortgage whose basis for approval is home equity. Home value and total debts on a property are more important to a lender than a credit score or job history. Our team has provded home equity loans in Lincoln for many clients.
Payment Terms and Conditions for Home Equity Loans in Lincoln
This is typically offered as an open initial or second mortgage on the property. It comes with 7%-15% interest for a one-year term. As an open mortgage, you are free to end payments early if your situation allows. For this to happen you will be asked to pay three months interest and be done the loan. It is a registered mortgage meaning that if you default, a lender has the power to sell your property in an attempt to recoup their investment. The catch is that prior lenders must be compensated first, hence the high fees compared to traditional lenders. Home equity loans are more popular than traditional bank mortgages because it is possible to customize them to your needs. Our experts will talk to you about the best options according to your needs.
Common Custom Choices Include:
- Blanket Mortgage: This is where multiple properties are used as loan security as borrows try to acquire more funding.
- Construction Draw Mortgage: We pay your construction workers to ensure completion of your building project.
- Interest Only Mortgage: The principal remains as you only need to pay interest on this loan.
More than these, other custom options can be written into the loan agreement. Our experts are pleased to talk about your special circumstances and recommend an equity loan accordingly.
How Much Can I Borrow With a Home Equity Loan
The money you can borrow depends on how much equity is left after all debts have been subtracted from the home’s value. Lenders must obtain a metric called LTV or loan to value ratio to decide whether to lend to certain individuals or not. This value is calculated by dividing a property’s debts with its appraised price. Our home equity lenders in Lincoln are willing to lend up to 75% LTV on properties. This means that a borrower still owns 15% of the property, which is sufficient for our private lender but anything less than that is too huge a risk to bear. Home equity lenders are very sensitive to risk, which leads them to avoid any properties with a heavy debt burden. While LTV is the key metric, some lenders may be sensitive to employment and credit score.
Common Uses for Home Equity Loans
Money borrowed with a home equity loan can be used in whatever which way you feel is best. Our company has seen many reasons for needing the money but the best are to invest in a home renovation, business, higher education or as capital for a business.
- Renovation: Money for this purpose is used to make repairs and necessary upgrades to the home.
- Debt Consolidation: The loan can be used to pay other expensive debts.
- Education: Your kids can go to school using this money.
- Business Investing: Money can be used as capital to find a business.
Home equity loans that we provide in Lincoln can also be used for emergency treatment, helping loved ones, stopping a foreclosure or power of sale. Home equity lenders only ask your reasons for needing the loan to update their records, unlike banks that might reject your request over your reason for needing the loan.
Comparing Home Equity Loans and a Home Equity Lines of Credit
A home equity loan and home equity line of credit are distinct types of loans. The home equity loan is a type of installment loan with fixed interest rates. An HELOC, on the other hand, is a type of revolving credit whose rates can change over time. A borrower is allowed to withdraw any amount of the HELOC without exceeding the credit limit. With both loans, approval and fees are mainly dependent on a property’s LTV ratio.