All About Equity Loans and How To Choose
Posted by Samantha Emerson on July 15th, 2009
When thinking about equity loans, borrowers are encouraged to weigh out the difference in rates for refinancing, home equity loans, and home equity credit lines. Equity loans are more than often based on a fixed rate, adjustable rates, prime rates. If the equity has dropped below market value, then refinancing the home would be a better option than home equity loans or credit lines.
When you are refinancing a home, you are getting more money out of your house from the lender. Refinancing will provide you an excellent opportunity to get the equity of your home backup to market value.
In other words, if the market value declines, refinancing is your ticket to add to the equity on your home. This is happening more than ever these days due to the recession, and many lenders will give you very easy repayments too.
If you are thinking about going through with a major home improvement, consolidating debt, paying off student loans or anything else that would require a very large sump of money, then you would want to look into getting a home equity loan. Home equity loans are also known as second mortgages as they will combine the amount you borrow and put it with your first mortgage.
The last type of equity loan that you could apply for is the home equity line of credit, this is good if you will need some extra money over a period of time, say ten years or so. As with many other equity loans these are usually with a fixed rate, you can think of them as a 10 year credit card, just you get longer to repay what you borrow with less interest in most situations.
So now you should have a better idea of three most common types of equity loans that there are. Let’s recap real quick. If you need to borrow money over a period of time you should go with a equity line of credit, if you need to improve the value of your home to get it equal to its market value or above then you would want to refinance, if you need a large amount of money quick then you should pick a home equity loan.
If you are having problems deciding which lender to go through for an equity loan, Fannie Mae along with certain large banks usually give better rates than the smaller and less popular lenders that are out there. The more that you compare rates the better off you will be in the long run as these loans can take up to 30 years to repay.