First of all, what is a home equity loan?
Usually abbreviated as “HEL” (no pun intended), home equity loans are the kind of loans that take advantage of a borrower’s home equity, which is being used as collateral. The money from these loans could be used for major expenses like college tuition fees of children, medical emergencies, or big home repairs. The interests on these loans are tax deductible.
So how do you go about applying for this kind of loan? Here are the steps:
1. Check on your home equity if you have enough funds to draw a loan upon.
2. Call the financial institution where your home equity is with. Since you are already an existing customer, they are most likely going to grant the loan. But of course, nothing should stop you from reaching out to other companies that can give you better rates and payment terms. You may also seek the help of local real estate mortgage brokers for the top lenders that they can name. The internet is also a good resource. Look at the top searches for home equity loans.
3. You can have an adjustable or a fixed interest rate for your loans. But if you already have bad credit, they you may not have a choice.
4. To complete the loan process, the lending company will have to order an appraisal of your property in order to determine its actual value. Just know that the appraisal has a fee although you do not have to pay for it immediately, it will be charged against your loan. It could cost around $250 for the one-time appraisal. Even if your loan is not approved, you will have to shoulder this amount as well as the other fees that the lender might impose
5. If you do not really need the money badly, it is not good to have this kind of loan because for sure, the interest rates are higher since this is already your second mortgage on the property.
Home equity loans are secured because of your property. So if you fail to pay up the amount you owe, your home could be foreclosed and your family will be left homeless. So be careful with managing your finances if you have such loans.