To all those people who say home equity loans are passé, I have to say, it’s still a great way to refinance. Specially, if home values are still high in your area or have come down to a respectable sane amount after the zoom in prices in the last couple of years. Agreed, maybe it’s does not create mass hysteria like it did before but it could be your ticket out of huge credit card debts.
So what do lenders look into before extending a loan?
1. Your credit worthiness i.e. your, credit rating and income.
2. The amount of outstanding debts you have
3. The appraised value of your home
4. The amount outstanding on your first mortgage
How much money can you get on a home equity loan? Taking all the above points into consideration home equity loan providers can in the best case scenario extend up to 85% of the appraised value of your home minus the amount outstanding on first mortgage.
Things to ask your loan provider:
1. Length of the loan extended
2. Get info on how you can get access to your credit line by check or credit card or both.
3. Is there a minimum withdrawal requirement while opening account
4. After account is opened are there minimum/maximum withdrawal preconditions.
Questions pertaining to; time of the loan, withdrawal and renewing credit lines:
Some home equity loans come with a set fixed time or a draw period when you can withdraw from your account. Some plans may require you to pay all the outstanding balance, while others you may be allowed to repay your outstanding amounts over a fixed period and this needs to be verified. You will be in most cases able to renew your credit line after the withdrawal period is over. If this does not happen you may not be allowed to borrow additional funds.
Home equity loans are still a great option if you are reeling under debt but remember your home is the collateral.
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