What is a Home Equity Line of Credit (HELOC)

A home equity line of credit (commonly referred to as HELOC in short) is a second mortgage taken out against the equity of your home. Instead of being paid in a single lump sum check and then repaid in monthly installments like a traditional mortgage, a home equity line of credit works in a similar fashion to a revolving charge account such as a credit card. The amount of the home equity line of credit is the credit line and transactions against that line reduce the available credit.

Payments made to the HELOC replenish the available credit. Most banks may even issue a home equity line of credit Visa or Master Card which can be linked to the home equity line of credit account, making it seem even more like a credit card.

The one difference is that, while a credit card account is typically open-ended and will remain in force as long as the payments are kept current, a home equity line of credit has a maturity date after which the line can no longer be used and by which outstanding amounts has to be paid in full.

A home equity line of credit account can be a very good source of emergency funds or financing for home improvements, large purchases, or pretty much any purpose the borrower desires. Some people have used home equity line of credit funds as a source of capital for an investment, borrowing the funds at, say four percent interest and investing them in a mutual fund or bond paying some higher amount.

This can be a risky prospect, but can be lucrative if it pans out.

Whatever option that you choose, there is always a flip side to it. So work out the finances, see if you can square them off or make a profit out of using it. Ability to repay is something you cannot overlook. Otherwise, use this in times of emergency and do be discriminate when using an HELOC or you may end up with more debt than you can chew.

Interest Only Home Loans

If you have a steady job, a family, and like the idea of building equity in your home, an interest only home loan is not very ideal for you.

An interest only home loan does not pay off the principal of a loan as you go, so there is no equity built into your home as you pay. What this means is that if you are suddenly in need of large sums of money you couldn't get a home equity loan or sell your home for a profit because you have not put anything into the home. Many families consider their home a safety net, because if they get into trouble or there is a family emergency they can borrow against the home or even sell it for liquid money. If you have an interest only home loan you lose the safety net.

One serious disadvantage to the interest only home loan is that it has a substantially higher interest rate than other loan programs. Many lenders tell borrowers that the interest rate is the same or lower, but over time the interest rate is higher than a traditional loan program because it is riskier for the lender to extend an interest only home loan to a borrower.

Another thing that borrowers must consider is that the interest rate of an interest only home loan may increase substantially after the interest free period. This might not be an issue if you are able to make the payments, but the change in payments can often render the homeowner unable to pay, so that they end up defaulting on their loan. Investing the money during the interest free period is a great idea, but a good deal of people simply fail to do this, or they invest too aggressively and end up losing money. There is a very find line here, making the interest only home loan very costly and less than ideal for some people.

While an interest free loan may work for some, it can spell disaster for others. The most important part of the loan process is research and finding out what type of loan is best for you.

Current Interest Rate Charged by Banks on Home Equity Loans in San Francisco

Realty rates has been exploding in the fast few years especially in the major urban areas like San Francisco spurred by the all time low interest rates in the home mortgage segment. There are a number of choices available for home equity loans in San Francisco and due to the intense competition many financial institutions are providing highly competitive rates.

The average interest rate on a 30 year old home equity loan has broken the barriers of 5% interest to the lowest level of 4.97%. The average interest rate for 15 years old home equity loan is around 4.46%.

How to avail low interest rates from banks in San Francisco ?

Interest rates on any types of loans to a great are dependent on your credit score. It’s always advisable to keep an eye on your credit score and the current rate of interest before start your search to avail the best interest rates. If your credit rating is high or better then there are bright chances that you can get lower interest rate.

Along with calculating the interest rate with the help of your credit score, it’s also advisable to research about the interest rates offered by various banks.

Home Equity Loans

Home equity loans are loans that are issued out to individuals in need of money, against the security of their residential houses. In this kind of loans, the houses of the borrowers are kept as collateral against the sum borrowed by them.

Home equity loans, in recent times has emerged out as the main source of finance to people who are in desperate need of cash. More and more of individuals are increasingly resorting to home equity loans for their financial needs, the main reason being the collateral and security factor.

Usually, to take up a loan of such huge amount, people have to sell off their assets and dispose of their belongings to raise the finance, for their needs. But, the one standing character of home equity loan is the fact that, the borrower needs not to submit extra collateral except the house against which he is getting the loan, like he needs to do for getting any other loan credited in his account.

Also equity home loans are really beneficial and affordable since the interest that accrues, actually accrues on the amount that the borrower has drawn till that time, or while repayment of the loan, the borrower needs to pay the interest only on the amount that is yet to be repaid. All these enticing factors are drawing more and more number of individuals, looking for a loan that involves easy repayment terms.

The best part of home equity loans is that of revolving credit, once the amount of loan that the lender will lend to the borrower has been fixed by the lender, calculating on the value of the home against which loan is sanctioned, the borrower needs not to borrow the entire amount at the same time but can actually draw according to his needs, and pay the interest only on the amount that he has drawn till that time and not the entire amount of loan that has been sanctioned.

Lenders who want to attract more and more borrowers also give the borrowers many schemes, which make the repayment of the loan all the more easy. The fact that borrower needs not give any other collateral, or pay any extra interest makes the entire thing even more easy for the borrower.

Second Mortgages

Second mortgage is one of the things that come naturally once you have not planned the whole mortgage package. However all is not lost, the thing that one has to do is to make the most of the opportunity that is in hand.

This is how the second mortgage system runs, once the first mortgage is not paid back and the owner is bound to take the 2nd mortgage. However there are many things that are related to the second mortgages. The first is that once the second mortgage is taken, it pays of the first mortgage, but as you can see that as the mortgage amount that is being lent to the borrower is very high, i.e. it is the total of the first mortgage and its interest and then the second mortgage interest and its amount. This means that the interests rates will be extremely high, and unless the person cannot come up with an appropriate solution the owner can claim foreclosure on the borrower and then eventually get your property on the first mortgage which will be in the good shape as the second mortgage has paid it all.

So the basic thing is that second mortgage should not be taken unless it is completely required. However if you have no other way out, there are market plans such as the bad market credits which can help you in such situations and there are other lender which would agree on lesser interest rate then the bank itself or major lenders, as they would first check all your record and then give you an interest rate that would become a difficulty to pay.

Unless you want to take the second mortgage make sure that you have some amount of money coming your way and try to get rid of the second mortgage as soon as possible; however here is another thing that one has to decide, and it is indeed a very critical one. If you have failed to pay your first mortgage and the only option left is the second mortgage, the mind usually stops to work, and you get confused with everything. The think that you should think of is whether your financial situation is going to get good, or is there any option that you can get a refinance to your mortgage. If none of these things is happening that the wise choice would be to just sale the place which the mortgage plan that is available or hand it back, it may require some legal documentation but the biggest step is your mental state. However this only remains as a suggestion. The main decision lies in the borrowers hand, and every person’s financial condition is only clear to him.

The next thing, which is good news, is that there are various companies opening day by day, offering you incentives that were unknown and unheard of in the previous days, and that is the thing that can help you spice up in our quest to find the best 2nd mortgage deal. Each of the firms has sites on the internet, so you won’t even have to go and visit them personally a general view and careful analysis of the entire plans will give you the best second mortgage package ever. However the most important thing is that if you really want your dream home or any other thing on which you have taken the mortgage to stay under your hands, then the second mortgage is more of blessing that can help you gain the ownership once again.

Will update on a regular basis.

So stay tuned !

Home Equity Loans

A home equity loan, also known as a second mortgage, allows homeowners to borrow money from their home's available equity.

Home equity loans are commonly used for debt consolidation, educational expenses, unplanned emergencies, vehicle purchases, home improvements and other gifts and purchases.

Home Equity Benefits

Home equity loans are a popular financing option for homeowners who need additional cash. These loans usually offer a lower interest rate than credit cards. In addition, the interest you pay may be tax deductible (consult a tax advisor).

Fixed Equity Loan vs. Line of Credit

The two most popular types of home equity loans are a home equity line of credit (HELOC) and a home equity fixed loan.

A HELOC offers you a revolving credit line with a variable rate, much like a credit card. You draw only what you need, when you need it. They normally have a lower monthly payment because your payments are interest-only.

With a home equity fixed loan you receive the entire loan amount at once. A home equity loan offers the stability of a fixed rate and fixed payments over the life of the loan.

Compare Equity Loan Options and Save

If you do decide that a home equity loan is right for you, remember to do your homework. There are a variety of loan options available so it's important that you compare lenders and rates in order to find the best deal.

Notes :

If you do have anything to share regarding mortgages and equity loans, feel free to contact me. I welcome article contributions as well.

Home Loan Tips Your Bank Won't Tell You

1) A home loan is the cheapest loan you will ever get. As such don't pay it off early. Your strategy should be to (i) borrow as much as possible (ii) for as long as possible and (iii) pay it off as slowly as possible.

Be sure that you pay all other borrowings before paying down your home loan -- (since all other debt is more expensive).

2) No bank announces that the lock-in has ended and rates are going up. None informs borrowers there is a way to avoid the automatic rate increases -- and lower payments to the bank.

3) When you move your home loan to another bank, it is called "refinancing". When you keep your loan at the same bank, it is called "re-pricing".

After the lock-in has ended, do one or the other -- refinance or re-price. Continuing with loan after the lock-in period is almost always more expensive than refinancing or re-pricing.

4) It is often worthwhile to re-price with the same bank to avoid legal and other fixed costs from switching.

Tell your bank you intend to re-price. You may be surprised by the bank's attitude. It will not be offended. It will become more friendly and helpful since they don't want to lose your business. To keep you as a customer, the bank will come up with an attractive re-pricing package.

5) You will get the lowest rates by bargaining. Two good ways to increase your bargaining power are: (i) Don't refinance alone. Do it with a group of friends. (ii) Shop around. Show banks the lowest rate you find -- and then ask if they can improve on it.

6) A common sales pitch is “free partial repayment” within the lock-in period. It is not as special as it sounds since you cannot finance the partial repayment with a bank loan. You must make the payment with cash or otherwise.

7) Nearly all banks are willing to go lower than their published rates. Most acknowledge that their quoted rates are “subject to negotiation” and “the relationship manager may be able to lower rates further”.

8) Be especially wary of one-time offers. A marketing gimmick is for banks to tell customers about “special offers that have not yet been made public”. The deals are supposedly reserved for "special customers like you".

While it is correct that the offers have not been advertised, they are often complex and usually more expensive than a simple pegged-rate home-loan.