Home Equity Explained
What is a Home Equity Line of Credit HELOC?
A Home Equity Line of Credit is a second mortgage, which means it is behind your first mortgage that you have on your home. In the simplest terms, look at a line of credit as a large credit card. Let's say you take out 1,000 dollar line of credit; you only pay interest on it when you actually use the line of credit, just like a credit card. Also, the line of credit is adjustable, so it can move up or down.
What is a negative amortization loan and is it a good way to lower my monthly payments?
A negative amortisation loan is really for the sophisticated borrower. An example of a negative amortisation loan, in its simplest terms, is the following: Let's take that example of a $5,000 loan. If you go out and get a negative amortisation loan, and you're not making enough interest payments to the bank, they will actually add that money on a monthly basis towards your mortgage. Yes, I can get you a very cheap payment, but it's just going to be tacked on to the mortgage. A negative amortisation loan is not a very good loan for probably 95% of the consumers that are out there.
How do I apply for a Home Equity Line of Credit HELOC?
One of two ways: either you can go into a local bank, or you can go to somebody like myself as a mortgage broker. Most of the time, for second trust deeds, I will usually just do those if it's a purchase transaction, or if someone cannot go down the conventional route to be able to get a loan. For example, if you can't really qualify from an income standpoint; if your credit's a little low, that's where I can come into play and help you with the second mortgage.
When applying for a Home Equity Line of Credit HELOC what is the loan amount based upon?
The second mortgage's rates really come down to three things. One is what your credit score is. Two is the amount of loan that you're taking out. Three; what is called the combined Loan to Value. Believe it or not you get a better price if they're able to lend you more money. The mindset there is that at some point in time they know you're going to tap into that money. Therefore, they want to give you a little bit more up front.
