Mortgage Advisors

mortgage advice

Home Equity

Home equity is the value of a home, less any money owed on that home. A home equity loan is a mortgage on the borrower's principal residence. Home equity loans are usually taken out for the purpose of making home improvements or consolidating debt. Home equity loans are also used for substantial expenses such as college tuition or medical expenses. There are two general types of home equity loans. A first mortgage is a loan for a home that has no other mortgage against it, while a secondary mortgage is a loan for a home that has at least one other mortgage or lien. Secondary mortgages are typically used for home improvement.

Even if you qualify for a home equity loan, you should still consider whether you will be able to afford it. Home equity loans give you easy access to cash, and you may be inclined to borrow money more freely than you normally would. When you apply for a home equity loan, you may have to pay certain fees for property appraisal, application fees, and up-front charges or points. Generally, you will be required to pay closing costs to cover attorney fees, title search, mortgage preparation, mortgage filing, property insurance, title insurance, and taxes. Even after you receive your home equity loan, you will continue to pay fees that may include annual membership fees or maintenance fees, as well as transaction fees for withdrawals.

Another way to borrow against your home's value is with a home equity line of credit. A home equity line of credit can provide a large amount of cash at a relatively low interest rate, and can also carry certain tax advantages.

Home equity conversion is another way of turning your home's value into cash, without moving out or making regular loan repayments. The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage program that is insured by the Federal Housing Administration (FHA).