Six Things You Need To Know
About Equity Loans
home equity articles and tips
Equity loans allow the owner of a home, farm or ranch to borrow against the accrued equity in the property. This can be a great way to remodel, refurbish or fix buildings on said land. Here are six things you need to know about equity loans.
Be Careful with Your Property
Remember to be very careful with how much of a lien you place on your property. There is a potential to lose your land, if you are unable to make your payments. Take out an equity loan only after you have carefully considered all possible repercussions.
How will the money be used?
Your home, farm or ranch is both a residence and an asset. If you want to borrow against the equity, then you must not overburden yourself with too much debt. An equity loan is an investment and any upgrades should increase the value of your property offsetting the costs of loan servicing.
Is your local real estate market rising or falling?
Financial institutions will calculate your equity based partially upon the present value. If your local real estate market is falling, this could leave you "underwater," owing more than your property is worth.
Select an Interest Rate
Some banks will want to promote their "adjustable-rate mortgages" (ARMs). The problem with ARMs is that if interest rates increase dramatically, you could have a tough time repaying the equity loan. Be sure to look into this before making any final decisions.
Calculate the Closing Fees
Nothing is free and there may be numerous fees associated with your equity loan. These could include application, points, credit check, processing, title search, documentation and underwriting fees. Your total equity loan value includes all of these fees.
Pay on Time
Modern equity loans can be challenging with some including a "prepayment penalty fee." Make sure to send in your mortgage payments on time. If you want to control your financial destiny, you might want to find a loan without a prepayment penalty.
Trust Experienced Financial Firm
There is a wide variation in the level of professionalism you will find in equity loan lenders. It's important that you work with an established company you can trust. Ellis Equity hard money lenders in Texas can help you reach your goals regarding equity. Working with professionals who have been in busy for a long time can give you an advantage when it comes to your equity.
Make sure you find a first-class lender and increase the value of your home with a good equity loan. These tips can help you to make a good decision for your finances and your future.
Home Equity Tools
