All About Equity Loans

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Home Improvement Equity Loans

Homeowners often need extra cash for home improvements. And often a homeowner will opt to take
out a secondary loan, otherwise known as a home equity loan, to remodel the home. Some borrowers
stay up-to-date on loan choices and elect to choose the home improvement equity loans. The equity
loans for improving home value offer cash to homeowners to make repairs or remodel the home,
including external and internal repairs, carpeting, tiling, floors, borewell, painting outside and inside
structure, roof repairs and renewals, pipe repair, structural modification, structural repair, and
structural remodeling.

The maximum loan amount given to customers depends on the customer’s status with the lender. If
the customer had prior loans and showed good faith, then the lender may offer 100% equity lending,
while new comers may receive 85% more or less on equity lending. The loans are often extended
15-years; however, few lenders will offer longer terms or shorter terms, depending on the lender and
the outcome of the application. The lenders present joint and single packages, however, are
responsible if more than one party applies for the loan.

Home improvement equity loans come in fixed rate or adjustable rate options. Thus, the fixed rate is
often the first choice, since the loans interest will remain constant–and the borrower will not be
subject to the vacilliations of the market.

However, the few that take out the adjustable rate loans are subject to pay higher or lower interest
rates per quarter on the loan. Many home improvement loans require that an “independent
contractor” oversees the improvements of the home; and thus home improvement loans are intended
to improve the home, forcing the borrower to utilize the cash only for repairs and improvement. Few
lenders will place penalties on home improvement equity loans to guarantee the loan is used for its
intentions.

Home Improvement Equity Warnings

Homeowners may consider taking out a loan against their home to improve the equity not realizing
that the equity has increased over the years. The market changing in innoticeable ways, including
increasing equity on homes. If the home is in a good neighborhood, the equity on the home is
probably already in excellent standing; however, the homeowner may not be aware where he stands
personally.

Lenders are crooks at times; and some lenders will send out contractors to prompt the homeowner to
increase the equity on his home by adding new additions. The homeowner is often instead persuaded
what appears to be a good deal without examining the other options.

The contractor begins his journey to add the additions, and during the course of work, he stops
forcing the homeowner to sign a series of papers, which the homeowner is not giving the time to read
carefully. The homeowner finds later that he signed an agreement that increased his mortgage
balance, interest and so forth and now his home is at risk. This can happen and it has happened.

If you own a home, be aware that some lenders are crooks out to take homeowners for a ride. If you
are offered what appears to be a good deal, it makes sense to read any information carefully before
signing the contracts. If someone unexpectedly comes to your home offering you a deal, then you
should dismiss the offer and investigate the source.

Don’t let the word investigate intimidate you, since the process is merely gathering information on a
subject and putting the pieces together to see if they fit. Home equity loans are designed to offer
homeowners a way out when the mortgage payments are not affordable at the time; however, there
are other solutions for paying off your home, so stay on top of things and research before you
consider home equity loans.

How Much Will I Pay in Equity Loan Fees?

Equity loans come with many fees and costs. Therefore, homeowners or borrowers are wise to
select a loan that has the cheaper rates. Over the course of any loan, a borrower will pay a
deposit on a equity loan. The deposit is a contracted agreement exchanges between seller and
borrower. The deposit is usually a percentage of the home value, which extends as much as ten
percent, or more.

Other fees, such as the legal cost and conveyance fees will cover the legality of the agreement.
This is important to understand, since lenders will often hire in a solicitor to inspect the home.
The homeowner has the right to request his own inspector, thus potentially saving costs and fees.

The valuation and surveying fees are also inspectors that guarantee that the home equity is worth
the lending amount. Again, the borrower has a right to select his own inspector to save costs and
fees.   

Stamp duty is unavoidable, since this is the tax that goes to the government. The indemnity
guarantee is a form of insurance if the home purchased has a “high LTV Ratio.” This means that
the home is worth the amount of the loan, but not much greater than the amount borrowed.
Therefore, you are paying for insurance and premiums, which may be optional for reducing costs
if you select the best value.

Insurance of course is not optional in most instances, but is optional for cutting costs, since the
homeowner can select his own choice of coverage in most instances. The Arrangement costs are
applied to the wages of the lender, since he took the time to find you a loan. This fee may be
optional for including in the repayments. Finally, many lenders will obligate borrowers to life
insurance polices. This is also an optional charge that you can select to cut costs on equity loans.

How to Avoid Bad Equity Loans

The Federal Trade Commission has issued alerts to homeowners–and specifically homeowners who
are elderly and poor–in recent months. The market is swarming with mortgage lenders providing
equity loans and some of these lenders are taking advantage of the misfortune.

Some lenders are giving loans to homeowners who do not generate enough income each month to
repay the debt. The lenders’ goal is to take possession of the home once the mortgager fails to repay
the debt, thus gaining equity for himself.

Some lenders are encouraging homeowners by offering them a equity loan. And some borrowers
have been taken for a ride because they failed to read the terms and conditions on such loan
carefully. The Balloon Repayment stipulated that the homeowner will repay only the interest toward
the mortgage and once the interest is paid then the homeowner will repay the principal on the
mortgage. Thus, the homeowner pays for the interest all to find out he never paid a dime on the
mortgage itself, and once the repayments kick in for the principal, the homeowner is at risk of losing
his home if he doesn’t have the cash to repay the debt.

Few lenders will offer what is known as “flipping” loans. If a homeowner is paying $150 each
month on his mortgage with low interest rates, and is offered and accepts the “flipping,” then he is at
risk of loss, since he accepted a loan that has higher interest rates, steeper fees and costs, and interest
on all the charges applied to the loan. If you are comfortable with your current mortgage
arrangement, it is wise to stay put when a lender calls offering you (what appears) to be a good deal,
but is probably either a scam or high-interest loan in disguise.

How to Bargain for the Best Equity Rates
 
To keep up with the rates of equity loans, you should read any information available to you. If you
have the Internet, you can go online and read surveys, which will guide you to links that will
provide updates on equity loans and rates. For example, the rates on equity change on set intervals,
and this interval change includes rates of “7.92%” high and “4.91%” low. This piece of information
may not seem pertinent, but if you consider that equity loans have interest and capital for repayment,
you will see the value in the statistics.

Furthermore, if you are applying for equity loans, you can point out to a lender offering higher
interest rates that the current ratings are slightly lower. This may open up the door to lower rates of
interest; otherwise, you can excuse your self and find lenders with competing rates.  

You will also need to consider points on loans, locks, rates, fees, and so forth when considering a
loan. Many equity lenders today are offering loans with “no closing costs” or other upfront fees.
However, if you read the fine print or terms, you will notice that you will need to take out a loan
amount possibly steeper than you can afford to receive no closing costs.

Other fees may apply regardless of the claim there are no upfront fees. The key is to carefully
research any potential loan opportunity, since researching can help you find loans that may not have
upfront fees, including closing costs; and you could get the amount needed versus the amount the
lender expects of you. Finally, loans are a big step and taking the steps to the loan requires the
borrower to make decisions with caution since the home is at stake.

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