Home Loan

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Home Loans
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Home loans allow you to borrow against the value
of your home. These loans appeal to borrowers who
find that they can borrow relatively large
amounts of money, and theyre easier to qualify
for than other types of loans (because they are
secured by your house). If your home is worth
more than you owe on it, a home equity loan can
provide funds for anything you want (you dont
just have to use it on home-related expenses, for
example). A home equity loan is a type of second
mortgage. Your first mortgage is the one you
used to purchase your home, but you can add other
loans to borrow against the property if you have
built up enough equity.
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• Benefits of Home Loans
• Home equity loans are attractive to both
  borrowers and lenders. Here are a few of the key
  benefits for borrowers
• Home loans typically have a lower interest rate
  (or APR)
• They are easier to qualify for if you have bad
  credit (sometimes)
• Interest costs on a home equity loan may be tax
  deductible

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• What Is APR?
• Borrowers can qualify for relatively large loans
  with this type of loan
• Most of those benefits (except for the tax
  deduction) are available because home equity
  loans are generally safe loans for banks to make
  the loan is secured by your house as collateral.
  If you fail to repay, the bank can take your
  property, sell it, and recover any unpaid funds.
  What's more, borrowers tend to prioritize these
  loans over other loans because they dont want to
  lose their homes (faced with the choice of
  missing a mortgage payment or a credit card
  payment, you might skip the card payment).

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Of course, banks have to be careful not to lend
too much (as they did in the housing crisis) or
they risk major losses. To protect themselves,
lenders try to make sure that you dont borrow
any more than 85 or so of your homes value
taking into account your original purchase
mortgage as well as any home equity loan youre
applying for. The percentage of your home's value
available is called the loan to value ratio, and
may vary from bank to bank.
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Logistics

• When you get a home loan, you get a lump-sum of
  cash, and you repay the loan over time with fixed
  monthly payments. Your interest rate is set
  up-front, and each payment reduces your loan
  balance and covers some of your interest costs
  (it is an amortizing loan).
• If you dont need all of the money at once, you
  can also consider a home equity line of credit
  (HELOC). That option provides a pool of money
  that you can draw from if and when you need it,
  and you only pay interest on any money that
  youve actually borrowed. However, be aware that
  banks can close or cancel a HELOC before youve
  had a chance to use the money, and the interest
  rate on a HELOC generally changes over time.

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• Common Home Equity Loan Uses
• You can use a home equity loan for anything you
  want. However, they usually get used for some of
  lifes larger expenses because homes tend to have
  a lot of value to borrow against. For example,
  you find that a lot of borrowers want to
• Remodel, renovate, or otherwise improve the house
  and property
• Pay for a family members college education
• Fund the purchase of a second home
• Consolidate high-interest debts
• Pitfalls of Home Equity Loans

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