Definition of Equity

Equity

Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.

FAQ about Home Equity Loan(Second Part)

What index is used to determine rates on Bank of America's home equity line of credit accounts?

The index is based on The Wall Street Journal Prime Rate. This index plus or minus the stated margin is what determines the home equity line of credit rate and annual percentage rate (APR).
Fixed-rate loan options are available on Bank of America home equity lines of credit. Our fixed-rate loan option allows you to lock all or part of your home equity line of credit balances at a fixed interest rate, payment and term. A monthly bill shows your balance, including any fixed-rate loan options. You can also designate separate names for each fixed-rate loan option to make them easy to identify. You can choose to fix any portion of the outstanding balance on your line.

Will I have to pay back any outstanding balance at the end of the draw period?

Any balance outstanding at the end of your draw period will be amortized into equal monthly payments. Any unpaid fees and interest will be added to your fixed principal payment. You will not be able to access the line after the draw period has expired unless you reapply for a new home equity line of credit. If you choose to open a new line of credit, you can move any outstanding balances over to your new line, up to the available credit limit.

Up to what percent of my home's value will you lend?

Home equity lines of credit up to 100% are available for customers who qualify. Pricing guidelines may vary based on loan-to-value (LTV) ratios, line amount and credit history.

Can I get a home equity loan or line of credit if my home is currently for sale?

You can get a home equity loan or line of credit as long as your home has not been for sale within the last 90 days.

Can I get a home equity loan or line of credit on a rental property?

Yes, however, the rates are slightly higher and the loan amount is calculated differently.

Will interest on my home equity loan or line of credit be tax deductible?

Under current law, interest paid on loans secured by a primary residence may be tax deductible. Ask your tax adviser about your home and your personal tax situation to determine whether or not interest would be tax deductible. If you obtain a line of credit secured by your home, Bank of America will provide you with a 1098 form if interest is over $600 or an interest paid notice if interest is less than $600 each year.

Do I need an appraisal to get a home equity loan or line of credit?

Under some circumstances, we may require a complete appraisal, including a walk through of the home.

FAQ about Home Equity Loan (First part)

What can I use my home equity for?

You can use your home equity to pay for almost anything. Make home improvements, pay for college, consolidate debt, buy a new car, go on vacation.


How do I know how much my home is worth?

For the purposes of your application, estimate the value to the best of your ability. We'll determine the current value of your home by appraising the property.

How is a home equity line of credit different from a home equity loan?

Home equity credit uses the borrower's home as collateral. The three main differences are:

* Pricing. A line of credit usually has a variable interest rate while a loan may have fixed or variable interest rates.
* Access. A line of credit allows ongoing access - by check or Equity Maximizer® Visa® — to your money over an extended period of time. As you repay the money you've used, those funds become available for you to use again.

With a home equity loan, you get the money all at once then repay it over an extended period of time. Unlike a line of credit, you do not borrow, repay and borrow the funds again.
* Payments. A home equity loan generally has fixed payments, which can make budgeting easier.

A home equity line of credit generally has a variable payment that can be as low as an interest-only payment during the draw period. During the repayment period, monthly payments include a fixed principal amount plus interest.

Types Home Equity Loans

Types Home Equity Loans

The under mentioned two types of home equity loans are : The Standard Home Equity Loan and Home Equity Line of Credit. Another way of borrowing against home equity is cash-out refinancing.

The Standard Home Equity Loan
A standard home equity loan, (also called a term loan, a closed-end loan or a second mortgage installment loan), works like a traditional loan. You receive a lump sum payment at a fixed interest rate and you pay the money back in monthly payments over the life of the loan. Since the interest rate on the loan is fixed, your monthly payments will also be fixed.

An example of this is a home equity loan for $30,000 with an interest rate of 7.5% where you pay the money back in monthly payments of $356.11 over the 10 year life of the loan.

Home Equity Line of Credit
A home equity line of credit works like any other line of credit. You are granted an amount you can borrow and you draw money from the account as you need it. You pay interest on only the amount actually borrowed and the interest rate is variable over the life of the loan. While most home equity lines of credit have a variable interest rate, a fixed interest rate can sometimes be negotiated. A home equity line of credit is 'revolving' meaning that you can borrow money, pay off the borrowed money and then re-borrow that money. The money in a home equity line of credit is accessed using specially issued checks or credit cards

Here is an example of a home equity line of credit: You are given a $20,000 home equity line of credit. You borrow $10,000 dollars and are charged a 5% interest rate. The interest rate for the home equity line of credit is not fixed but varies with changes in interest rates. If you pay back $5,000 towards the principal, you still have $15,000 in your line of credit that you can borrow against as needed.

Cash-out Refinancing
While cash out refinancing is not a type of home equity loan, it does allow you to borrow against the equity in your home. In cash out refinancing you take out a new mortgage that is greater than what you owe on your current mortgage - you pay off your current mortgage and use the difference as a home equity loan.

Here is an example of cash out refinancing. Your home is valued at $150,000. Your mortgage is $100,000 and you have $50,000 worth of equity in your home. When you bought your home, you got the going mortgage rate which was 9%. Interest rates have since come down and you decide to take advantage of the lower rates and also borrow $20,000 from your equity for a home improvement project. You take out a new loan for the $120,000 at 6% - you use $100, 000 of that to pay your old mortgage and $20,000 for your home improvement project. You now have a $120,000 mortgage at 6% where as you previously had a $100,000 mortgage at 9%. The difference of $20,000 is the way in which cash out refinancing replaces a home equity loan.

Cash out refinancing typically has a lower interest rate than a home equity loan but closing costs associated with cash out refinancing are higher than closing costs associated with a home equity loan.

Advantages and disadvantages of a home equity loan.

Advantages and disadvantages of a home equity loan.

There are many advantages and disadvantages of home equity loans. They are mentioned below by which you can have an idea about it very clearly..

A lower interest rate and tax deductions are the two major advantages home equity loans have over other types of debt.

Since a home equity loan is secured by your home, it poses less risk to a lender than does a non-secured personal loan or credit cards - this lower risk is passed on to you in the form of a lower interest rate.

The second major advantage is that regardless of the way a home equity loan is used, the interest you pay on the first $100,000 you borrow is tax deductible. Credit cards and other types of non-secured loans do not have this tax benefit. This means that if you pay $3,000 in interest on your home equity loan, you will reduce your taxable income by $3,000 at the end of the year. If you use a home equity loan for home improvements or to buy another home, you can deduct the interest paid on the first $1 million that you borrow. The reason for this is that home improvement loans are similar to first mortgages for tax purposes. You should consult a tax advisor about the specific tax benefits available to you.

The biggest drawback of a home equity loan is the fact that your home is on the line and you could lose your home if you default on your payments. When you borrow from your home's equity you also reduce the equity or ownership you have in your home. This means that you trade ownership or equity in your home for cash that you will use for some some other purpose. In addition to interest you will pay on the loan, there are also costs associated with taking out a home equity loan - these costs are similar to the costs you paid when you bought your home.

Defination Equity loan

Equity loan

According to the theory the equity loan actually mean is a mortgage placed on real estate in exchange for cash to the borrower. For example, if a person owns a home worth $100,000, but does not currently have a lien on it, they may take an equity loan at 80% loan to value (LTV) or $80,000 in cash in exchange for a lien on title placed by the lender of the equity loan.

Many lending institutions require the borrower to repay only an interest component of the loan each month (calculated daily, and compounded to the loan once each month). The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day onwards. Some loan products also allow the possibility to redraw cash up to the original LTV, potentially perpetuating the life of the loan beyond the original loan term.

The rate of interest applied to equity loans is much lower than that applied to unsecured loans, such as credit card debt.

The Basics of a Home Equity Loan

The Basics of a Home Equity Loan

What is a home equity loan?

A home equity loan is a loan that uses your home as collateral. Your home equity is the part of your home that you actually own and this is the guarantee for your loan.

Your home equity is calculated by taking the current value of your home and subtracting your mortgage. For example, if your home is worth $150, 000 and you have a $100,000 mortgage, you have $50,000 of equity in your home. A home equity loan allows you to borrow money using your equity of $50,000 as security for the loan.

A home equity loan, often called a second mortgage, reduces your equity or ownership in your home. Since your home guarantees your loan, if you default on the payments, you can lose your home.

Tax benefits

Tax benefits of home equity loans

A home equity loan is also beneficial because the home equity loan rate charged is usually tax deductible, as the loan is used for its primary functions. You can use our home equity loan calculator to check what various home equity loan rates will mean for your monthly payments. Always compare offers from several lenders and brokers to obtain the lowest home equity rate possible.

Home equity loan vs. Home equity line of credit

Home equity loan vs. Home equity line of credit

This topic is mainly based on how much the home equity loan can be obtained in a lump sum or used as a revolving home equity line of credit.

A home equity loan can be either of the following:

* A fixed rate mortgage
* An adjustable rate mortgage

A homeowner who requires more money in large amounts usually applies for a home equity loan. Some expenses that make a home equity loan useful are:

* Debt consolidation
* Home repairs
* Medical bills
* College tuition for family members

Home Equity Loans

Home Equity Loans Basic Series

A home equity loan allows you as a homeowner to get a loan by using the equity in your home as collateral. The equity consists of whatever funds you have invested in your property in order to own it or improve it.

Since it is a debt against your own property, which you are in actual possession of, a home equity loan is a secured debt. The property can be required to be sold if the creditor wants the money back that you have borrowed.
Home Equity Guide

E-LOAN

About E-LOAN

E-LOAN is an online consumer direct lender dedicated to providing consumers with a simple, easy and open way to obtain mortgage, auto loans, home equity loans, and online savings and certificate of deposit accounts. Since its launch in 1997, E-LOAN has drawn upon its pro consumer values to improve the lending and online savings experience in revolutionary ways. By eliminating the traditional incentive structure to charge consumers higher rates, giving consumers free access to credit scores and eliminating hidden fees, E-LOAN is providing a uniquely open, fair and honest process. Protecting consumers' financial privacy is also a paramount concern, leading E-LOAN to implement industry leading privacy practices and advocate strong consumer financial privacy protection laws. Consumers have recognized E-LOAN for its trustworthiness and respect for customers. Three independent studies conducted by TRUSTe and The Ponemon Institute ranked E-LOAN as one of the Top 20 Most Trusted Companies for Privacy in America. In another independent study conducted by The Customer Respect Group, E-LOAN received the overall highest rating in the Online Customer Respect Study of North America's largest financial services firms. Since it started its operations, E-LOAN has originated and sold over $32 billion in mortgage and consumer loans.

Improvement Program Benefits for Home Equity Loans

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Home Equity

	Home Equity
	Home Equity Loans and Home Equity Line of Credits (also known as HELOCs) are fixed or variable interest rate solutions for getting cash out of available equity in your home. This equity could be used for any purpose such as making home improvements, consolidate debt, vacations, or unexpected expenses. Call today for a free consultation from a Countrywide home loan expert or visit any Equity section online to utilize mortgage calculators and home loan rate tools.

Flexible - Home Equity Solutions

Flexible - Home Equity Solutions

Flexible home equity loans are comprised of the below mentioned features. Those are mainly declaired in three aspects -

• Low rates and Customer rate discounts
• Rate and payment options to meet your changing needs
• Benefits of fixed rate and variable rate in one account