Home Equity Loans - Are They the Best Way to Borrow Money?

The Home equity Loan or HELOC has been around for many years and in the past has been a useful tool in helping middle class families do improvements on their home, send a child to college or even help provide starter capital for a small business. The concept is based on the idea that your home is worth a set amount in the current market, for example $250,000. Your mortgage balance is a portion of that market value, for example $ 100,000 leaving you with $ 150,000 in equity.

Home Equity Loans - Are They the Best Way to Borrow Money?
By [http://ezinearticles.com/?expert=Alan_Fernandez]Alan Fernandez

The Home equity Loan or HELOC has been around for many years and in the past has been a useful tool in helping middle class families do improvements on their home, send a child to college or even help provide starter capital for a small business.

The concept is based on the idea that your home is worth a set amount in the current market, for example $250,000. Your mortgage balance is a portion of that market value, for example $ 100,000 leaving you with $ 150,000 in equity. This equity can be accessed via a loan or line of credit up to a certain percentage of that equity amount. Any debt against that equity lowers the value of the equity above total debt (mortgage and Home equity). So a $50,000 loan against the equity would lower the available equity for future loans to $100,000. Or a line of credit (more common use of HELOCs) where $20,000 was actually used would lower available equity to $130,000.

Home equity loan repayments are tax deductible to the consumer and in a stable economy where interest rates are low a family with substantial enough income to make the payments or pay off large chunks of the loan can do well.

Unfortunately, the current atmosphere for these loans is bleak. People borrowed on the equity of their homes for any number of wise or unwise reasons and saw the value of their homes shrink along with any available equity. Some saw the reduction so severe that the loans outstanding were more than the worth of the house.

Also, unfortunate is the rise of unscrupulous lenders and their agents and brokers who decieved people into loans they could not afford such as mortgage brokers who neglected to tell their client about the escrow (property taxes and homeowners insurance) that would be due on top of their regular mortgage payment thereby doubling the anticipated promised payment to something less affordable.

Or the bank who gave kickbacks to appraisers to over-appraise a home so that more equity would be available; equity often borrowed on at the closing. More business for the lender, bad for the borrower.

When looking at a home equity loan try to find a reliable lender through research, ratings and word of mouth. Next, look at rates. Some are set at the Prime Interest rate or slightly above. They vary from lender to lender as well as do the closing costs. Next, determine the length of time on the loan. Remember the loan will be structured to indicate the amount of your payments representing interest only. If you pay via that method you will be paying interest but not decrease your principal.

Most importantly, do an honest self appraisal of why you wish to use the equity in your home.
Many people use HE loans to pay back high interest credit card debt. What happens all too often is that the credit card is not destroyed as it should be, but used again later. Credit card debt thus increases and the HE loan still hasn't been paid off and so total debt has increased.

Going into debt can be useful if well planned and thought out but many times the lender is plunged into a cold, murky place where no matter what...the loan has to be paid back.

Alan S. Fernandez is president of Foundation Financial Services with a BBA in Finance and Economics from Iona College, studied under the Life Underwriters Training Council and Certified Financial Planner programs and with 15 years in the insurance industry is a well known problem solver among businesses and individuals alike. He is also an insurance instructor with Citicorp. He can be contacted at [mailto:afern109@optonline.net]afern109@optonline.net or visit the FFS website at http://www.foundationfinancialservicesny.com

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Home Loan After a Bankruptcy

Many people who have undergone bankruptcy want to own their own property and want to stand in their own feet as a morale booster. But many issues pop up when they look for home loans. Have you had any information on home loans sanctioned to a person after he has undergone bankruptcy?

Home Loan After a Bankruptcy
By [http://ezinearticles.com/?expert=Jon_Elton]Jon Elton

Many people who have undergone bankruptcy want to own their own property and want to stand in their own feet as a morale booster. But many issues pop up when they look for home loans. Have you had any information on home loans sanctioned to a person after he has undergone bankruptcy? In practice home mortgage loans and bankruptcy will not go together. But it is not true that the option for a home loan is completely closed forever for them. If you talk to people, you will be flooded with misinformation telling that no financial institutions will issue loan to people with the history of bankruptcy. Do not care about this misinformation campaign, you can very well get a home loan to acquire a dream home, only thing is you may have to wait for some mandatory period.

As per the rules and regulations a person who have undergone bankruptcy must wait two years mandatory period from discharging of debts and the filing of bankruptcy before acquiring any wealth in his name. Typically most lenders will not even consider the home loan applications from a person with the bad history of bankruptcy at least for four years; this is really an unfortunate situation of a person eager to get back to his normal life pattern. But you have to content with the real life situations, there is no other way unless you wait for at least four years to get a conventional loan. You can look out for some private lenders as well who can help you in arranging the home loans after the mandatory period of two years.

The major challenge you will be facing is the important issue of getting back your credit scores in a good level and you require some finances essentially to achieve this. You have to do lot of homework to build a good credit. You have to prioritize your financial dealings. You start paying off all pending credits as early as possible, without getting much bad credit. You should make sure that you have cleared off all parts of the financial credits in connection with the bankruptcy before initializing the process of a new loan. In general the record of bankruptcy will remain nearly for seven to eight years, but in real life after two years you are perfectly eligible for any dealings.

How to get back good credits or bringing back on track the credit history? The best method is to get as many credit cards as possible and use them very regularly. Do not forget to pay off the credits within the due period. This way you will be improving your credit history very much. Also this will help you to regain your credibility with the creditors. You should able to convince the lender the worthiness of issuing a home loan for you. If you own a good standing with one creditor, other creditors will follow the suit and will be tempted to issue the loans to you.

If you have a high income and significant cash reserve do not forget to produce before the creditor. That will absolutely give confidence in you for the creditor. Do a good homework before going for Home loans.

Jon Elton owns and operates a [http://mymarketer.net]Car Home Life Insurance Quotes website to help while making decision about insurance. He also operates a [http://mcobi.org]Cheap Car Auto Insurance site to help taking decision about auto Insurance.

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