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What is a home equity loan? A home equity loan is where you borrow money using the equity in your home as the collateral. Many people use home equity loans for refinancing their home, their kids’ college tuition or unexpected medical bills. Be aware that using a home equity loan will reduce the actual equity of your home. Your home equity is the value of your property. Your home equity will increase as you pay your mortgage or do home improvements that benefit the value of your home. Collateral is property that you use as a guarantee that you will repay the money. If you do not pay this is where your collateral comes into play. The lender can use your collateral to obtain the money you owe. Using your home as collateral is risky if you do not know one hundred percent that you can pay the loan back because you will lose your home if not. A home equity loan is like a second mortgage some might say. You can use this money to improve your home furthering its value or pay for other expenses you might have. In order to get a home equity loan you will probably have to have great credit history. It is even possible to have your home equity loan interest deducted from your income taxes. There are two types of home equity loans; closed and open end. Closed end home equity loans means you will receive one lump sum when the loan is closed and will not have the option of borrowing more. The lenders will base the amount you can borrow on things like your credit history, the appraised value of your collateral and your income. Closed end home equity loans usually have rates that are fixed for up to fifteen years. You can also refinance a home equity loan if needed. You want to try and always pay the minimum amount if not more every month. Open end home equity loans are sometimes called a home equity line of credit. This means you can decide when you want to borrow and how often against the equity of your property. The lender will still set a limit to your credit line. You might be able to borrow up to one hundred percent of the value of your home, however some states are only allowed to loan up to eighty percent of the value. There are certain home equity loan fees you should be aware of that may apply as well, depending on the laws in your state. These include title fees, stamp duties, closing fees, appraisal fees, originator fees, and surveyor fees. While you may have to pay all these fees, if you do your research before obtaining a home equity loan, you will know if it is worth it. You don’t want to chance losing money or value on your home. If you are uncertain if a home equity loan is right for you, speak to your financial consultant. Discuss all your concerns and questions so you can both decide what is best for your situation. For more insights and further information about a Home Equity Loan and to get a free no-obligation loan quote, please visit our web site at http://www.personalloantips.com/home_equity_loan.php
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