Las Vegas Home Equity Loan Information

There are several types of home equity loans. Some can be a better fit than others based on your situation, mortgage rates, and the purpose of your home equity loan. The Las Vegas home equity loan information offered below will help you understand your options.

Types of Home Equity Loans

Cash-out Refinance

A cash-out refinance pays off your old mortgage and replaces it with a new one. The new loan covers the balance of the old loan, the extra equity you are taking out and applicable settlement costs. Because you are eliminating the first loan, rather than taking out a new loan as a second mortgage, the interest rates may be lower than a second mortgage. This is essentially a traditional refinance except that you are pulling out equity in the home. The funds are paid to you in one lump sum. When evaluating a cash-out refinance, compare the mortgage rate of your current loan against the new one. If the new interest rate is less, then it may be beneficial. Otherwise, you should ask about other options and keep your first mortgage rate.

Home Equity Loan

A home equity loan is a second mortgage on top of your first mortgage. With this type of loan, you borrow a specific amount that you pay back over a specific number of years, either at a fixed rate or a variable one. Second mortgage rates are traditionally higher than first mortgage rates. Closing costs also still apply.

Home Equity Line of Credit (HELOC)

A home equity line of credit traditionally has an adjustable rate that changes with the prime rate. HELOCs are open-ended, so they function like credit cards. The lender sets your maximum credit limit. You can access funds up to your limit and can access in different amounts. Your payment reflects the current balance. As your balance drops, the remaining credit may still be withdrawn. Credit limits may be altered by the lender should significant changes take place in the real estate market.

Ask about annual fees, cancellation fees, and mandatory minimums or withdrawal requirements. Similar to credit cards, HELOCs can be closed by the lenders at any time. This type of loan may be great if you are unsure about needing the maximum amount of the loan. However, be aware that the maximum allowed can be reduced, limiting the available funds.

Las Vegas Home Equity Loan Information

All home equity loans are based on the market value of your real estate and the balance of current loans. You can get a sense of whether you have any equity in your residence by calling a local real estate professional for a market analysis. Mortgage companies will request appraisals to determine a more definitive amount prior to approving the loan. Think twice before taking more equity than you realistically require. Also make sure that the new mortgage payments are within your budget. All home equity loans use your home as a lien, leaving you susceptible to foreclosure if you fail to make payments. This Las Vegas home equity loan information is intended as a broad overview. Consult with a local mortgage consultant for up-to-date interest rates, closing costs, and other options.

Comment balloon 0 commentsArina Hanciulescu • January 08 2016 05:11PM