A sum of borrowed money (principal) that is generally repaid with interest. Loan-to-Value Ratio The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. Lock Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application. M Margin The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. ...
 

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Home Equity Loan Vs Home Equity Line Of Credit
By Rachmat Noer Tjandra
There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are sometimes referred to as second mortgages, because they are secured by your property, just like the original, or primary, mortgage.

Home equity loans and lines of credit usually are repaid in a shorter period than first mortgages. Most commonly, mortgages are set up to be repaid over 30 years. Equity loans and lines of credit often have a repayment period of 15 years, although it might be as short as five and as long as 30 years.

A home equity (HEL) is very similar to a regular residential mortgage except that it typically has a shorter term and is in a second (or junior) position behind the first mortgage on the property – if there is a first mortgage. With a home equity (HEL), you receive a lump sum of money at closing and agree to repay it according to a fixed amortization schedule (usually 5, 10 or 15 years) with the same payments each month. Much like a regular mortgage, the typical HEL has a fixed interest rate that is set at closing for the life of the loan. Such loans are typically granted for up to 80% of the value of the home, but some lenders will lend up to 125% of the home’s value.

For example, if your home is currently worth $130,000, and you have a mortgage against it for $70,000, then you have $60,000 of equity available. Some home equity loans may allow you to borrow up to 80% of your home’s value, others may go higher in special circumstances.

This is very suitable for people who need money in a long term and own any home or property. With this kind of loan, borrower can lend an amount of money equivalent to the equity of their property without selling it. While the lender will lend the money in safety as they hold the guarantee if the borrower can’t pay the money they lend.

The idea of getting a home equity while interest rates are low to help you pay off your bills, buy a car, or even pay for your child’s education may seem like a great idea. However, you should educate yourself first so you know exactly what a home equity is and if

   

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