The most important word in “home equity loan” is equity. Start with the fair market value of a home, subtract the mortgages (first and second) and any liens against the property, and what you have left is the equity. This equity can be used as collateral to secure cash in the form of a loan or mortgage.

The amount borrowed is based on a percentage of the appraised value of the home. The percentage rate can vary from 75% to 125%. The length of the financing will also vary. The two main types of home equity loans are fixed rate loans and adjustable rate loans.

Fixed rate loan – provides a fixed amount of money at a fixed interest rate, repayable in equal payments over the life of the loan. Fixed rate financing costs more in set-up fees and comes at higher interest than adjustable rate loans. But if homeowners stay put and interest rates go up, they will save money over a comparable adjustable rate loan.

Adjustable rate loan – the interest rate goes up or down according to the index upon which it is based. Adjustable rate loans will have a cap on how high the interest rate can go. Usually called ARMs (Adjustable Rate Mortgages), this type of loan has lower up-front costs and starts at a lower interest rate than fixed rate financing. This means lower initial monthly payments.

Home Equity Line of Credit (or HELOC) loans offer unique options for borrowers. HELOCs are generally adjustable to the prime interest rate, which means if the prime rate goes up or down, then so does your payment. The primary benefit of a HELOC is that as you pay it down, you still have access to your equity (usually through a check or credit card). That equity is always available to you for investments, paying off high interest debt, vacations, or to pay off unexpected bills.

Putting Home Equity to Good Use

According to the Consumer Banker Association, the top ten reasons for getting a home equity loan are:

Debt consolidation, the most popular reason people cash out their home equity, is a smart form of financing because of the money it can save. For example, say you owe $15,000 on a credit card that charges 17% interest. If you get a debt consolidation loan at 9% interest and pay it off in five years, you’ll save you over $30,000!

If you’re paying more than 15% interest on anything, you should seriously consider a debt consolidation loan. The right terms could drop your monthly payments by 35%-50%, depending on interest rates, origination costs and tax consequences.

Even for people who have bad credit or who have filed for bankruptcy, a home equity loan is not out of reach. It can be a good way to make a fresh start.

JumpStartMyCredit.com works with mortgage companies all over the country. We work hard to match you with mortgage lenders that are the best match to your particular situation. Whether you have good credit, bad credit, or something in the middle, JumpStartMyCredit.com can be your one mortgage resource.

Up to Four Mortgage Offers

At JumpStartMyCredit.com, we feel the best way to get a great loan is to compare your options. We will route your mortgage to up to four lenders that are best suited to help you on your home purchase loan. Property location, credit type, loan to value, applicant stability, and other factors are used to determine which lenders will work best for you. All you have to do is sit back and pick the best loan. You can literally save thousands. What do you have to lose? The answer is nothing.

Pride of Ownership

Are you tired of watching your friends and family who own their homes gain thousands of dollars in equity each year while you rent? It is not a secret, for most people, their home is the best investment they will ever make. If you are currently paying rent, you can probably afford the monthly payment on a mortgage. Give JumpStartMyCredit.com a shot. We want nothing more than to help you with your next home loan, no matter if it is your first, or your fifteenth.

Rates Are Rising

Current interest rates are still near record lows. If you delay the purchase of your home, rates could rise and you could have lost hundreds every month because you waited. Do not risk it. Apply for your home loan today. Even if you have not found the home you want to buy, you can get pre-approved and find out exactly what you qualify for. With a solid mortgage pre-approval, your offer is as good as cash and as a buyer, you have much more negotiating power.

No matter what your current situation is, we should have a home loan option for you.

Apply today for your home loan. We look forward to serving you.