Home equity line
The concept of home equity line of credit is, availing of additional finance over the mortgaged property on the strength of the acquired equity value of the property accrued over a period of time.
Home equity line of credit is one of the prudent ways of obtaining additional fund to meet variety of necessities like clearing of a number of small loans and to consolidate ones loan position, or to meet the expenses pertaining to home improvement, childrens education or any other expenses.
Advantages:
It is but natural, any homeowner will search for a loan package with least rate of interest and multiple advantages. In the above pursuit he will go through a number of companies literature and brochures and finally selects one of the companys, which offers most apt package to his requirement.
Home equity loan is a personal loan obtained over the security of the building of the borrower and it is a fully secured advance; as such it is comparatively much easier to avail the loan from any bank or a financial institution at comparatively lesser rate of interest.
Because of the keen competition in the field, it is quite normal, that all agencies are trying to lure public by offering them several attractive choices of different schemes at the least possible rate of interest that the lender could afford to offer.
Here also, a borrower can exercise his right to select the agency through which he is going to avail the loan, and he need not hang on to the same old current lender for the second mortgage, in case he feels dissatisfied with any of the services of the current lender, or in case, some other institution is offering better and more attractive package.
As already mentioned earlier, each company will try to offer some marginal benefit or the other by slightly twisting the norms within the frame work of overall lending policy, and try to claim advantage over others, and try to defeat others in the competition.
For example, very recently, an American company, B D Nationwide Mortgage Company an American mortgage broker company, that has corporate head quarters in Encinitas, California, announced offer of Fixed rate HELOC (home equity line of credit) conversion program for those house owners seeking home equity loans.
This company that specializes in refinance, home equity loans and credit lines for house owners seeking debt consolidation or cash payment, says- This unique home equity program allows homeowners to convert portions of their adjustable rate equity line into fixed rate home equity loans. Further they say that, Conversion options are available to convert a portion or all of the home equity line balance to a fixed interest rate home equity loan.
Lynda Nelms, a Sr. loan officer and mortgage consultant at BD Nationwide, said "This is a progressive loan that allows my borrowers to be savvy using their home equity when they see fit, while converting adjustable rate interest into a fixed rate second mortgage with a simple interest amortization."
Pit falls:
By and large, majority of the registered financial institutions are trust worthy and dependable. However, it is always better on the part of the house owner, to be on his guard and study even minor most detail of the terms of the financial institution thoroughly. Also, it is safe for the borrower to search for any mention about hidden charges or adverse conditions, acting detrimental to the interest of the borrower in offered terms of the lender. Since, it is a long term commitment with the financiers involving huge amount, one must be very careful before binding oneself by signing over the application or agreement.
Unlike personal loans, in case of a home equity loans, the house is offered as security, hence one must be very careful about the terms upon which the loan is availed. Any default in future repayments for any reason beyond the control of the borrower, will lead to forfeiture of claim over borrowers own property.
While approaching for mortgage loans, the owner of the house must be very definite about the reputation or creditworthiness of the institution lending the loan, because, many institution headed by unscrupulous men belonging to land mafia can manage to play trick and can cheat the borrower of his hard earned property at a subsequent date.
It is easy to avail several loans over the same property at different time gaps, because the value of landed property will generally, be escalating (except under extraordinary or exceptional conditions) and will be accruing better equity as the years pass by, but such availing of different loans recurrently over the same property will bury the borrower deep into debts and at a point of time he will be unable to come out of the situation and ultimately he may loose his property.
Pros & Cons:
• The above scheme will provide extra cash of large sums upon the security of our house owners house, hence he will be saved from approaching any money lenders to avail loans on the strength of outsiders gurantee, or he is saved from approaching his friends, relatives or well wishers to stand as guarantors to any loan he wishes to seek from a bank or a financial institution.
• An individual can consolidate his loan position by clearing his several petty loans after availing one such above home equity loan and can get released from the clutches of private lenders.
• Easy availability of house equity loan creates a sort of temptation to avail loan over the property often, and that could spell trouble to the house owner.
• In case there is any sudden drop in the estate value for any reason, the house owner will be placed in difficult position because the lending institution may demand for differential margin over the property security.
Essence:
Any way, the long and short of home equity line of credit is, that, it is a property mortgage loan that can be availed on subsequent mortgage, on the strength of enhanced equity value of the property. The amount so borrowed can be utilized to any purpose the borrower wants and it is a special offer with no strings attached. Many lending companies and corporations are offering many special packages to suit the different requirements of people from different walks of life, hence a package best suited to an individual can be chosen.
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