Thursday, November 22, 2007

Home equity loan

A home equity loan (sometimes abbreviated HEL) is a type of loan in which the borrower uses the equity in their home as collateral. These loans are sometimes useful to help finance major home repairs, medical bills or college education. A home equity loan creates a lien against the borrower's house, and reduces actual home equity.

Home equity loans are most commonly second position liens (second trust deed), although they can be held in first or, less commonly, third position. Most home equity loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios. Home equity loans come in two types, closed end and open end.

Both are usually referred to as second mortgages, because they are secured against the value of the property, just like a traditional mortgage. Home equity loans and lines of credit are usually, but not always, for a shorter term than first mortgages. In the United States, it is sometimes possible to deduct home equity loan interest on one's personal income taxes.

2 comments:

Adrian said...

Home loans have become a big headache to avail, this is my personal experience. In paper we might come across to so many promises making us secure them easily but the fact is something else. When we are looking to make the most of it some hindrances are bound to make things difficult for us. I was therefore wondering about the Grant applications if they can be of reliable help.

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