Banks Just Love Those Home Equity Loans

There are a number of great benefits to taking out a home equity loan; not least the opportunity to open a line of credit, pay existing debts or put your children through college, the list is endless. There are also positive tax benefits, if you’re unsure about this you should speak to your accountant before taking out a home equity loan. So in a world of greedy banks making billions of dollars a year, why do they like it when we take out a home equity loan?
The simply reason is that home equity loans are the “loan of the day”, they are very popular and as a result they make banks a lot of money. Another reason, and one that is perhaps more important, is that home equity loans are secured loans, secured on a tangible asset, your home. Therefore, there is less risk to the bank for lending you the money. This is great news for banks and its shareholders as they are making record profits with less risk. It’s a simple formula to the banks; they’ll lend you the money in return for an interest rate payment. If you fail to pay, they will take your property from under you and sell it, whatever happens they can not lose.
So as long as borrowers pay their home equity loan bills on time and they got what they wanted out of it, surely everyone is a winner, right? On paper, this certainly appears to be the case; however there is a growing concern that many people view the equity in their home as their spending money and are starting to fritter away, what in many cases is their only form of assets or savings. Experts argue that there needs to be more control on home equity loans and the reason for the loans.
by: Adam Jackson

Home Equity Loans For College

Home Equity Loans For College - Very few parents or students would argue that college costs are soaring these days. It is now more expensive than ever before to get a good education for your children. It is true that there are many types of student loans available, and even some government student loans and grants, but these often fall short of the needed funds for college. The additional money has to come from someplace and a home equity loan is one of those possible avenues for college cash.

Homeowners may have an advantage over those who do not own their home. In many cases a homeowner may have enough equity in the home to take out either a home equity loan or home equity line of credit. These types of loans can be used for just about any purpose, with college education financing being one of the most common. Depending on your circumstances, the interest that you pay on these types of loans can be tax deductible. However, always consult your tax advisor regarding the deductibility of interest for home loans as the law can vary.

Just how does one get these types of loans? That is a good question. Generally speaking, you begin by shopping for the best deals on home equity loans or lines of credit. Once you have narrowed down the search, you can apply to the lender. The amount of equity you have in the home will be the basis for the maximum amount that you can borrow.

In most cases, you will be limited to about 80 percent of the equity that you have in the home. You can find lenders who will go above that mark, but you may have to shop for them.

You will need two things when you talk to the lender. The first is an estimate of what the current value of the home is. You can often use receipts from the tax assessor's office for this purpose. The second thing you need to provide to the lender is the balance still owed on the home.

To get a sense of the amount of equity that you have in your home use this example. Assume your home is worth $100,000 and you still owe $50,000 on it. If the lender is allowing 80 percent of value, you would be looking at a maximum loan of around $30,000.

If you already have a second mortgage on your home, that will need to be accounted for as well. Of course, your past credit history will also be a factor.

Depending on your needs and circumstances, a home equity line of credit may work better for you. This type of loan allows you draw out money as you need it rather than take the money in one lump sum.

Even with home equity loans and lines of credit, homeowners should still pursue the other forms of college financing available to their children such as grants and scholarships. Every little bit helps with costs rising the way they are today.

Many lending institutions are now specializing in these type of loans are offering some very competitive interest rates that are in line with the current mortgage rates
 by: Peter Kenny