Vivienda Propia Mortgage - Home Equity 101

Vivienda Propia Mortgage

Home Equity Loan 101

Many Reasons to Consider Home Equity

Putting Home Equity to Work

Estimate How Much You Need

Some Definitions

Preparing for the Home Equity Loan Process

How Can Vivienda Propia Mortgage Help You?

Many Reasons to Consider Home Equity

In today’s economy, the rising value of your home is one determinant factor. There are many other reasons why you should consider home equity financing. For instance, it has great potential tax advantages. In many cases, you may be able to claim the interest you pay on home equity credit as a deduction and consequently reduce your taxes. Consult your tax advisor or accountant regarding deductibility of interest. If you're looking to borrow money or consolidate your debt, home equity products can be a smart choice because they usually carry a lower interest rate than other loans and may substantially reduce your monthly payments

Home equity loans offer a steady payment structure--which means that your interest rate and monthly payments are fixed over time. You also receive the money all at once. A home equity line of credit, on the other hand, is like a credit card--your payments are determined by how much you borrow and interest rates vary as the Prime Rate changes. In today's market, it could be a risky situation since you have no control over the interest rates. Besides, the lender may terminate your line of credit at any time and call in the outstanding balance if you do not make your payments on time

Putting Home Equity to Work

There are many smart ways to leverage the equity in your home. Many people use it primarily to refinance their debt and pay off higher-interest loans such the balance on their credit card accounts. If you do not have outstanding loan balances, you can use it to further increase the value of your home by starting home improvement projects. Thinking of remodeling? Adding a room? A second story? Building a new garage? All these projects can be financed by home equity credit.

Deciding which Loan Program is Best for You.

You can choose from two basic types of home equity programs: a home equity loan or a home equity line of credit. Deciding which program to choose depends primarily on your needs and the purpose for which the money is going to be used.

- Estimate how much you need

If you need financing for a specific purpose such as paying off your credit card or other debts and know just how much you need, you might want to consider a home equity loan. This way, you'll only need to borrow a specific amount based on your requirements. Other items you may want to cover with a home equity loan are home improvements, sending a child to college, paying off your car loans, etc.

- Stability or Flexibility

A home equity loan offers a stable payment structure. Your interest rate and monthly payments are fixed over time. A home line of credit on the other hand, while affording more flexibility, has varying interest rates that follow changes in the Prime Rate

With a home equity loan, you receive the money all at once. With a home equity line of credit, you withdraw the money as you need it.

- The Flexibility of a Home Line of Credit

Several programs are generally available: A revolving line of credit, interest only and fixed rate and fixed term. Ask our loan officers which is best for you.

Some Definitions
Here are some definitions of terms that may come your way as you leverage the equity in your home:

Annual Percentage Rate (APR)
The cost of credit on a yearly basis expressed as a percentage.

Application Fee
Fees that are paid upon application. An application fee may include charges for property appraisal and a credit report.

Balloon Payment
A lump-sum payment that you may be required to make under a plan when the plan ends. This payment will be substantially larger than each of the other scheduled payments.

Cap
A limit on how much the variable-interest rate can increase or decrease during the life of the plan.

Closing Costs
Fees paid at closing, including attorneys' fees, fees for preparing and filing a mortgage, for taxes, title search, and insurance.

Equity
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balances.

Index
The basis for rate changes that the lender uses to decide how much the Annual Percentage Rate will change over time.

Interest Rate
The periodic charge for use of credit expressed as a percentage.

Margin
The number of percentage points the lender adds to the index rate to determine the Annual Percentage Rate to be charged.

Rescission
A rescission period is required by the Federal Government to allow the property owner time to "think over" the loan transaction. This period is 3 business days (including Saturdays but excluding Sundays and holidays) between the loan closing and funds disbursement that applies when a security interest is taken in a consumer's principal dwelling. During this rescission period, the property owner has the right to cancel the loan transaction.

Security Interest
An interest that a lender takes in the borrower's property to assure repayment of a debt.

Variable Rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

Preparing for the Home Equity Loan Process

Applying for a home equity loan has become increasingly easy over the past few years. We now accept online applications making the process very easy and convenient considering our busy lifestyles. However, you still need to be adequately prepared before you begin a home-equity application process. There are generally three areas that you’ll need to gather information around:

Your income.
This includes income from all your sources and other investments that you wish to be considered in your application. No-doc loans do not require income verification.
Your financial obligations.
This should detail your current financial situation including account balances, and account numbers.
Your home.
You’ll need to gather all the information about your home. This includes specifics like the original purchase price of the home, the year you purchased it, and its current market value.

How can Vivienda Propia help you?

Use our calculators to estimate your payments and your savings,
Apply for a home equity loan now.

Or call us at 1-866-873-3839