Home Equity Loans (HEL): Home Equity pledged as Collateral
Home Equity Loans
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There are numerous loan facilities available in UK which is enjoyed by large number of people these days; they may be salaried people, business men, students, working women, or housewives. Home equity loan is one such finance option which is getting popular these days.
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Home equity loan is a long term credit scheme which facilitates the loan seekers to pledge their home equity as security or guarantee against the loan. In this type of loan, the actual home equity is reduced and lien is generated against the collateral. These loans are of two types called open end home equity and closed end home equity. In closed end HEL, the loan seeker can borrow money against the property in question only one time and cannot reuse the property during the repayment tenure. The amount of loan depends upon the assessed value of his asset; the borrower’s salary, credit record and other financial details are also considered. The customers are granted amount between 80% and 100% of the appraised asset value depending on lender’s decision. The repayment duration is up to 15 years and interest rates remain constant throughout, irrespective of the economic fluctuations.
In open end HEL, the customer can borrow the loan against same property, a number of times, though the amount to be credited is limited by lenders. The only drawback of this type is that rate of interest is variable and repayment duration is long so any rise in interest rate will make the borrower pay back more money in the long run. The duration in this case is generally up to 30 years. The good part is that with long time period, EMI comes out to be small and easily affordable by the borrower. However if borrower fails to payback the debt, it is recovered by foreclosure and sale of the property in question in both the cases.
Both these types are called second mortgage because money is granted against the cost of property. The loan seekers should study the proposal of lender thoroughly before finalizing. All such lending schemes have certain fees associated with them like stamp duty , title fees, early pay off and closing charges, appraisal fees and processing fee for time period extension etc. With home equity loan, the borrowers can enjoy tax benefits so they should have its knowledge.
HEL is one such easily affordable and long term credit scheme to fulfill usual financial needs of the borrowers and at the same time they can enjoy additional benefits like tax saving, refinance and multiple loans.
Aaden Marsh is Advisor of Seniors home equity loans.For any information regarding Home Equity loans, home loans for pensioners visit http://www.homeequityloansau.com
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