When it comes to your finances, sometimes you just don’t have enough extra cash lying around to pay for life’s expenses. Your kids can’t afford to pay for their own education, your house needs upgrades, and you have many high-interest credit cards on which the debt keeps mounting. Where can you find the funds to take care of life’s expenses? Answer: A home equity mortgage.
What Are Home Equity Mortgages?
Home equity mortgages allow you to access the equity that lies in your biggest investment: your property. This loan lets you use the equity in your home as collateral so you can pay for renovations, education, and swelling credit card debt. When you take out a home equity mortgage, a lien is created against your home using its existing equity.
How Are Home Equity Mortgages Calculated?
In order to calculate home equity mortgages a simple formula is used. You subtract the amount owning on your mortgage from the value of your home and that’s how much you’re entitled to.
Value of your home – the amount owing on your mortgage = home equity
Normally, homes increase in value as they age. So, if you’ve kept your home in somewhat good shape, it’s safe to say that’s it’s value has gone up, giving you more equity.
Is a Home Equity Mortgage Like a Second Mortgage?
Yes. Like a second mortgage, a home equity mortgage allows you to use your home as collateral. Both second mortgages and home equity mortgages are secured against the value of your property. The rates for a home equity mortgage generally mimic those of second mortgages, as in they are higher than those of a first mortgage. Furthermore, home equity mortgages also need to be paid on a monthly basis like traditional mortgages.
What Do I Need To Qualify For a Home Equity Mortgage?
In order to qualify for a home equity mortgage you need to have good credit. As with any other loan you acquire, your credit history needs to be strong.
What Can I Use The Equity In My Home For?
The equity found in your home is yours to use as you wish. In most cases people use their home equity mortgage to send a loved one to school, wedding expenses, renovations and property upkeep, as well as paying down credit cards.
Remember, like any other mortgage you are responsible for paying back your home equity mortgage in monthly increments.