How to calulate your home equity
How To Compute Your Home Equity
By [http://ezinearticles.com/?expert=Vanessa_A._Doctor]Vanessa A. Doctor
A home equity loan is one credit facility, which lets you borrow money using the equity in your property as collateral. Equity refers to the amount of money you've already paid on your mortgage. With such a loan, you can borrow against the equity, and what you do with the cash you get is up to you.
There are good and bad reasons for getting a loan. Before you start looking for one, ensure that you have a definite goal for the money, which is one that is part of a coherent strategy that will increase finances, and make the process of acquiring a home a relatively hassle-free one.
Basic Facts
Your home equity is that part of your home's value (in dollars) which is actually yours. In effectively computing it, follow these steps. First, you need to find out what your home's current value is. In doing so correctly, get the assistance of an appraiser if you want to get the accurate value.
The next step is to find out what you still owe. In computing this, simply add up your down payment and payments that have applied to the principal balance, then subtract the sum from the original amount of the mortgage.
In doing this right, do not add the interest rates. The result would be the amount of money you owe your home The next thing is to deduct the amount that you owe on your home from your current value. The result would be your home equity, which is the combination of your down payment, payments toward the principal and value from property appreciation.
How To Find Out If A Fixed-Rate Is Better Than A Lump-Sum Loan
A Fixed Rate loan is where a bank will loan you an amount that is equal to a certain percentage , and the standard is from 70 to 80%, of your home equity.
The actual percentage depends on various factors including the borrower's credit record, payment history, etc. In some instances, a loan may be made for the whole amount, however such cases are generally rare. In situations where this happens, the borrower usually has a pristine credit record.
How To Get A Home Equity Loan
If you are inclined to get a loan, you will first need to apply for it, get your home appraised then wait for approval. Once you get approved, your money will be released in one, lump sum. This type usually has a fixed or predetermined period. The period may range from a few years to a few decades, with an interest rate also fixed for the whole duration of the loan.
There are also some which have a balloon-payment structure. In this type of loan, the fixed interest rate is generally quite low. However, the period is usually less than 10 years. When the loan period nears conclusion, the borrower will have to make a payment in full.
Positive Aspects Of A Lump-Sum, Fixed-Rate Loan
In this type of option, the fixed rate ensures the security of your loan. As such, you will know exactly what your interest rate is every year for the whole period. You can also make financial projections with a high degree of certainty.
In addition, obtaining your home equity loan in one big sum is great if you have other debts that you wish to pay off. Through this method, you can deal with all of your debts in one swing, and immediately make significant reductions in your overall interest rate payments.
Vanessa A. Doctor from [http://jump2top.com]Jump2Top - SEO Company http://realestatepress.org - Real Estate Press
By [http://ezinearticles.com/?expert=Vanessa_A._Doctor]Vanessa A. Doctor
A home equity loan is one credit facility, which lets you borrow money using the equity in your property as collateral. Equity refers to the amount of money you've already paid on your mortgage. With such a loan, you can borrow against the equity, and what you do with the cash you get is up to you.
There are good and bad reasons for getting a loan. Before you start looking for one, ensure that you have a definite goal for the money, which is one that is part of a coherent strategy that will increase finances, and make the process of acquiring a home a relatively hassle-free one.
Basic Facts
Your home equity is that part of your home's value (in dollars) which is actually yours. In effectively computing it, follow these steps. First, you need to find out what your home's current value is. In doing so correctly, get the assistance of an appraiser if you want to get the accurate value.
The next step is to find out what you still owe. In computing this, simply add up your down payment and payments that have applied to the principal balance, then subtract the sum from the original amount of the mortgage.
In doing this right, do not add the interest rates. The result would be the amount of money you owe your home The next thing is to deduct the amount that you owe on your home from your current value. The result would be your home equity, which is the combination of your down payment, payments toward the principal and value from property appreciation.
How To Find Out If A Fixed-Rate Is Better Than A Lump-Sum Loan
A Fixed Rate loan is where a bank will loan you an amount that is equal to a certain percentage , and the standard is from 70 to 80%, of your home equity.
The actual percentage depends on various factors including the borrower's credit record, payment history, etc. In some instances, a loan may be made for the whole amount, however such cases are generally rare. In situations where this happens, the borrower usually has a pristine credit record.
How To Get A Home Equity Loan
If you are inclined to get a loan, you will first need to apply for it, get your home appraised then wait for approval. Once you get approved, your money will be released in one, lump sum. This type usually has a fixed or predetermined period. The period may range from a few years to a few decades, with an interest rate also fixed for the whole duration of the loan.
There are also some which have a balloon-payment structure. In this type of loan, the fixed interest rate is generally quite low. However, the period is usually less than 10 years. When the loan period nears conclusion, the borrower will have to make a payment in full.
Positive Aspects Of A Lump-Sum, Fixed-Rate Loan
In this type of option, the fixed rate ensures the security of your loan. As such, you will know exactly what your interest rate is every year for the whole period. You can also make financial projections with a high degree of certainty.
In addition, obtaining your home equity loan in one big sum is great if you have other debts that you wish to pay off. Through this method, you can deal with all of your debts in one swing, and immediately make significant reductions in your overall interest rate payments.
Vanessa A. Doctor from [http://jump2top.com]Jump2Top - SEO Company http://realestatepress.org - Real Estate Press
posted by Rupert Hines III | 11:00 AM
