Home Equity Loans - Types, Benefits and Risks

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What are Home-Equity loans?

Home Equity Loans lets homeowners borrow money by leveraging the equity in their homes. The loan is based on the difference between the homeowner's equity and the home's current market value. It is also know as second mortgage.




Types of home equity loans?

There are 2 types of equity loans

1. Fixed-rate loans (provide a single, lump-sum payment to the borrower, which is repaid over the given period of time at an agreed-upon interest rate) and
2. Lines of credit (Borrowers are pre-approved for a certain spending limit and can withdraw money when they need it via a credit card or special checks.

Monthly payments vary based on the amount of money borrowed and the current interest rate) & both are available with terms that generally range from 5 to 15 years.

Benefits of home equity loans?

• Easy source of cash,
• Interest paid on a home-equity loan is also tax deductible;
• A lower interest rate,
• Lender gets more interest & fee & also repossess the property, 
• Sell it again and restart the cycle with the next borrower,

Risks of home equity loans?

• Interest rate risk
•  Ease of Spending

Interest rates of home equity loans?

Various from place to place city to city.