When a borrower receives a lump sum amount of a loan with mortgage, known as a loan with home equity closed end. This is contrasted with a line of credit mortgage in which the right to use the sum to the total value of your line of credit is granted. A loan closed end home equity often writes for 15 years, can have a fixed interest rate and requires the borrower to make monthly payments until paid loan . These loans are considered traditional second mortgages.

equity loan

Function
If you own your home and have accumulated enough capital, loan closed end home equity can provide the money you need while providing a number of benefits. First, the interest rate you pay is considerably lower than the interest charged on any of your credit card or loan staff. Moreover, in most cases the interest you pay may be tax deductible, but later you must check with your tax advisor. Finally, you can choose when to use the money because the income of your loan can be placed in a savings account to earn interest. And in most cases, you can decide when the loan will be fully paid.

 

Considerations
Before making a loan closed end home equity, you must understand some of its drawbacks. First, you run the risk of losing your home if you can not refinance or have difficulty paying. A loan home equity closed end is secured by your home as collateral. And if you have a late payment of 60 to 90 days, the lender may be forced to foreclose on your house. Also, if you choose a loan with a variable interest rate, you should be aware that your monthly payments will increase when interest rates rise. Finally, the cost of closing your loan can be substantial, so it will be important that you know what you will be before you embark on a loan of this type.

 
Size
The amount of loan closed end home equity is a function of both the value of your home and a lender policies. For example, many banks will lend you money up to 85% of the appraised value of your home minus the amount of other loans secured by your home. Of course, this is after you have done your credit history and your ability to repay the loan .

Warning
There have been cases where the equity of a home has risen dramatically and attracted owners to take advantage of them mortgaging their homes. In some cases, they have done more than once to refinance their homes or borrow additional amounts through home equity loans closed end with successive embargoes in their homes. Then the value of homes declined rapidly and many of the borrowers owed ​​more than their homes were worth. At the same time, many borrowers lost their jobs and were unable to keep their homes from foreclosure.

Prevention and resolution
Under no circumstances should you think about the funding of a loan closed end home equity as “found money.” Be sure to make serious use of the money before offering your home as collateral. Also, compare loans before deciding on a lender or another, because once you sign your name in the papers, you are committed to the terms. For example, if your loan closed end home equity has a variable interest rate, make sure you know how often and how often your payments can be raised.