Home Equity In Alamo

Alamo Home Equity

What can you use home equity for?

If you are a homeowner who needs cash for major purchases, education, home improvement, or other situations, then you can utilize the equity in your home via a second mortgage. If you've owned a home for the past several years, it has likely appreciated in value (six percent a year on average; in some areas a lot more).

A second mortgage is based on the equity you have built up in your home. The equity can be turned into cash that can be used to remodel your home, consolidate high-interest debt, purchase the car of your dreams, or even pay for tuition. The appreciation is yours; and so is the cash. Use it to simplify, enhance, or change your life.

Types of Second Mortgages Available
Equity seconds are second mortgages that use the equity you have in your house as the basis upon which a lender loans you money. Most lenders will require an appraisal in order to establish your house's value and the equity contained therein. Borrowing with an equity second normally allows you to obtain a better rate due to the fact that the money borrower is secured on property you have ownership in.

Over-equity seconds are second mortgages that lend you money over and above the value of your house. Over-equity seconds are commonly known as "125's" or "115's" because they allow a lender to loan you money at 125% or 115% of your house's value. Requirement of appraisal is based upon the amount of money borrowed. Typically, if you plan to borrow over $35,000 on an over-equity loan, an appraisal is required. Borrowing with an over-equity second allows you to obtain a loan when a personal loan may have not been possible.

Tips on getting a second mortgage:

Borrow the amount you actually need.
"If you still owe $100,000 on your $150,000 house, and your lender uses an 80 percent loan-to-value (LTV) ratio, you could borrow up to $20,000. You may need the whole amount, but remember that a second mortgage represents payment at a higher interest rate than your original loan, and you will have to pay off both loans when you sell your house. It's prudent to take out less than the full amount if you can.

Do your homework when you shop for home equity lines of credit.
These flexible loans vary widely, and some do not charge an annual fee. Compare the interest, teaser rates and rate caps on every line of credit you consider.

When comparing home equity loans, look at short-term and long-term costs.
Short-term costs include origination fees, points and closing costs. Long-term cost is the total amount of interest you'll pay over the life of the loan. This is easy to calculate using an amortization chart. If your loan is adjustable, you will need to compare the annual percentage rates (APRs), points, index rates, margins, lender fees and other loan terms.

Watch out for negative amortization.
If you have an adjustable-rate home equity loan, your monthly payment cannot be fixed. As with any adjustable, your payments should increase when interest rates rise. If your adjustable program specifies fixed payments, that means the additional interest is added to the end of your loan, and you'll be expected to pay this extra money at the end of the loan term. This can also happen with a
line of credit. Ask your lender to specify your payment terms very clearly before you commit." (Source: houseandhome.msn.com)

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