Using a “cookie-cutter” approach for home equity loans may be enough for some people, but the truth is, everyone’s financial situation is just a little bit different, which requires the solution to be tailor-made for the best solution and highest level of success.
Most companies specializing in home equity loans realize the importance of providing you with a unique solution. They focus on ensuring you as the customer, are 100% satisfied.
These tailor-made loans include offering the most reasonable interest rate, easy repayment schedule, and obtaining the exact finances needed. Making the entire loan process convenient and customized will give the loan company a happy customer and outstanding word-of-mouth advertisement. As the customer, you should take advantage of these types of loans. You will have the choice of two types of loans that can be modified specific to your need.
The first is a home equity line of credit. This type of loan allows you to borrow the difference between what you owe on your home and what the current value is, the equity. To secure this loan, you will be required to qualify for quite a bit of credit. Keep in mind that one of the most important
To ensure you get the best possible service and loan options possible, you will need to play an active role in the lending process. It is true that the lender will be providing their services for you, but you too need to invest some time to make sure communication is accurate and that you know what you “need” versus “want.” Here are a few simple strategies to help you along your way:
Because your home is the collateral against a home equity loan, doing everything possible not to jeopardize it should be your number one priority. Therefore, these monthly payments should be at the top of your list.
Drastically reduce or eliminate your credit cards. You might consider keeping one for emergency purposes only, but they will get you in more trouble than you think.
Work with a reputable lender who has your best interest as their number one priority. If you own a home with $50,000 equity but only need to borrow $20,000, if your lender encourages you to borrow more than you need, find another lender. This is probably the quickest way to get into trouble – over-extension of financial resources/commitments.
Maintain some equity in your home at all times for real emergencies. I hope that you will never have to draw on this, but it would be better to have some money sitting in equity than to have borrowed it all.
Always read the fine print in any contract or agreement. If you do not understand something – ask! If you still do not understand – ask again!
Keep your credit in good standing. About every six months, request a credit report from the three main sources.
Consult with a reputable lender or use an online mortgage calculator to determine what your current debt is, how much you really need to borrow, and how much you can afford to pay monthly.
Consider your current employment situation. Unfortunately, this is a difficult time and although not pleasant to think about, be honest about your situation.
Never use money borrowed on a home equity loan as a means of paying off daily expenses.
Ensure the purchase, especially a large purchase such as home improvement, an automobile, etc., are long-term investments.
Avoid balloon payments.
It is important to understand that the first several years the only thing being paid on your loan is the interest. No money paid goes toward the principal amount, meaning that it takes time to build equity. Confirm with your lender that you are entitled to pay additional money each month or year toward the principal as a way of paying the loan off early – in other words, that there is no pre-payment penalties.
An example of making extra payments – if you pay one extra house payment a year, either paid in one lump sum or broken down into smaller payments added onto your existing monthly payment, you would reduce a 30-year mortgage to 18 years. This works on home equity loans as well as first mortgage loans. The fact is that most people do not even realize this is an option. Your best chance of making the right choice is to become as educated as possible. The basic guidelines provided above are your first step to successfully obtaining a home equity loan.