Important Facts about Home Equity Loans in Lakeville
Home equity lending has made a major comeback after its near collapse during the great recession. More financial institutions and individual lenders are now allowing clients to borrow money against the value of their homes. If you intend to take up this kind of a loan, it is wise to consider a number of factors to avoid any inconveniences down the road.
Equity
This refers to the share or proportional value of your home that you own versus what the bank owns. For example, if you home’s estimated value is $300,000 and you have not yet cleared your $250,000 mortgage, your equity is $50,000, this is referred to a loan-to-value ratio.
Provincial Bank notes that in most cases, lenders prefer working with clients who have at least an 80% loan to value ration remaining after the home equity loan.
Two Types of Home Equity Loans
Unknown to most homeowners is that lenders offer two types of
home loans, standard/normal and home equity of credit (HELOC). If you opt for the standard/normal loan, you will get the whole amount at a go while in the latter; the lender gives you the amount borrow in smaller sums over a specified period. Your financial need will determine the most appropriate home loan that you should take.
For example, if you intend to carry out an extensive home renovation project, the standard home equity is the best option. On the other hand, if you want to access to small amounts monthly, then the HELOC is ideal. Bottom line; consider the reasons why you are applying for the loan to make an informed decision.
It is a Type of Mortgage
A home equity loan is a type of mortgage that is similar to the home loan you used to purchase your home. Therefore, it is imperative to consider the tax deductible to make the necessary financial plans. The current federal tax law allows one to deduct mortgage interest on a home equity debt of up to $100,000.
Understanding what home equity Lakeville loans entails will help you make the right choice. Be sure to consult a professional before making your final decision.
