Home Equity Mortgage Loan
Home equity mortgage loan is a kind of loan where you use
the equity of your home as the collateral for the mortgage
loan. A mortgage loan is a specific kind of loan where a
property or asset is used as the security of the loan.
Whenever you take up a loan, you are bound by the lenders to
repay back the loan amount with certain interest rate before
the end of tenure of the loan. If under any circumstances, you
fail to pay off the total amount in time, then your lender has
the right to take possession of your property, which was meant
as a security against the loan acquired.
In most home equity mortgage loans the equity of the home
is valued as the security of the loan. The type and the
character of the mortgaged property determine the difference
between a normal mortgage loan and the home equity mortgage
loan. Home equity is a kind of liquid asset where an equity or
value of the loan is being used as the collateral. Here the
money is borrowed on the basis of the fluctuating value of the
property. On the other hand, in general mortgage loans, a real
property is being used as the collateral, with a fixed real
estate value.
There are two types of home equity mortgage loans -
(i) Closed end home equity mortgage loan: In this case,
you will get a lump sum at the end of the loan term. Most of
the time, the 100% equity value can be accessible. However,
the amount of the loan, in these cases largely depends on the
credit history of the borrower, along with the appraised
collateral value, and the earnings of the borrowers.
In many cases, borrowers with excellent credit record and
satisfying income are granted more than 100% of the total
equity value of the home. In such a case, it is called 'over
equity loan'. Generally, this type of mortgage loans come up
with fixed rate of interest with a tenure period of 15 years.
If you want to avail the loan for shorter tenure period, you
may have to pay off a large amount at the end of the loan.
This is often called 'balloon payment'.
(ii) Open end home equity mortgage loan: In case of these
types of loans, the borrower to a large extent controls the
payment frequency and loan amount. The borrower borrows
against the equity of the home as the equity line of credit.
The lender here defines the limit of the credit line based on
the appraised home equity value, the credit history and the
income rate of the borrower.
Here the loans are available mostly on the basis of
adjustable interest rate along with 30 years of term period.
The available equity amount can be reached up to 100%.
Home equity mortgage loans are offered to borrowers with
good credit record. To qualify for a home equity mortgage loan
you have to pay some due fees and charges. Generally the
charge for these types of loans is a bit more than other types
of loans. This is because; it requires a thorough inspection
of the home equity along with regular and prospective up
gradation of the estimation.
| 
