UK Home Equity Loans
1. What is an equity loan?
An equity loan is a loan based on the difference between what you owe on your mortgage and the amount of money you would get for your home if you were to sell it. The difference between the two amounts is called the equity that you have built up in your home. It usually takes a year for you to notice any difference in price if you donít do any renovations, but under ordinary circumstances people usually look at the amount of equity for loan purposes after about five years.
2. What is the difference between a Home Equity loan and a Home Equity line of credit?
A home equity loan is a one-time thing. You can only get one home equity loan on a specific home. However, a home equity line of credit is something that you can use over and over again. It works like a checking account. When you pay off some of the money you borrowed on the line of credit you can borrow on it again. The interest is charged monthly and is based on your outstanding balance.
3. What are the benefits of getting a home equity loan compared to a home equity line of credit?
If you want to borrow money for extensive renovations and that is all the money you want to borrow, then a home equity loan may be better for you. Once you have it paid off then you wonít have any monthly payments to make and there wonít be any temptation to use the money from the line of credit for something frivolous. With a home equity loan, you have a fixed rate of interest so you are not subject to the changing market rates.
4. What is cash out refinancing?
Cash out refinancing allows you to use the equity you have built up in your home by refinancing the mortgage. Under this type of transaction you get a new mortgage where the balance is higher than the original mortgage because of the unpaid balance. You will still only have one payment of your home each month, instead of two that you would have with a home equity loan or line of credit.
5. What factors should I consider when I want to borrow based on the equity built up in my home?
When you decide that you want to borrow money to make renovations to your home, you can choose to borrow based on the equity. The factors that you should consider are the interest rate, the length of the term and the amount of the extra monthly payments that you will have.
6. Is there are difference between a home equity loan and an equity loan?
Yes an equity loan is different from a home equity loan. You can get an equity loan of up to £50, 000 and in London teachers could qualify for a higher amount. With this type of loan, you donít have to make any repayments until you sell the home or stop being a key worker. If you sell the home you can pay off the full amount of the equity loan from the proceeds of the sale.
7. What kind of research should I do when considering getting a home equity loan?
The main thing you should look at when comparing the different types of loans you can get for renovations to your home is the annual rate of interest. This will affect your monthly payment. If the interest rates are low, then you are better off with a fixed rate of interest so that your monthly payments will stay the came over the term of the loan.
8. If I have bad credit will I still be able to get a home equity loan?
Yes even if you have bad credit you can still get a home equity loan provided that you do have equity built up in your home. Since the home is the collateral on the loan, the lender does have security and has less risk of losing the money should you default on the loan.
9. Do I have to go back to the same lender for a home equity loan as the one that has my original mortgage?
No you can choose a lender that offers you the best terms for the loan. You can have more than one mortgage on a home with different lenders. The main mortgage will be called the first charge and the second one will be called the second charge. The chances are very likely that if you find a lender that can give you more favourable terms, you original lender will match them if you go back.
10. What is the Lifetime Mortgage Loan?
The Lifetime Mortgage loan is a type of home equity loan that is available to those homeowners aged 55 and over. You donít have to repay the money until you die, at which time it has to be paid by the estate, or you have to leave your home because you cannot take care of yourself.
[UK Loan Types]