5 things everyone should know about home equity financing

5 things everyone should know about home equity financing

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If you’re looking for an affordable and simple way to borrow money, home equity financing should be on your shortlist. You can use a homeowner loan for almost any purpose, it’s often cheaper than other forms of borrowing and they are often easier to arrange than other types of credit.

Here are five things you should know about home equity financing.

1. It is a secured form of lending

Home equity financing allows you to borrow against the equity in your home. Your equity is the difference between the value of your property and any mortgages or loans secured on it.

When you take out a secured loan you offer your home as security to the lender. The lender takes a legal ‘charge’ over your home in return for advancing the loan. Whilst this additional security means the loans are often at low rates, your home is at risk if you don’t keep up your repayments.

2. Home equity finance is available if you’re self-employed or if you have bad credit

Unsecured credit is often difficult to arrange if you are self-employed or if you have a less-than-perfect credit history. Lenders are sometimes reluctant to agree to loans if you have trouble proving your earnings or if you have County Court Judgments or defaults.

However, as home equity financing is a secured form of lending, lenders have the additional collateral of your home as security. This makes it much more likely that they will recoup their loan and so they are often more likely to consider self-employed applicants and those with bad credit.

3. It is cheaper than other forms of borrowing

As the lender takes your home as collateral, they have much more chance of getting their loan back than they do on an unsecured loan or a credit card. This means that they can often agree to lower rates of interest on home equity finance than on other types of borrowing.

You will therefore find that home equity financing costs less than other sorts of borrowing. Many people take advantage of this by using a homeowner loan to consolidate other borrowing they have at higher rates of interest.

4. You can use home equity financing for almost any purpose

Home equity financing can be used for almost any purpose. Many people use a home equity loan to consolidate other borrowing, such as unsecured loans or credit cards. As well as reducing the interest costs of borrowing it can also help to simplify your payments. This is because you will have one simple, affordable monthly repayment to the home equity loan rather than multiple smaller payments to various store cards, loans and credit cards.

You can also use home equity financing to undertake repairs or improvements to your home. Whether you want to convert your loft, fit a new bathroom, buy new carpets or replace your boiler a home equity loan can provide the cash that you need.

5. You can spread the repayments over a long term

Unsecured loans and credit cards are often designed for short-term borrowing so they can only be taken out over a short period of time.

Home equity financing can typically be taken over 3 to 25 years, meaning you can spread your repayments over a longer term to make them more affordable.

To access the money tied in your home equity and get a great loan rate, book an appointment with the Mortgage Genie.

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