Home equity loan tips

What is Collateral? It is a house that you give as a pledge to guarantee debt repayment. If you don't do that, the lender is secured and he can take your property and sell it (if he wants) to get its money back. The Equity is the difference between your home value and how much you still have to pay out because of the mortgage.

A home equity loan is another (second one in most cases) mortgage that enable you to turn equity into money for your current expenses like: college education, tuition, home improvements, repairs, debt consolidation and more. There are two types of home equity debt: home equity lines of credit and home equity loans (called HELOCs or second mortgages, because your property is a pleadge again, just like with the previous mortgage.

Difference between the first mortgages and home equity loans or lines of credis is shorter period of repaing. First mortgages are usually set up for longer than thirty years. Home equity loans are below that (sometimes much below, even for a few years). The draw period often is 5 or 10 years. The repayment period usually is ten or fiveteen years. Each lender can set its own draw and repayment terms. Lenders have been known to have draw periods of 9 years, 6 months. Repayment periods of tweenty years.