In the last several years there has been a lot of commercial time purchased by home equity lending companies. They promise low rates, low fees, and easy qualifying, however, what they do not tell you is exactly what a home equity line of credit is, and how it can affect your credit.
Home equity loans can take on several different formats. First they can be formatted as a second mortgage loan that is provides you with a lump sum amount of money to work with. This loan is secured by your equity in your home. The second way that a home equity loan can be formatted is as revolving home equity lines of credit that are secured by your home.
Equity lending has really boomed in the recent years because of lower interest rates and the real estate property rush that has impacted most real estate markets in the United States. People are using their home equity loans to consolidate their unsecured debt at lower mortgage rates, to make home improvements before putting their homes on the market, to take vacations, as well as to pay for college tuition.
While home equity loans can be a great way to pay off credit card debt or make improvements to your home, like any form of debt they also come with their own problems. The first problem is that people that use a home equity loan for debt consolidation often times create more debt for themselves after paying off their credit cards with the equity loan by charging more things on their credit cards. At this point they not only have a higher mortgage payment to contend with, but they also have more unsecured debt to pay off. The second problem that home equity loans have is that they move unsecured debt to secured debt, and if you have problems paying the second mortgage that you took out on your home to pay off debt, make improvements on your home, or take a vacation, you can lose your home.
If after weighing out the pros and cons of equity lending you are still interested in applying for one of these loans then you will need to find a loan program that is right for you. Your first option for finding an equity lender is to talk to the company that currently finances your first mortgage. If they can not provide you with a second mortgage or a refinancing package that you like you can also talk to local banks, local mortgage lenders, or you can talk to a mortgage broker.