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Home Equity Installment Loans

If you have been searching for a way to pay for a much needed home renovation, purchase a second investment property, or pay for a college education for your child, a home equity installment loan may be something that you want to consider. This is a popular option for many reasons and does not require a large amount of down payment or investment to get going. This is also a great way to gain some additional income without needing to refinance your mortgage.

What is Home Equity Installment Loan?

When you choose to participate in a home equity installment loan, you are using the equity that you have gained in your home as collateral. Many lenders will be willing to offer a significant loan with very low interest rates depending on the amount of equity that has built up in your home.

Equity is gained as you pay off your home, so the longer that you have had your home the more equity you are likely to have. Likewise, the exact equity that you have in your home can vary from one year to the next depending on the value of your home and how much is left on your regular mortgage loan.

There may be some confusion between a home equity line of credit and a home equity installment loan. A home equity line of credit is a revolving loan that allows you to borrow small amounts against the value of your home. Typically, you set up a predetermined limit of money that you wish to borrow against and are able to have that money available as time progresses.

In some ways a home equity line of credit is very similar to a credit card. The interest rates are higher than a traditional mortgage and you have the benefit of borrowing more or less against your maximum loan amount depending on the needs that you have at the time.

However, with a home equity installment loan, you are participating in something entirely different. With this loan style, you will have an amount of money that you borrow up front. This amount is fixed and the interest rates are lower than what you would expect with a line of credit.

Depending on the specifics of your home, you will then have between three and thirty years to pay off the balance of the loan. If you decide to sell your home, you will also be required to pay this loan in full, so keep that in mind while you are setting up this type of loan.

The amount of money that you can borrow is usually based on a certain percentage regarding the value of your home and the amount that is remaining on your mortgage. Some lenders even allow you to borrow up to 90% of your home’s value, meaning that if you have a home that is worth $150,000 and your mortgage balance is $100,000 you would be able to borrow up to $45,000.

Who Uses Home Equity Installment Loans?

There are many reasons that people would want to choose a home equity installment loan. They are great for home renovations or paying down credit cards. Some people even use them to finance a wedding or a trip that they have been planning to take. The main idea is to use a home equity installment loan when you have a large amount, payment that you need to make and would like to pay it off over an extended period of time. They are also a great option because interest rates change regularly and a home equity installment loan helps to keep the low rates intact for your loan.

Pros and Cons

One of the best things about a home equity installment loan is that you are able to secure a large sum of money without needing to put down a large down payment or go through the rigorous paperwork as you would with a traditional home mortgage. However, if you are uncertain as to the final amount that you need, it may be difficult determining the right amount to borrow. Also, it will be more difficult to change the Loan amount that you have borrowed in the future.

A home equity installment loan is a fantastic option for many people. If you are considering this loan type, be sure to research your many options so that you will know if it is the right loan option for you. There are many loan types available and you should review them carefully before choosing one for your specific need.