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The reasons to consider a second mortgage are as varied as the programs available to you once you make the decision to tap into your home equity. Some popular reasons include college tuition, bill consolidation, health expenses, and home repairs. When it comes to borrowing money, these types of loans are favored for a number of

reasons, not the least of which is the tax deductibility of all the interest paid on an equity loan. Before you start shopping around, however, you should decide whether you want a closed-end second mortgage or a home equity line of credit (HELOC).

A closed-end second, also known as a home equity loan, refers to a second mortgage that is structured in a very similar way to your first. To borrow using a home equity loan, or closed-end second, you make a one-time choice on the amount you would like to borrow, close on the loan, and receive a check for the amount you’ve chosen. You will have regular payments structured over a period of years, and upon completion of those payments, your home equity loan will be paid in full. If you decide later that you would like to draw additional funds, you will need to arrange for an additional loan with additional closing costs. However, the closed-end second carries a fixed rate that will never go up and offers a straightforward plan for paying the money back.

A HELOC, on the other hand, is a line of credit from which you can withdraw money again and again. In many ways, a HELOC is just like a credit card, but the interest you pay is tax-deductible. You will close on a HELOC only one time, but if you decide after a few months that you need to withdraw additional money, you will be able to do so up to the value of the loan. That is to say, if you close on a HELOC for $60,000 and over a period of time pay back $13,000 toward the principal, that $13,000 is available to be drawn again at any time. You will continue to make payments toward what you owe just as you would on a closed-end second; however, the full amount of the loan is always available to be drawn on, as long as the amount you owe and the amount you borrow do not exceed the total amount of the original HELOC.

Whether a closed-end second mortgage or a HELOC is right for you is something you, your loan officer, and / or your financial planner must decide. If you are relatively sure that you will need to borrow against your equity only one time in the next several years, a closed-end second offers the fixed rate and regular amortized payment schedule that ensures you know both how much your payment will be and how long it will take you to pay off the loan. This kind of assurance can be particularly useful if you don’t trust yourself to spend wisely, or if you tend to buy impulsively and don’t want the option of drawing out additional funds.

A HELOC can be most useful if you are taking on a project, such as home repair, that has the potential of unforeseen expenses. A HELOC offers you the flexibility to borrow again and again. You may even be able to secure a HELOC that carries a low interest-only payment allowing you to borrow more and still have a manageable payment amount each month. Whichever you choose, drawing against the equity in your home is sure to save you money on the interest you’re paying for your purchase power, and as always, the interest you pay on any type of home mortgage is tax-deductible, offering an additional incentive.

Consult your loan officer or financial planner to decide whether a closed-end second mortgage or a HELOC would best suit your needs. Once you’ve made this first decision, you’ll be well on your way to finding the right equity loan for you.

For more articles on Home Equity Line of Credit, visit: http://www.bills.com/home-equity-line/

justin narin
http://www.articlesbase.com/personal-finance-articles/home-equity-loan-vs-home-equity-line-of-credit-725002.html

December 13, 2008 — BLOOMFIELD, MI – Mortgage rates dipped this past week to 40 year lows and although many homeowners would like to refinance and lower their mortgage payments, a significant portion cannot due to being upside down in their homes.

Nationally, as of October, almost 25% of financed properties have less than 5% equity in them or are upside down. Nevada leads the nation at almost 53%, followed by Michigan at almost 47%. Refinancing to lower mortgage payments will be difficult for many homeowners as they would have to bring money to the closing that they probably don’t have.

The government’s efforts in creating programs to help homeowners, have so far failed to significantly slow the deluge of foreclosures.

FHA Secure, designed to help homeowners refinance out of subprime ARM’s, has reported questionable result numbers according to the New York Times. In fact, the definition of the program was changed to pump up the program’s numbers.

FHA’s Hope for Homeowners has also generated dismal results. A 47 page list of participating lenders, updated by HUD December 12th, doesn’t have any of the top tenlenders in the country on it. These lenders account of almost 70% of the mortgage market, if they’re not on the list, consider the program a failure.

On November 11th, the government announced an initiative for lenders to modify mortgages held by FNMA & FHLMC. An $800 per loan incentive was even offered. This program was so well received by lenders that there’s now talk about tying the receipt of federal bailout funds to participation in the initiative.

So, what would be a better solution to help keep people in their homes and seriously slow foreclosures? It’s all about affordable monthly payments. So, how about doing away with appraisals altogether on refinance transactions that don’t pull any cash out of a property and lower the homeowner’s mortgage payment?

Through ownership of FNMA/FHLMC/FHA/VA the government already effectively owns over half the residential mortgages in the U.S. As such, we’ve got nothing to lose by ignoring appraised values. We can only gain by lowering monthly payments to make it more affordable for homeowners to stay in their homes and avoid foreclosure.

This solution also avoids the issues of trying to force lenders into doing loan modifications and the investor lawsuits associated with those same modifications.

Anyone have a better idea?

Drew Sygit
http://www.articlesbase.com/real-estate-articles/the-great-american-housing-challenge-749036.html

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At one point or another, many people find themselves in a situation in which their debt is becoming unmanageable. When this happens, you want options that will allow you to consolidate bills while lowering your overall monthly payments. Using a home equity loan or line is a great way to consolidate bills.

There are many advantages to using a home equity loan or line to consolidate all your bills. For one thing, it has tax advantages just like your first mortgage. Most people are able to deduct the interest that they pay on their taxes. This makes using a home equity product to consolidate bills a wise choice. The debts that you are looking to combine, such as car payments, credit cards, and personal loans, have no such benefits.

When looking to use a home equity product to consolidate bills, it is important to choose the one that fits you the best. As we said before, there are two types of home equity products that can help you consolidate bills, a home equity loan and a home equity line. Both have equal tax advantages and can be used to consolidate bills.

A home equity loan works much like traditional mortgage loan. You will usually have a fixed rate and payment. When you choose a home equity loan to consolidate bills, you will also have a set term in which the loan will be paid off. This is good because you know exactly how much time is involved and when the loan will be gone.

A home equity line of credit can also be a good choice to help you consolidate bills. These loans work much like a credit card with added tax benefits and lower rates. Your rate is usually variable, and your payment is based on a percentage of your outstanding balance. These are good if you want to have more money available to you after you consolidate bills, but don’t want the entire sum upfront. As you pay down the line, more money is available to you, similar to a credit card. You will have a draw period in which you can use the money as well as pay it back. Then you will have a repayment period in which you can only pay and not draw. These are a bit more complicated than a straight loan, so if you use this option to consolidate bills make sure you understand all the terms.

Using a home equity product to consolidate bills is a wise choice. Not only will this afford you a lower rate, it will also give you tax benefits. When you consolidate bills into one lower payment, consider using the equity in your home for a great deal.

Thomas Erikson
http://www.articlesbase.com/finance-articles/consolidate-bills-with-a-home-equity-line-of-credit-and-get-your-monthly-payments-under-control-122783.html

We use home improvement loans because they were created to help us make improvements on our homes that we couldn’t otherwise afford. These loans can be used for things like adding an extra room, putting in a pool for our family in the summer, re-doing a kitchen or bathroom, or even replacing old carpet with new.

These are secured loans, which means that collateral is required which is usually based on the current equity in the home. In order to qualify for tax deductions, the improvements must be on the your primary residence, not on second homes, rental or vacation property.

Interest rates on your home improvement loan is usually lower than other secured loans since it is deemed as less risky and tends to improve the borrower’s home. You must own your home or be financing your home to be qualified for a home improvement loan.

These loans are intended to help you the borrower add additional features to your home. The most popular home improvement is kitchen and bathroom remodeling, however other things such as installation of a new roof, adding a garage, or installing a pool are other frequently done improvements. The two most common types of home improvement loans available are; FHA Title I Home Improvement Loans and Traditional Home Improvement Loans

With both, you must either own or be in the process of buying the home since it’s going to be used as collateral for the loan. When going for the Traditional loan you must have considerable equity in your home, usually upwards 20%. Your current equity in the home, as well as that created by the improvements, is your collateral. The lender then secures the loan taking a first or second lien.

Usually, home improvement loans are allocated for ten years or less, however some lenders may have programs that will allow for up to 15 years, depending on how much money is borrowed. Just like mortgages, interest paid on your loan is tax deductible. The Interest rate on home improvement loans is frequently considerably lower than personal loans because lenders consider those very risky.

An FHA Title I Loan is a U.S. Government program that helps you improve or rehabilitate your home much like a conventional home improvement loan.

This program is obtainable through various lenders, commonly banks. Some types of luxury improvements such as swimming pools and barbecue pits aren’t allowed under this loan. With Title I loans, you aren’t required to have any equity in your home for collateral. The loan period can be up to 20 years and you can have some past credit problems, providing you’ve shown recent acceptable credit.

On loan requests below $7,500, the lender will not take a lien on the home. The requirements are less severe than conventional home improvement loans and make it easier for a greater number of home owners to partake. As an added bonus, the interest paid is tax deductible.

Greg K. Hansward
http://www.articlesbase.com/finance-articles/how-to-obtain-a-loan-to-fix-your-home-106723.html

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