Believe it or not, many people do not understand equity and the power it provides.

In its purest form, equity is money. With regard to real estate
(specifically, your house or other investment property), equity is measured
in terms of the value of the property minus what you owe. So, if your home
is valued at $100,000, and you owe $40,000 on it, you have $60,000 in
equity (actual money that is available to you, under particular
circumstances).

Surprisingly, many people have this type of equity and do
not take advantage of it. Some people are actually in dire financial straits
and fail to realize their problems can be solved very easily, by taking the
equity from their home. Remember, your home is a “vault,” and the money
inside that vault belongs to you. Best of all, you can use that money/ equity
for anything you desire, from home improvement to travel expenses to
spending money.

Exactly what is a home equity line of credit or HELOC?
A home equity line of credit, which lenders and mortgage brokers
refer to as a HELOC, is a different kind of home loan. An equity line has
different rates and terms from a conventional first mortgage. In a standard
home loan, or mortgage, your monthly payments cover both the principal
loan and the interest you are charged.

Most mortgage payments include escrow, or taxes and insurance. An equity line of
credit payment does not reduce your principal loan amount and does not include escrow. You are
borrowing the equity in your house and paying the bank an interest premium
on that loan. With a HELOC, you pay only the interest on the loan and,
generally, you get the money for less time than you do a standard first
mortgage.

The underwriting on these loans is very simple, and in most cases, the
loans are very easy to get. At close, you either get one big check, which you
can deposit into your savings or checking account or you can get a check
book and treat your equity line of credit as another checking account. The
payment on equity lines is very enticing. Paying interest only makes for a
very low payment. It’s important to remember, though, when paying
interest only, you are not paying down the principal loan balance.

The Power of Interest-Only Payments
So, let’s suppose you take an equity line for $50,000 at 4.25% interest.
This interest rate is based on the Prime rate, a floating rate that can change
but does not fluctuate very often. When this article was first published, the prime
rate was 4.25 percent. So, on your $50,000 equity line of credit, your payment
is $177.00 each month. This is an incredibly low payment on a loan of this size.
This gives you a great deal of power, because you can control a large sum of
money for an extremely low monthly payment. It is this low, because you are only
paying the interest on the loan.

At the end of the first year, you will have paid the bank over $2,100.
You will, however, still owe $50,000. This is because your monthly
payment is an interest-only payment. This is where some people can get in
trouble with home equity lines of credit. If you use all the equity in your
home and never pay down the balance, then decide to sell your house, you
won’t make anything on the sale, because you’ll owe it all to the bank.

It is also important to understand the terms on a home equity line of
credit (HELOC). When talking to mortgage professionals about home
equity lines of credit, be sure you understand the terms, as lenders vary on
what they’ll offer. Like conventional mortgages, which have terms of 30
years, 15 years, 10 years, etc., home equity lines also have various terms, but
not all lenders offer them. Don’t let this confuse you. Just find your
trustworthy mortgage broker, and tell him or her exactly what you want.

Unlike mortgage payments, which include complicated yearly amortization of the
principal loan amount, interest-only payments are calculated very easily. You can
do it in two simple steps. To find out your payment, first learn what rate of interest
you’ll be charged. If you are using 80 percent or less of the equity available and you
have an A credit rating, you’ll be able to get the best rate available, which is
the prime rate.

Now, let’s assume you have $40,000 in equity in your house, but you
only need $20,000 (taking less than 100% of the equity is important). You
take $20,000 and multiply it by 4.25%, which gives you 850. This is what
you’ll pay each year to borrow $20,000. Next, divide the 850 by 12 for a
monthly, interest-only payment. Your payment for your $20,000 home
equity line of credit is $70.83.

This is a very powerful loan. Imagine paying less than 71 dollars for the
ability to control $20,000. Some people pay more for cable TV or their monthly
cell phone bill. Some people even take the equity in their home and invest it elsewhere.
You’re probably figuring out how much equity you have right now, and what you can
do with that money!

To learn how you can turn your equity into a never-ending money cycle that
will fill your bank account year after year, read Winning the Mortgage Game.
Whatever you decide, open the cash vault inside your home, and make use
of your equity today.

Mark Barnes is author of the wealth-building system, Winning the Mortgage Game and other investment real estate books. He is also a suspense novelist, and his new novel, The League, will thrill both suspense and sports fans. Learn about Mark’s wealth-building system and get his free home loan course at http://www.winningthemortgagegame.com. Learn more about The League and read an excerpt at http://www.sportsnovels.com

Tags: debt consolidation, equity line, finance, home loan, Mortgage, real estate, refinancedebt consolidation, equity line, finance, home loan, Mortgage, real estate, refinance

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Some unexpected incidents can disturb the rhythm of your lives. Besides that, various financial obligations get you off track and finally, you end up earning a bad credit score. A bad credit score or history poses a threat to your financial health, so you should get rid of it as soon as possible. A bad credit home loan can help you emerge from such precarious situations.

A bad credit home loan is a specifically designed home loan which is based on your past credit history or score. Most of the time, people opt for this loan option to consolidate their existing debts. All the debts are clubbed into a single debt with a convenient single monthly instalment. A bad credit or poor credit home loan is an easier way to avail a large loan amount; otherwise it becomes really difficult to secure a loan with poor credit.

Different people have different uses of a bad credit home loan. People use the loan amount for holidaying, to buy a new car, to pay their existing credit card debts and for other various needs. A bad credit home loan is procured against collateral, that’s why; it comes under the category of secured loans. Like a secured loan, it benefits the borrower with low interest rate, longer repayment period and small monthly repayment.

UK loan market is filled up with many lenders specialized in bad credit home loans. Every lender comes up with some added benefits to attract more borrowers. Normally, everybody does a market research before opting for any loan plan, but, it becomes a daunting task to meet each lender physically. To make it easier, lenders provide detailed information with the help of their online presence. A thorough online research would help you take a sound decision.

About The Author

The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting home-loans-for-everyone as a finance specialist.

For more information please visit http://www.home-loans-for-everyone.co.uk

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If you need money for home improvements or a business, then you could use your mortgage to generate the credit you need. Although using your mortgage to generate credit shouldn’t be your first choice, if other lines of credit are closed to you then releasing equity from your home is a good way to generate a line of credit.

When should you release equity?

Releasing equity should definitely not be your first choice for generating credit. If you need money over a short period, then try using credit cards or save up the money. You could also get a personal loan. However, if you have a lot of equity paid for in your property and you need a large sum of money, then equity release could be helpful. Also, if other lines of funding are not open to you because of poor credit or other reasons, then equity release might be for you.

Remortgaging

One way to release equity in your property is to remortgage. You simply have to get a new mortgage, borrowing more than you currently owe on your property. This way you can make use of some of the capital you have already paid back into your home to consolidate debt or make home improvements.

Mortgage for life

Another way to release equity using your mortgage is to change your mortgage to a lifetime mortgage. This means that you take out a mortgage that will allow you to get a lump sum that you can spend as you choose. The interest rates on the loan will be high, and will be allowed to accumulate for your lifetime. When you die, the loan is repaid through the sale of the house. If the value of the loan and interest is more than the house is worth, the lender absorbs the loss. If the loan amount is less then the extra money is distributed to heirs according to your will.

Home reversion

Home reversion is another method of equity release. Home reversion means that you sell a proportion of your house to a company, who will give you a lump sum in return. When the house is eventually sold after death then the company receives the proportion of the house that they paid for, whether that is more or less than the loan that was given out.

Problems with equity release

Although equity release can free up much needed funds, there are a number of flaws with the concept. The major problem is the risk involved. You might be giving up a lot of home equity that has taken you years to build up for a relatively small loan amount. Equity release should be looked at as a last resort, but if you know what you are getting into then using your mortgage to generate credit can help you pay for items that you need or to consolidate high interest debts.

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