People who have been doing investment or had done investment before know that finding ways to fund the purchase is always the problem that you have to overcome. Home equity loan allows the homeowners to use their house as collateral to avail loan. It is a good choice for purchase financing especially for those people who do not have other equities to be used as collateral. When you need money, you can write checks against the account in which your home equity loan is deposited into. Hence, the easy accessibility is another reason that contributes to the popularity of this loan. Read on to find out a summary on the benefits of home equity loan to the customers as well as lenders.
Benefits for customer:
This is a secured loan which gives you easy accessibility to cash. Although the interest rate of this loan is higher than that of a first mortgage loan, it is practically lower than that of other types of customer loans such as credit card loans. Because of this, many people use this to pay off their credit card loans. Via a fixed-rate, they borrow against the value of their houses to clear credit card debt which has higher interest rate. Furthermore, interest paid on this is tax-deductible. In addition, it can be used as a debt consolidation loan as well. To sum up, it gives you lower interest rate, tax-deductible benefits and single loan payment.
Benefits to lender:
With this loan, a lender, who are initially earning money from the interest and fees on the first mortgage of the borrower, are now earning more interest and fees. In the event in which borrower default, prior to the money they earn from first mortgage and home equity loans, they can resell the property that is used as collateral for home equity loans. What a win-win situation.