A Guide to Homeowner Loans
What Is a Homeowner Loan?
Simply put, a homeowner loan is a loan secured with your home
equity. Basically, your home equity is the difference between
what your home is worth and how much you currently owe on your
mortgage loan. To calculate your home equity, you simply
subtract the amount you still owe on your mortgage loan from the
current market value of your property.
When you obtain a homeowner loan, you use your home equity as
collateral against the repayment of the loan. The lender gains a
legal claim or a lien against your home, but does not actually
take physical possession of it. However, if you do not repay
your loan as agreed, the lender has the right to sell your home
in order to recoup the loan funds provided to you. This
typically only happens in extreme cases; however, because most
lenders would much rather work out a satisfactory payment
solution than go through the effort of selling your property.
Homeowner loans are particularly attractive for a few reasons.
First, homeowner loans are fairly easy to obtain for individuals
of all credit levels, as long as the borrower is able to offer
sufficient home equity as collateral. Next, homeowner loans
typically have lower interest rates than unsecured loans and
offer attractive repayment terms. Third, there are no
restrictions on how you can use your homeowner loan. You can
spend your loan money in any way you choose.
Homeowner loans are excellent because they allow you to get your
hands on the funds you need, without having to sell your home.
The amount of loan and the interest rate you can expect to pay
will depend on many factors, including the amount of equity you
have in your home, your credit rating, and your income.
Generally speaking, however, you could borrow as much as