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An equity loan is a mortgage placed on real estate in exchange for cash to the borrower. For example, if a person owns a home worth $100,000, but does not currently have a lien on it, they may take an equity loan at 80% loan to value (LTV) or $80,000 in cash in exchange for a lien on title placed by the lender of the equity loan. Many lending institutions require the borrower to repay only an interest component of the loan each month (calculated daily, and compounded to the loan once each month). The borrower can apply any surplus funds to the outstanding loan principal at any time, reducing the amount of interest calculated from that day onwards. Some loan products also allow the possibility to redraw cash up to the original LTV, potentially perpetuating the life of the loan beyond the original loan term. The rate of interest applied to equity loans is much lower than that applied to unsecured loans, such as credit card debt. The reasoning behind this is that equity loans involve collateral, and credit card debt does not. This economics or finance-related article is a stub. You can help Wikipedia by expanding it.Categories: Personal finance | From Wikipedia under the
GNU Free Documentation License What is a home equity loan and what is the process to applying/being accepted for one? Q. I paid roughly $90,000 for my home. It was a TLC home and I've fixed it up in the past 9 years dramatically. New roof, new walls, siding, porch, heating system, well etc. My home and property was valued at $275,000 last year. Does equity play a part in this. Am I eligable for an equity loan? I don't want to go into it without fully understanding what it is--I also don't want to go to my banker with stupid questions...Another thing. Im looking to build my own home--hence the loan inquisition. Asked by Phoenix - Sun May 20 15:16:18 2007 - - 4 Answers - 1 Comments A. Let's say you owe around $70K for your house & it now appraises for $275K, you can "cash out" some of your equity. Equity is the difference between what you owe & what the home is worth or appraised at now. There are many programs for "cashing out" equity. You could get up to 100% of your equity out. I do not suggest this &your interest rate on your equity loan will be a lot higher. You could cash out say 80%, based on my #'s above that would total about $164,000. & you could use this money towards a down payment & for construction costs with the home you're interested in building. You want to make sure you're using your money with the best programs. Talk to a lender who will show you the pros & cons. Don't use all of your liquid… [cont.] Answered by Miss Emily1 - Sun May 20 15:44:34 2007 How does home equity loan qualification works if you re self employed? Q. I am self employed and want to get qualified for home equity loan. What are the qualifications lenders look at. What do I need to show them and have? Been trying to find out on the net, but can find any good resources. If you know any and dont mind sharing would be awesome. Thanks!!! Asked by smiling_chicka - Mon Oct 27 12:31:11 2008 - - 1 Answers - 0 Comments A. You will most likely be required to show two years of IRS filings to prove income. Everything else is basically the same as applying for a first mortgage - house appraisal, savings/checking account statements, credit reports and scores, etc. Answered by Steve D - Mon Oct 27 12:41:44 2008 My parents are taking out a home equity loan to lend me money to start a business, does anyone get taxed?
Q. I'm looking to open a shop and my parents offered to lend me some money to help out. They are taking out a home equity loan to lend me about $35,000 to $55,000. I agreed to pay them back. Because they are taking out a loan do they have to pay any taxes? Do I have to pay taxes on this money? I don't have any assets so I wouldn't be able to get a loan for the amounts of money I posted. Asked by Felt B. - Sat Nov 24 19:37:34 2007 - - 3 Answers - 0 Comments A. not unless you are going to pay them any interest on the loan!!! sure hope you make it -- hate to see your folks lose there home!!! Answered by mister ed - Wed Nov 28 09:30:31 2007 From Yahoo Answer Search: "equity loan"
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