5 secrets nobody told you about home equity loans

What is a Home equity loan?

A Home equity loan is where you bet a part or the whole of your house property in return for money from the bank which is usually a bulk amount. Basically, your property is being set as a collateral, in case of failed payments, the collateral is subject to the bank as default. This type of loan is called as the secondary mortgage, as the primary mortgage, it is also secured by the property.


  1. A helping hand- To put it in a lighter form, home equity loans let you borrow from the banks against your own property. Sounds cool though, right? In case if you own a property that has gained sales value and land value across the years that you’ve built it. Pushing the house or property as a collateral for a large sum of money at a time of emergency or something that is yet to come is safer one way or the other in terms of helpful aids at an emergency.
  2. You got, One shot- At a time of an emergency, say if a family member is in bad health or there is a requirement for higher studies investment, your home equity loan will come to aid. As your house is a collateral of stable and worthy criteria the amount you receive against the equity will be of huge help in such times. It is a fact that the borrowers qualify for a large amount for the equity loans which will act as the source of future investments
  3. Don’t ignore the contracts- When the banker offers a bunch of contracts before you, though they may be quite long and definitely nauseating for you to read, kindly, do not ignore those 30-50 pages of writings that contain all the important and necessary details about the hidden insurance, interests, mortgage percentage, premiums etc. in regards with which you should sign the contract for a hassle-free and no-shock at the end kind of a loan.
  4. Follow the three days rule- This three days rule is applicable for the large sums included loans as per the government regulations. Most likely for home equity loans and home improvement loans. This option simply means that the borrower has up until three days time to think and decide if he/she should go through with signing the contracts or should retrieve from the responsibility instead. This is a safe-play mode for the borrower because home equity loans carry a large amount of interest and principal amount to be paid.
  5. Do your research- There are two types of loans when it comes to using your home as a collateral namely, Home equity loan(HEL) and Home equity line of credit(HELOC). HEL is often amortized as you have to pay both interest and the principal amount together which is fixed and is highly predictable, whereas the HELOC is applicable for approval of larger amounts bus can be negatively amortized in terms of payments where you are made to pay only a part of the interest and the payments are not fixed where you end up with huge credits to be paid at the end of the loan

Related Articles