Mortgage Equity Loan

Many of us are feeling the crunch of the recession that has been wreaking havoc on the financial markets, local businesses, homes and even churches. While there are strides being made that are bringing us back into some sort of recovery, the process is a slow one and many people are just now really starting to feel the effects of events that may have taken place a year or more ago. It is for this reason that having some education about your finances and the possibility of getting a mortgage equity loan.

With the layoffs that happened over the past year or so, literally millions of people lost their jobs. This has the effect of almost destroying a household budget since unemployment benefits are so dramatically less than what most people make on their job. When all this happened, many people had no choice but to rely on available credit to help them make their bills while they worked on a reorganization plan or looked for a new job. Once a new job was gotten it was often with a wage that was much less than what they were used to making.

This had the effect of leaving a huge gap in their finances. As time goes on and things start to get better, people typically will have a little better luck now in finding employment that will pay them up closer to the wage they were used to earning before, but in the meantime they need a little bit of help now and this is where a mortgage equity loan can comes into play.

A mortgage equity loan can be obtained based on the value of your home in relation to the amount that you owe on your mortgage. For example if your home was worth $100,000 and you owed $60,000 on your mortgage, then in theory you would have $40,000 worth of equity in your home. Most financial institutions won’t go over 90% of the value of your home for loan purposes with some of them only being willing to do 80%.

So if you figure that the institution will only do 80% (you really don’t want to do more than that anyway) with the example given above, you would have approximately $20,000 in usable equity that you could possibly get a line of credit for. Should you leverage your home above 80% you could be subject to insurance that your lender will require should you default on your loan.

This $20,000 in available equity can be used to pay off high interest credit cards or other unsecured debt. Equity loans are typically low interest, although not as low as your primary mortgage will be, and long term. Home equity loans are typically from 10 to 30 years in length and are desirable since that long of a loan will let you have lower payments in the short term. They’ll be expensive in the long term, but if you take care with your finances you can find yourself paying them off early.

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