Equity Release Mortgage Schemes Are Not My Favourite By Trevor Barrett

If a person has a property with a mortgage that is less than the value, they can take another loan called a home equity mortgage based on the amount of the difference. We still tend to call them mortgages or maybe a home mortgage loan.

When you have some real estate with some spare equity on it, it can be a good method of raising extra capital. People take these out for several reasons such as buying a new car, going on holiday or doing some improvements to their home.

Find out the value of your home and subtract the value of your existing home loan. The result is what is known as equity. A property valued at 400,000 with an existing mortgage of 100,000 means that the equity in it is 300,000. The lender would use that figure as a basis for how much extra you could get as a home equity loan.

Thus, the extra amount borrowed over and above your standard mortgage is the equity mortgage loan. The current mortgage loan can then be continued without any effect to it. It is good to know that you do not have to sell your house to get hold of some of the money tied up in it.

Cash poor and equity rich is when you have money tied up in property but you only have a small income. As we get older and have lived in our home for some time this can happen. In that case it is often known as a reverse mortgage. A pension can be supplemented by income derived from a lump sum based on the equity.

You can use that lump sum to redeem the main mortgage and use the balance for something special or just to live off or a combination of both. The amount of the loan is collected from the estate of the house owner after death.

A fixed interest rate is normally a part of the conditions of home equity loans. Budgeting for the monthly payment amount is made simpler when you know that it cannot vary.

These loans for the elderly are not actually one of my favourite things.

The interest rate will normally be variable if it is not a lifetime mortgage. It depends on a couple of things.

Here are some of them:-

• how much the loan is for
• the length of the mortgage term
• whether you have a good or bad credit record

The total amount of interest that you will pay over a long term will be greater than over a short period of course.

The only reason for taking out a loan at all should be that you have no other choice. Particularly when you are putting your home at risk. Before you fill out the application form, try to raise the money from friends and family or some other legal means.

The lender has your property as security so home equity mortgages will have a lower rate of interest than an unsecured loan.

With the way that the economy is today I have had to become the money advice expert for our family and would like to share some ideas that I have found. This one is relating to our mortgages website and is all about the refinancing mortgages. Article Source: http://EzineArticles.com/?expert=Trevor_Barrett