Got bad credit, heed a home equity loan?
ADVICE Author: Kam Brar
Got bad credit, need a home equity loan?
If you have bad credit and need money, but own a home with equity in it, than a home equity loan may just be the ticket for you. Basically how a home equity loan works is that it allows you to unlock the equity in your home by offering up your home as collateral to the lender against the loan.
Collateral in is the key!
A home equity loan is basically a mortgage product; it can either be in first, second or even in some cases a third place mortgage on title. Some consumers have a tendency to confuse it with a home equity line of credit, where the two differ is that a home equity line of credit is not only based on equity but also relies upon both the borrower and the deal overall to fit all of the general lending guidelines.
Equity lenders on the whole tend to be far more flexible on things like credit score, debt service ratios and other general lending requirements because they hold the view that not only is it highly unlikely borrowers will walk away from the equity in their homes. But in addition for most borrowers when their home is on the line, there’s little chance that they will default on the monthly mortgage payments.
Home Equity Loan Uses
Home equity loans are taken out by borrowers for a variety of reasons:
Debt consolidation
Unexpected medical or family emergency
Home repair and or renovation
Job loss
Divorce
Financing the purchase of another property
Pay off judgments or liens (i.e. tax arrears)
Home Equity Loan Pluses
Far easier to qualify for if you have bad credit
Payments for the term can be deducted from the mortgage proceeds up-front
Generally quick turnaround times when you need the funds in a hurry due to the fact there are virtually no “lending guideline hoops” to jump through
Typically for short terms, so you’re not “locked” in for prolonged periods
Help fix immediate credit issues so improved credit in future will open up the doors to more refinance options down the road
Home Equity Loan Minuses
Like any other financial instrument it’s best that you know what you’re getting into prior to signing on the dotted line for a home equity loan. As there are pluses with home equity loans there are a few minuses that you need to be fully aware of:
First and foremost like any other mortgage loan product if you fail to meet the payment schedule required by the lender you could potentially lose your home.
Another thing you need to look out for and beware of is, unscrupulous broker, unscrupulous lenders and scammers! There are a ton of honest brokers and lenders out there but sadly it’s the dishonest ones that give all of the good ones a bad name as well. These crooks have figured out a myriad of ways to cheat homeowners out of their equity and homes. Legitimate brokers & lenders never give you a high-pressure sales pitch nor are they ever reluctant to put things in writing, but the scammers will. If you have any doubt about the individual or the deal, it’s best to walk away because “if it walks like a duck and talks like a duck it’s probably a duck”
How to Find the Best Home Equity Loans
The right home equity loan can save you thousands of dollars while the wrong one can cost you a fortune. When looking for a good home equity loan you should keep the following in mind:
Prior to signing anything, make sure it fit’s your budget. There is no point in borrowing money to get out of a financial crunch only to land in new one because the payments are still too much. Make a budget, it’s imperative.
Before you put you home on the line, be crystal clear that it is the best financial solution for your situation. Again this is where a professional broker can really help you as they have access to a variety of loan/mortgage products and can work with you to figure out the right one for you.
Another thing a lot of borrowers never look into or give much thought to is loan/mortgage insurance. The reason for this is because this insurance is designed to kick in when things go wrong, and let’s face it how many of us really walk into a situation thinking something will go wrong, it’s just human nature to think everything will work out just fine. It’s worth taking the time to look into this option with your mortgage, talk to your broker and or insurance agent.
Have an exit plan, remember this home equity loan is a short term solution, you should walk into this knowing that at the end of the term, something will have changed along the way that will allow you to not have to keep paying higher rates an refinance at lower ones. Again talk this over and figure it out with your mortgage broker.
Before you sign anything, make sure you clearly understand what you’re signing. Have your mortgage broker go over the details of the lenders offer and don’t be embarrassed to ask questions (a good broker will never mind answering your questions), it’s the only way you’re going to be certain that the decision you’re making is the right one.
So that’s it, if you follow the pointers outlined above it should make the whole process of getting a home equity loan easier even if your credit is not the best! Good Luck!
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Contact Information | Auxilium Mortgage Corporation |
| Name: |
Kam Brar
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| Company: |
Auxilium Mortgage Corporation |
| City: |
Victoria |
| Province: |
British Columbia |
| Country: |
Canada |
| Phone: |
250-590-6520 |
| Email: |
Email |
| Website: |
http://www.kamthemortgageman.com
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