Tapping Into Your Home's Equity
The following California second mortgage programs are available:
- Home Equity Loans - Borrowers get all the money up front, and
then make payments on that fixed loan amount until the loan is paid.
- Home Equity Lines of Credit - Borrowers can get an initial
advance against the line of credit, then reuse the line as often as
needed during the period the line is open. Most credit lines are accessed
through a checkbook or a credit card. Credit line payments are based
upon the outstanding balance.
Contact us today for a
California Second Mortgage, California Home Equity Loan, or California
Home Equity Line of Credit.
California Home Equity Loan Rates, California Home Equity Loans &
Second Mortgages
If you need to borrow money, home equity lines may be one useful source
of credit. Initially at least, they may provide you with large amounts
of cash at relatively low interest rates and they may provide you with
certain tax advantages unavailable with other kinds of loans.
At the same time, home equity lines of credit require you to use your
home as collateral for the loan. This may put your home at risk if you
are late or cannot make your monthly payments. Those loans with a large
final (balloon) payment may lead you to borrow more money to pay off this
debt, or they may put your home in jeopardy if you cannot qualify for
refinancing. If you sell your home, most plans require you to pay off
your credit line at that time. In addition, because home equity loans
give you relatively easy access to cash, you might find you borrow money
more freely.
Remember too, there are other ways to borrow money from a lending institution.
For example, you may want to explore second mortgage installment loans.
Although these plans also place an additional mortgage on your home, second
mortgage money usually is loaned in a lump sum, rather than in a series
of advances made available by writing checks on an account. Also, second
mortgages usually have fixed interest rates and fixed payment amounts.
You also may want to explore borrowing from credit lines that do not
use your home as collateral. These are available with your credit cards
or with unsecured credit lines that let you write checks as you need the
money. In addition, you may want to ask about loans for specific items,
such as cars or tuition.
Length of California Second Mortgage
Some California second mortgages may extend for as long as 15 or 20 years;
others may require repayment in one year. Some second mortgage loans may
extend for as long as 15 or 20 years; others may require repayment in one
year. You will need to discuss the repayment terms with the individual mortgage
company and select one that offers terms that best suit your needs.
For example, if you need to borrow $20,000 to make repairs on your home,
you may not want a loan that requires you to repay the entire amount in
one or two years because the monthly payments may be too high.
California Second Mortgage Payment Calculations
Be sure you understand how much your monthly payments will be and what
they cover. Your mortgage company should be able to give you this information
in advance. With some loans, you will be required to make monthly payments
on the principal and interest.
With other loans, you may be required to pay interest only on the borrowed
amount. With these loans, your monthly payments will not reduce the principal
amount of the loan.
On "home equity lines," the mortgage company does not have
to give you the exact amount of the monthly payment, but must explain
how it is figured. This is because the borrowed amount will vary and your
outstanding balance will change if you use the line of credit.
For example, if your monthly payment term is 5% of the outstanding balance
and your outstanding balance is $5,000, your minimum monthly payments
would be $250.
California Second Mortgage Costs
Many companies will charge a fee for lending you money. The fee is usually
a percentage of the loan and is sometimes referred to as "points."
One point is equal to one percent of the amount you borrow.
For example, if you were to borrow $10,000 with a fee of eight points,
you would pay $800 in "points." The number of points mortgage
companies charge varies, so it may be worthwhile to shop around. If the
fee seems too high, you may be able to bargain for or find a lower fee.
Be sure to get the amount of the fee in writing before you take the loan.
Many states limit the amount of fees a mortgage company may charge on
a second mortgage loan. You may want to check with your state's consumer
protection office or banking commissioner to determine whether there is
a limit in your state.
California Second Mortgage Rates, California Home Equity Loan Rates
If you have a fixed rate loan, the interest rate is set for the life of
the loan. However, many companies offer variable rate mortgages, also known
as adjustable rate mortgages or ARMs. If you have a fixed-rate loan, the
interest rate is set for the life of the loan. However, many companies offer
variable rate mortgages, also known as adjustable rate mortgages or ARMs.
These provide for periodic interest-rate adjustments.
If your loan contract allows the mortgage company to adjust or change
the interest rate, be sure you understand when the company has the right
to change the interest rate, whether there are any limits on how much
the interest or payments can change, and how often the company can change
the rate. You also should know what basis the company will use to determine
a new rate of interest.
Top Ten Mistakes When Getting A Home Equity Credit Line
1. Not checking to see if your credit line has a pre-payment penalty
clause.
If you are getting a "NO FEE" credit line, chances are it has
a pre-payment penalty clause. This can be very important (and expensive)
if you are planning to sell or refinance your home in the next three to
five years.
2. Getting too large a credit line.
When you get too large a credit line, you can be turned down for other
loans. Some lenders calculate your credit line payments based upon the
available credit, even when your credit line has a zero balance. Having
a large credit line indicates a large potential payment, which makes it
difficult to qualify for loans.
3. Not understanding the difference between an equity loan and a credit
line.
An equity loan is closed (You get all your money up front, and then make
payments on that fixed loan amount until the loan is paid). An equity
credit line is open (You can get an initial advance against the line,
then reuse the line as often as you want during the period the line is
open. Most credit lines are accessed through a checkbook or a credit card.
Credit line payments are based upon the outstanding balance).
Use an equity loan when you need all the money up front-- i.e. Home improvements
or debt consolidation.
Use a credit line if you have an ongoing need for money or need the money
for a future event-- i.e., you need to pay for your child's college tuition
in three years.
4. Not checking the lifecap on your equity line.
Many credit lines have lifecaps of 18%. Be prepared to make high interest
payments if rates move upwards.
5. Getting a credit line from your local bank without shopping around.
Many consumers get their credit line from the bank with which they have
their checking account. Shop around before deciding to use your bank.
6. Not getting a good-faith estimate of closing costs.
Within three working days after receipt of your completed loan application,
your mortgage company is required to provide you with a written good-faith
estimate of closing costs.
7. Assuming that the interest on your home credit line/loan is tax deductible.
In some instances, the interest on your home credit line is NOT tax deductible.
It is beyond the scope of this document to provide tax advice or quote
from the IRS code. Contact an accountant or CPA to determine your particular
situation.
8. Assuming a home equity line is always cheaper than a car loan or
a credit card.
A credit card at 6.9% can be cheaper than a credit line at 12%, even
after the tax deduction. To compare rates, compare the effective rate
of your credit line with the rate on a credit card or auto loan.
Effective rate = rate * (1 - tax bracket)
Example: If the rate of the home equity credit line is 12% and your tax
bracket is 30%, your effective rate is12% * (1 - 0.3) = 12% * 0.7 = 8.4%
If your credit card is higher than 8.4%, the credit line is cheaper.
Besides the interest rate, you may also want to compare monthly payments
and other terms of the loan.
9. Getting a home equity credit line if you plan to refinance your first
mortgage in the near future.
Many mortgage companies look at the combined loan amounts (i.e., the
first loan plus the equity line/loan) even though they are refinancing
only the first mortgage. If you plan on refinancing your first loan, check
with your mortgage company to determine if getting a second line/loan
will cause your refinance to be turned down.
10. Getting a home equity credit line to pay off your credit cards due
to excessive spending habits.
When you pay off your credit cards with your credit line, don't put your
home on the line by charging large amounts on your credit cards again.
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