Buying a home is sure to be one of the biggest decisions of a person's life. If you have decided to buy a house then home equity loan may be right choice for you. However, homeowners particularly elderly, minority and those with low incomes or poor credit-should be careful when borrowing money based on their home equity. 

Home equity loan is a fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Also known as a second mortgage or equity loan.

Uses:

• For home improvement
• For Vehicle purchase
• For investment in other real estate
• To refinance other debt
• For debt consolidation
• For some major purchases or expenses
• For vacations
• Substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans, wedding loans etc.

Before you apply, you must consider all the details and formalities that will come along with your loan. It is important to consider all of your financial information, and realize exactly how much you will be able to pay each month.

Types of home equity loans: There are two types of home equity loans & they are:

1. Standard Home Equity Loan (SHEL): It is a referred as term or closed end loan. The term loan is a one-time lump sum payment that is paid off over a set amount of time. There is a fixed interest rate which allows for the same loan repayment each month. After you get your money you cannot borrow further from the loan. If you want to borrow up to 100% of your home's value at a fixed rate of interest, choose our Home Equity Loan. Use those funds for a purchase opportunity, home maintenance, debt consolidation, or major expenses. 

2. Home Equity Line Of Credit (HELOC): An Equity Line of Credit is money in a loan account that can be used as you need it. You can use any portion of it at any time and pay it back at any time. The interest rate is usually variable and is tied to the prime rate. If you want a reserve of funds you can draw on in the future, choose our Home Equity Line of Credit. You'll have the credit you need when the need arises - and you make no monthly payments until you draw on it. Be ready for expenses like medical bills, emergency home repairs, tuition, and more. 

Which ever of the two types of home equity loans that you should use depends on your unique situation. You can base your decision on some common questions such as how much money will you need, how long will you need the money for, how long will you need to pay the loan off and how much of a monthly payment can you afford.

Costs: The single largest cost associated with most home-equity loans is interest. When comparing loans, keep in mind that the annual percentage rate (APR) is calculated differently on a traditional home-equity loan than on a home-equity line of credit - the first has a fixed interest rate and the second has a variable interest rate.

Fees: Interest is not the only cost associated with equity loans. Taking out a home-equity loan or a home-equity line of credit imposes the same fees as a mortgage. These fees include closing costs, such as attorney fees, title search, document preparation and insurance. They also include an appraisal to determine the market value of the property, an application fee for processing the loan, points (one point is equal to 1% of the loan) and an annual maintenance fee. 

Equity: The difference between the fair market value (appraised value) of the home and the outstanding mortgage balance is called equity. If your home is worth $100,000 and you owe $75,000 on the mortgage, then you have $25,000 of equity in your home. This is what a home equity loan borrows against. Your home's equity is a valuable asset because you can use the equity as collateral for your loan—you can get money from your home without having to sell it.

Negative Equity: When the liens total more than the property value, you have negative equity. If your home is worth $250,000 and the liens against it total $150,000, you have $100,000 in equity. If the amount of the loan secured against a property is high relative to the property's value and then property values drop, you could end up with negative equity.