Home Equity Loan

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Related to home-equity loan: Home Equity Line of Credit

Home Equity Loan

A loan in which the one borrows against the value of one's home. That is, the collateral of a home-equity loan is one's house. The amount in these loans is generally the difference between the homeowner's equity in the house and the market value of the house. The homeowner receives the amount of the loan in a lump sum, and may use it to finance other purchases or ventures. If a home-equity loan is not paid off, the lender may take possession of and sell the house in order to pay for the loan; this can occur even if the homeowner continues to make payments on his/her mortgage. These loans generally have variable interest rates, which are nonetheless still lower than most other lines of credit. Home-equity loans are sometimes called second mortgages or equity loans. See also: Reverse mortgage.

Home equity loan.

A home equity loan, sometimes called a second mortgage, is secured by the equity in your home.

You receive the loan principal, minus fees for arranging the loan, in a lump sum. You then make monthly repayments over the term of the agreement, just as you do with your first, or primary, mortgage.

The interest rates on home equity loans are generally lower than the rates on unsecured loans. However, when you borrow against your equity you run the risk of foreclosure if you default on the loan, even if you have continued to make the required payments on your first mortgage.

Home Equity Loan

Same as Second Mortgage.

References in periodicals archive ?
Homeownership is at an all-time high in the United States, making home-equity loans and home-equity lines of credit (HELOCs) an attractive resource for borrowers looking to leverage their equity and gain tax advantages.
Only about 20 percent of all home-equity loans and lines of credit are securitized, according to the Federal Reserve flow of funds report and Banc One Capital Markets Inc.
Initially, these line-of-credit home-equity loans work much like a credit card with your house as collateral for the loan.
Because home-equity loans are usually tax deductible, the after-tax cost of borrowing on programs like Back on Track(SM) can be significantly lower than people may think, Templeton said.
While most home-equity loans involve middle- to upper-income borrowers, the low-end market and its tantalizingly high interest rates have attracted the attention of financial institutions from Citibank to Security Pacific to the former Bank of New England.