The Basics About Home Equity Loans:  Glossary

Introduction

Many people today have found themselves trying to resolve problems associated with their financial affairs.  In fact, you may be such a person.  You may be contemplating what options you have in this regard at this point in time when it comes to resolving problems associated with your finances. 

One option that you will want to keep in mind is possibly obtaining a home equity loan as part of your overall plan to restore a sense of true and lasting order to your finances.  Through this article you will be provided with some basic information about home equity loans that will be helpful to you.  Because it is important to understand the terms relating to home equity and a home equity loan, this article presents a glossary of common and basic terms for your consideration.

Armed with this information, you will be in a better position to determine if a home equity loan really is right for you at this point in your life. 

Equity

The equity in a home or residence or other type or real estate is the value of that property above and beyond any other mortgage loan encumbrance that may already exist on that property and the appraised value of that real estate.

Second Mortgage

A second mortgage is a type of home equity loan that can be used for a wide number of purposes.  For example, a second mortgage can be used for debt consolidation, home repairs or for emergency purposes.

Home Equity Line of Credit

The common and widely used definition of a home equity line of credit is:  “This is another type of home equity loan.  It is similar to a second mortgage in that the real estate is used as collateral for the loan.  However, unlike with a second mortgage in which a consumer such as you obtains a lump sum payment from the loan, there is no lump sum payment with a home equity line of credit.  With a home equity loan you obtain the proceeds from the loan rather like you receive funds via a credit card.  You receive money or the loan proceeds through a home equity line of credit in installments over time.”

Mortgage Refinancing

Mortgage refinancing is the process by which the first mortgage on a home is replaced with another “first mortgage” which normally has a lower interest rates and better terms overall.

Debt Consolidation Loan

Home Equity loans oftentimes are used for debt consolidation purposes as was mentioned earlier in this article.  You can save money through lower interest rates, lower costs and tax deductions through home equity loans that are used for debt consolidation purposes.