The Basics About Home Equity Loans:  What is a home equity loan?

Introduction

If you are in the process of attempting to bring a sense of order to your financial affairs, you may be contemplating what your options are in this regard at this point in time.  One of the options that you will want to keep in mind is possibly obtaining a home equity loan.  Through this article you will be provided with some of the basics associated with home equity loans.  Specifically, this article is presented to provide you with some basic information about what is a home equity loan in the first instance.

Home Equity Loan

A home equity loan is a loan in which a person is able to obtain financing with the equity in that person’s residence being used as collateral for a loan.  The equity in a home or residence 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.

The most common types of a home equity loans in this day and age are second mortgages and home equity lines of credit.  Both of these types of loans depend upon the equity of the real estate being used as the collateral for the home equity loan itself.

Second Mortgage

As mentioned a moment ago, one of the types of home equity loans that are common today is the second mortgage.  Through the second mortgage, a consumer in needs of funding or financing will obtain a lump sum loan through the second mortgage process.  Again, and as has been mentioned, real estate is used as collateral for the second mortgage.

Home Equity Line of Credit

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.

Rather 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.