Fixed Home Equity Loan
May 31, 2011 | 
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Fixed Home Equity Loan
A Fixed home equity loan is a second mortgage on your home, in addition to your original mortgage. You may borrow against the equity of your home, which increases when the value of your home increases and your original mortgage has been paid down. When you close at the end of the application process for a fixed home equity loan, you will receive a lump sum payment. You can use your fixed home equity loan for any purpose. Condominiums are eligible for a fixed home equity loan and there is no prepayment penalty (penalty for paying off the loan before it is due). The fixed home equity loans has a specific time frame, as to when the loan needs to be repaid. When seeking a fixed home equity loan, the home must be your primary residence.
You can expect to pay 5.75% for a 5 year fixed home equity loan and approximately 6.25% for 7 years. The Combined-Loan-To-Value (C-L-T-V), which includes what you owe on the first mortgage, can be as high as 90%. You can pay up to $300 in closing costs. Though, as stated previously, there are no closing costs, should the fixed home equity loan be closed within the first 12 months of the loan, you will be responsible for the origination fee, approximately $250.
When you take out a fixed home equity loan, you are now responsible for paying two mortgages. Be sure you will be able to pay the loans back, even if you should lose your job. This means keep money in reserve, for just such an unfortunate event. Since the bank has your home as collateral on the fixed home equity loan, they have something tangible to seize, should you fail to pay back the loan.
When a car loan or personal loan is taken out, you will pay a higher interest rate and your loan is not tax-deductible, like a fixed home equity loan. The main thing to remember, as with any loan, does not take one, if you are unsure of your capability to pay the loan off.
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