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Home equity loans and home equity lines of credit are quickly becoming a quality alternative to a federal or private student loan. Although primarily thought of as home improvement loans, home equity loans are becoming a trendy parent plus loans option. There are many valuable benefits from taking out a loan from your home’s equity value including:
- No maximum lump sum amount you can receive compared to the set maximum values associated with private and federal loans.
- Funding available for any need – tuition as well as room and board
- Loan interest is tax deductible for qualified borrowers
- Available to almost everyone with less strict qualification requirements
If you are new to home refinancing and never heard of home equity loans or lines of credit, allow us to provide you with a crash course on everything you need to know.
A home equity loan is a type of loan (usually a second mortgage) that permits a homeowner to acquire cash based on the present value of their home minus the mortgage debt still left to be paid off. Homeowners frequently apply for home equity loans to finance expenses such as debt consolidation, home remodeling, weddings, and other long-term investments.
Home equity lines of credit (HELOC) offer homeowners an open line of credit, where only the unpaid balance acquires interest. HELOCs give flexibility by letting borrowers access money on a needed basis.
Loan Terms:
Home equity loans require the borrower to decide the loan amount and ad the time of the application as the money will be available immediately with acceptance. Home equity lines of credit offer a loan amount that will be available over a period of time with the borrower only paying the interest of the outstanding balance.
Eligibility :
To qualify for a home equity loan or home equity line of credit you must have equity built up in your home. A homeowner's credit rating and LTV (loan-to-value) will determine the HELOC's interest rate, which can be as low or lower than the prime rate. Parents do not need to complete qualification forms and a new application each year. Most states allow you to borrow up to 100% of your equity, while others only offer up to 80%.
Interest Rates:
Home equity loans are offered at different rates based on credit, with an average around 6.5%.
Repayment :
Home equity loan repayment differs based on the amount of loan and the open line of credit time period. Typical home equity loan repayment terms are based on 10, 15, and 30 year maximums.
Additional parent plus loans:
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