Looking for a way to finance new home makeovers, invest in a second property, or purchase a child’s college education? A home equity installment loan may well suit you perfectly. Customers often turn to home equity loans as a way to fund a big cost or investment using the money they have already invested in their home, without re-financing their mortgage.
What is a Home Equity Payment Loan? – A home equity installment loan is a loan which uses the equity you already have in your home. With your house’s equity as a warranty, lenders are able to offer bigger loans at lower rates of interest than numerous other kinds of loans.
Compared with a home equity credit line, most house collateral installment loans are standard, one-time loans which are authorized for a given quantity and must be repaid over a pre-arranged schedule of payments ranging from three to thirty years, comparable to a primary mortgage or car loan. Installment repayment quantities consist of both primary and interest.
Loan companies offer installment loans depending on some area of your home’s appraised value, less any outstanding mortgage quantities. The maximum loan amount is calculated based on the loan-to-value (LTV) ratio, which might be as high as 80-90%. This means if your home is worth $150,000 with a $100,000 mortgage balance ($50,000 in equity), at 90% loan to value you could potentially qualify for an installment loan for home equity for approximately $45,000 ($50,000 x 90%).
Who Takes Advantage of Home Equity Installment Lending Options? – This kind of loan can be used to invest in anything from a house restoration to a wedding. Below are some of the main reasons consumers secure this type of credit:
- Financing a home redevelopment
- Pay off a child’s expenses
- Pay off other higher-interest debts
- Purchase a second house or rental property
- Get a business opportunity
- Pay for a marriage, anniversary, getaway, or another huge celebration or event
Loans for installments are a good option if you have a large, lump payment that you simply need to make now but would like to repay over time. They’re also ideal in a market with unstable rates of interest, allowing you to definitely secure a low fixed rate.
Benefits and Drawbacks – You will find pros and cons to home equity installment loans, and times when this kind of borrowing is more appropriate than others. Read on for a lot of ideas to help you figure out whether this type of loan is right for you.
A home installment loan is perfect for a one-time buy or investment, which include a home renovation or the payback of a high-interest financial debt, where you’ll only need to draw funds once and are prepared to pay it back on a fixed schedule. An installment loan is probably not a great idea for careless purchases that may end up being tough to repay. If you default on the loan you stand to lose your home, so it’s important to be sure you’ll have the means to repay the finances based on the agreed-upon terms.
On the favorable side, because your house serves as guarantee, you’ll most likely have the ability to get a lower interest rate than an unsecured loan – which can mean huge savings in interest payments over time. Interest rates are often fixed for this kind of loan, which makes it achievable to lock in a lower rate that won’t change with market fluctuations. You could even be able to count the interest as a tax deduction.
Home equity installment loans are ideal for consumers who are interested in one-time loans and are confident of their capacity to repay it. They’re also a great fit for those that like the security of a fixed interest rate.