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This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
Home equity loans are often touted as being the solution to so
many things – giving you access to money for home repairs or
improvements, a way to consolidate debt, finance a sudden family
emergency, or even as a way to start an investment portfolio.
There’s a lot to think about, though, before you go and sign up
for the first home equity loan you see.
A home equity loan is like a second mortgage on your home. If
your home is currently worth $130,000, and you have a mortgage
against it for $70,000, then you have $60,000 of equity
available. Some home equity loans may allow you to borrow up to
80% of your home’s value, others may go higher in special
circumstances. In this example, you would be able to borrow
another $34,000 as a home equity loan and still have only
borrowed 80%.
So the first step is to get a reasonably good idea of what your
home is worth on the market. Your friendly realtor may help with
this, but be aware that sometimes they can inflate the value in
the hope of getting your business. You can also look at what
price similar houses close by have sold for. Or you can pay a
qualified valuer to assess your home.
Now you have a starting figure, you can work out how much equity
you have in your home. The other important figure to work out is
how much you need for whatever purpose you have in mind.
Hopefully that works out to be less than the equity available!
It’s even better if it’s less than 80% of the available equity.
At this point it’s important not to get carried away. It can be
all too easy to say, well, I have $50,000 available and I really
only need $30,000 to complete the repairs, so why not borrow
$40,000 and blow the rest on a holiday? Remember – the more you
borrow, the more it will cost you in repayments. It’s very easy
to borrow too much, only to find yourself struggling to meet the
payments and maybe even losing your home.
You also need to decide what type of home equity loan you want.
There are two main types – a closed end loan and a line of
credit. A closed end loan is basically the same as a standard
home mortgage – you borrow the amount for a set period of time,
and make payments over time to gradually pay off the balance.
A line of credit, on the other hand, is like having a credit
card with a big limit. Some banks will require you to make
minimum payments each month, others only require payments if
you’re at your limit. Either way, the loan will only be for a
set period of time, and at the end of that you will either have
to extend the time period or refinance the loan with another
lender. This type of facility can be useful if you’re
disciplined with your money, but if you’re the type of person
whose credits cards are always at their limits, it may not be a
good idea at all to have ready access to such a large amount of
credit.
Next, you need to work out how long you want to borrow the money
for. This will vary depending on how much money you are
borrowing, the type of home equity loan and how much you can
afford to pay. There are lots of good mortgage calculators
online that can help you to work this out. If borrowing the
money over 5 years for a closed end loan means you won’t be able
to meet the payments, then see if spreading the loan over 10
years becomes more affordable for you. You will pay more in the
long run, but at least you won’t default on your loan.
When you know what you want, it’s time to go and find it! It may
be worth starting with banks recommended to you by friends and
family – at least they’ll be able to give feedback on their
experiences. You can also shop around online, looking for the
best deal.
Finally, when you have chosen the loan you want and are ready to
proceed, do two more things. Firstly, check for fees. Banks are
aware of the need to be competitive, and will often avoid
charging up front fees for that reason. However it’s amazing
what can be hidden in the fine print of a contract. So read any
loan documents thoroughly before signing. If you can, get the
contract explained to you by your legal advisor.
Home equity loans can be a wonderful tool when used correctly.
Do your homework first, find the loan that best matches what you
want, and go for it. Just make sure you don’t over extend
yourself or sign documents that will give you nightmares forever.
Copyright Felicity Walker 2005
About the author:
Investing and finance are two passions of the author. To find
out more, check out http://www.homeequ
ityloanzonecentral.com for more information.