Advantages and Disadvantages of Home Equity Loans

The amount he receives as a loan is the current market worth of his property. For example, if a person owns a property worth million and he keeps it as collateral for receiving a loan from the bank. Then the principal amount of the loan will be million, which is the market price of his property.

There are numerous benefits of a home equity loan and a very few disadvantages. Advantages of home equity loans are discussed in the following strides.

The rate of interest on which the home equity loan issued, is very low. This is the foremost benefit.
You can repay all the other debts and arrears with huge interest rate, by paying a lump sum amount received from the home equity loan.
Home equity loans can be of great help in medical emergencies.
Credit scores can be improved by repayment of loans with huge interest in one go.
There are absolutely no constraints or limitation in the use of loaned credit. You can use that money in whatever way you want. You can pay back your educational loans or car loans and can even use that money in your house restoration and renovation.
Through home equity loans, people with huge debts can become arrear free by paying back the balance amount.
It is a much secured loan.

But in case you have spontaneous and madcap habits of spending money, then it is advised that you don’t go for it. Home equity loan is perfect for those who can limit their expenditure whenever required and absolutely not for a brash money spender. The later one will definitely not be able to pay back the home equity loan and will ultimately end up losing his property as well.

This is the only disadvantage of home equity loan, that you stand a chance to loose your precious property on not being able to repay the loan. Therefore, before acquiring a home equity loan, people must reconsider their decision and indulge in it only if they are sure of its repayment.

Mortgage, Financial, Tax, and Retirement Strategist Ken W. Stone discusses if home equity passes the four critical financial planning tests of liquidity, safety, rate of return, and tax impact. Visit www.MortgageAcceleratorPrograms.com for more information. (c) Three Simple Adjustments, LLC
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Today I sent the check that will pay off my student loans, thus making my college education the most expensive thing I’ve ever bought.

Student Loan Default || Student Loan Repayment (Student Loan Rehabilitation)

What is the Rehabilitation payment program?

Rehabilitation payment program is the process by which a federal agency or a third-party given authority by a Federal agency, assess the borrower’s financial situation to allow a payment arrangement.  Through this process at the Dept. of Ed and the agency’s discretion, the debtors will be allowed to repay their student loans through installment arrangements (payments).  Only after the necessary documents have been obtained by Dept. of ED and the 3rd party agency the borrowers can complete the number of consistent payments required in order to successfully rehabilitate.

What is the purpose of the Rehabilitation payment program?

Student loan rehabilitation is a repayment program offered to borrowers with student loans in a default status.  The purpose of the Rehabilitation payment program is to offer a solution for those who can not pay the entire balance of the loan (or a lump sum pay-off).  The program is designed to get the loan back into good-standings with the Department of Education and to restore the status of the loan back to the status it was in, prior to defaulting.  Before a payment option is offered the holder of the defaulted student loan(s) must provide a reason for not being able to satisfy the entire balance of the loan.  Upon contact, if they determine that the borrower is in fact experiencing financial hardship, a borrower is allowed to make the payment arrangement.  A borrower agreeing to the payments must complete a number of required monthly payments to show the consistency of their payments.  By fulfilling the requirements of the arrangement a borrower may benefit from the program.  By starting this program and by making the initial payment the individual will no longer qualify for the Federal wage garnishment.

Upon a successful completion of the rehabilitation payment program a borrower’s student loan will not only be brought to a current status, but will also repair their credit. This program provides an opportunity to completely remove the negative rating that relates to a borrower’s defaulted student loan, as if it never went into default.

Benefits to completing the program may include:

* Your loan(s) will no longer be considered to be in a default status.
* The default status reported by the loan holder to the national credit bureaus will be deleted.
* The borrower may become eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility (to restore your eligibility to receive additional Title IV federal financial aid). **See section below**
* Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

What is the Rehabilitation payment program?

Rehabilitation payment program is the process by which a federal agency or a third-party given authority by a Federal agency, assess the borrower’s financial situation to allow a payment arrangement.  Through this process at the Dept. of Ed and the agency’s discretion, the debtors will be allowed to repay their student loans through installment arrangements (payments).  Only after the necessary documents have been obtained by Dept. of ED and the 3rd party agency the borrowers can complete the number of consistent payments required in order to successfully rehabilitate.

What is the purpose of the Rehabilitation payment program?

Student loan rehabilitation is a repayment program offered to borrowers with student loans in a default status.  The purpose of the Rehabilitation payment program is to offer a solution for those who can not pay the entire balance of the loan (or a lump sum pay-off).  The program is designed to get the loan back into good-standings with the Department of Education and to restore the status of the loan back to the status it was in, prior to defaulting.  Before a payment option is offered the holder of the defaulted student loan(s) must provide a reason for not being able to satisfy the entire balance of the loan.  Upon contact, if they determine that the borrower is in fact experiencing financial hardship, a borrower is allowed to make the payment arrangement.  A borrower agreeing to the payments must complete a number of required monthly payments to show the consistency of their payments.  By fulfilling the requirements of the arrangement a borrower may benefit from the program.  By starting this program and by making the initial payment the individual will no longer qualify for the Federal wage garnishment.

Upon a successful completion of the rehabilitation payment program a borrower’s student loan will not only be brought to a current status, but will also repair their credit. This program provides an opportunity to completely remove the negative rating that relates to a borrower’s defaulted student loan, as if it never went into default.

Benefits to completing the program may include:

* Your loan(s) will no longer be considered to be in a default status.
* The default status reported by the loan holder to the national credit bureaus will be deleted.
* The borrower may become eligible for the same benefits that were available on the loans before the loans defaulted. This may include deferment, forbearance, and Title IV eligibility (to restore your eligibility to receive additional Title IV federal financial aid). **See section below**
* Wage garnishment ends and the Internal Revenue Service no longer withholds your income tax refund.

Title IV federal financial aid (Additional student aid):

A borrower may restore your eligibility to receive additional Title IV federal financial aid (Student assistance).  The payment amount must be approved in advance by the department of education.  By making the qualifying payments on the rehabilitation payment program the payments will be considered as an approved amount.  By making six agreed-upon monthly payments over a six month period a borrower’s eligibility to receive additional federal financial aid will be restored.

Other ways to receive additional federal financial aid:

* Repay or satisfy the loan in full.

* Consolidate your loan through the FFEL loan consolidation program or the William D. Ford Direct Loan Program.

* Rehabilitate your loan by completing the entire rehabilitation payment program.

Since defaulted student loans have no statute of limitations for enforceability, a borrower would remain ineligible for additional federal financial aid until they complete one of the options mentioned above.

Additional questions:
Do I lose my ability to settle on my loan(s) while on the Rehabilitation Program?

What do I need do to get additional student aid?

OTHER TOPICS

What is a Treasury Offset?
Under this Treasury Offset Program, the Financial Management Service, a bureau of the US Department of Treasury will offset Federal and/or State payments if a borrower fails to pay their obligation.  While the most common type of Federal payment offset is Federal income tax refunds, several other types, including social security benefit payments, are also eligible for full or partial offset. In other words, if a borrower has an outstanding debt and they have incoming social security benefits, this too can be subjected to the offset.

In addition to defaulted debts held by ED, defaulted loans held by guaranty agencies are also included in the process.

Other Federal and State agencies also certify debts for offset, but Department of Ed has historically been responsible for the largest volume of offsets.  As a result, many tax professionals, and even the IRS, will automatically assume that an offset has been requested by the Department of Ed when, in fact, it may have gone to some other Federal or State debt.

What is Administrative Wage Garnishment (AWG)?
Administrative wage garnishment (A.W.G) is the process by which a Federal agency (Dept. of Education) or a third-party given authority by a Federal agency (the collection agencies) may, without first obtaining a court order, order an employer to withhold amounts from the debtor’s wages to satisfy a delinquent debt.  Dept. of Education considers AWG to be a tool of last resort. Before using AWG, Dept of Education expect its representatives to have attempted to resolve the debt through voluntary means: attempting to secure the balance in full, an approved settlement, or installment payments that are “reasonable and affordable” based on the debtor’s individual financial circumstances. Some within the industry may consider this the guaranteed recovery method.

Representatives must consider whether the debtor presents a legitimate defense to the repayment of the debt(s), and whether AWG may be ineffective because the debtor is self-employed or a Federal employee, in which cases the collection agency will recommend litigation or a salary offset.

What is a compromise (Settlement agreement)?
Compromises are account settlements whereby Department of Ed (through the collection agencies) accepts a reduced overall payment to satisfy the debt(s) in full.  The Department of Education can compromise FFEL or Perkins Loans of any amount, and suspend or terminate collection of these loans. It can be difficult, however to negotiate a “good” deal.

An orientation video on the steps in the process of acquiring student loans, presented by the Montgomery College Office of Student Financial Aid.

Home Equity Loans

A home equity loan allows you to cash-in on the equity you have built-up in your home. The funds you receive can be used for debt consolidation, home improvement, college education, investments or any purpose. With a home equity loan your home is used as collateral to secure the loan. If you default on the payment you can lose your home so it is important to insure that you can afford to take out the loan before you sign on the dotted line!

Many homeowners get a home equity loan to consolidate bills. This can be a great strategy if you are overburdened with high interest credit card and/or consumers loan debt. A home equity loan can usually be obtained at a lower rate and all or a portion of the interest you pay on the loan may be tax deductible. If you are considering a home equity loan to consolidate your debt it will be wise to cut up your credit cards and close out the accounts. The last thing you want is to take cash-out of your home and end up back where you started from because you did not have the discipline to stop using your credit cards!

A home equity loan can also be a great source for obtaining cash to make home improvements. Next to debt consolidation, home improvements are the 2nd most widely used reason that consumers obtain home equity loans. Depending on what kind of home improvements you are making, it can increase the value of your home which may help to justify the added monthly payment expense you incur when you obtain a home equity loan.

A home equity loan can either be in the form of a fixed-rate loan or an adjustable-rate line of credit. With a fixed-rate home equity loan you receive all of your money in one lump sum and the amount of your monthly payment is the same for the duration of the loan term. With an adjustable-rate home equity line of credit you are approved for a credit line amount in which you can draw from as needed. In most cases you will only pay interest on the outstanding amount and your interest rate is subject to change. As such your monthly payments may vary depending on the outstanding loan amount and interest rate in any given month.

There are many home equity loan lenders online who will lend to people with good or bad credit. You may want to compare the rates and programs of several lenders before making your decision to increase your chance of getting the best possible deal. Also, consult with your tax advisor to see how much of your home equity loan interest will be tax deductible.

Expand the description and view the text of the steps for this how-to video. Check out Howcast for other do-it-yourself videos from ssproductions and more videos in the Home Finance category. You can contribute too! Create your own DIY guide at www.howcast.com or produce your own Howcast spots with the Howcast Filmmakers Program at www.howcast.com If you have large expenses coming up, a second mortgage may be a viable option. Here’s how to apply for one. To complete this How-To you will need: A home appraisal A computer with internet access A credit report Your gross monthly income Mortgage lenders Step 1: Get an appraisal Contact a real estate broker for an appraisal of your home, or search online for “home appraisal” for a free estimate. Step 2: Use credit score to determine interest rate Request a copy of your credit report from annualcreditreport.com.You are eligible for one free credit report per year. Visit a lender to receive your credit score, and to estimate how much interest you will be paying for your second mortgage. Expect lenders to offer lower interest rates if you have a high credit score. Tip: Check your credit report carefully, and dispute any errors in writing to the credit reporting agency. Step 3: Know your future plans Know your future plans. Be aware of market downturns when you plan to sell your home, or you risk losing equity if the housing market drops and are forced to sell at a loss. Step 4: Assess your situation Determine if you can afford a …

Home Equity Loan vs Home Equity Line of Credit

There are advantages and disadvantages to both home equity loans (HELs) and home equity lines of credit (HELOCs), making the choice between the two dependent on your unique needs and circumstances.

Amount You Can Borrow

Both home equity loans and lines of credit allow you to borrow up to 100% of the equity in your home. In some cases, lenders will even allow you to borrow up to 125% of your home equity.

Qualifying Requirements

Both HELs and HELOCs require you show proof of the following:

* personal income;

* ownership of the home ownership (ie. Title);

* current mortgage;

* current value of the home (via a professional appraisal).

A home equity loan additionally requires proof that at least 20% of the home’s value has already been paid off. So, if you have yet to pay off at least that much of your home’s value, then your choice of which instrument to apply for is made for you.

Purpose for the Money

If you wish to use the money borrowed in a lump sum for a single, one-time expense (ie. a particular renovation, an emergency, a desired purchase, or to consolidate debt), then a home equity loan may be the better choice.

If you don’t have a single, particular use for the money in mind and don’t think you’ll need the money all at once but rather feel that you’ll be needing it on a periodic basis (ie. for lengthy and drawn-out remodels, medical bills, or college tuition payments that will be made in intermittent sums), then a home equity line of credit may be the better choice.

The HELOC gives you a flexibility that a home equity loan does not, allowing you to borrow however much you need, at the time that you need it, rather than taking out more than you need at once and, subsequently, paying interest on the whole amount from day one. Rather than receiving a fixed lump sum all at once, with a HELOC, you’re usually given checks or a credit card to use on an as needed basis. Part of the risk inherent in home equity lines of credit is that you could end up borrowing more over time that you can realistically pay off.

Interest Rate and Monthly Payments

Both HELOCs and HELs generally carry lower interest rates than conventional bank loans and credit cards, as they are secured by borrowing against your home. They both, however, commonly carry interest rates higher than that of your primary mortgage (or first mortgage). Interest on both instruments may be tax deductible (to find out, check with your tax advisor).

Interest paid on both of these instruments (HELs and HELOCs) is also usually tax deductible, whereas interest paid on conventional bank loans and credit cards is not.

The interest rate and monthly payments on a home equity loan is fixed, allowing you to budget accordingly, though in many cases you could opt for an adjustable rate (though that isn’t always advisable). The payment term on a home equity loan is also fixed, meaning that you must pay it off in full by a predetermined point in time.

The interest rate and monthly payments on a home equity line of credit is not fixed and will fluctuate over time, based on fluctuations in the prime rate, so budgeting accordingly can be much more challenging. The interest on a home equity line of credit is also typically higher than that of a home equity loan. The payment term on a home equity line of credit, however, is not fixed, and so long as you keep making minimum payments, you could conceivably stretch out the payment period indefinitely.

Closing Costs

Like other loans, a home equity loan comes with certain closing costs that must be covered in advance of receiving the loan.

There are usually no closing costs involved in a home equity line of credit, though you may have to pay an annual fee.

Collateral

Remember, that in either case, your home is considered the collateral for payment.

Shanna Wroten-Tucker of Waterstone Mortgage – Prime Equity Group in Boise Idaho shares good refinance news for responsible homeowners as provided in the Obama plan. Customer and firefighter Shane Lowe talks about his refinance success story. Go to www.homeloanboise.com

Home Equity Loans Canada- Your Questions Answered

In a November, 2007 report, the Canadian Association of Accredited Mortgage Professionals (CAAMP) stated that in the previous 12 months, 17% of mortgage holders took out home equity loans or increased their mortgage. The average equity loan was ,400.

What are people doing with all this money? Paying down debts, sending the kids to school, investing in their homes – there are many possible answers to that question. If you’ve ever considered tapping into your home’s equity, the following FAQs can help you decide whether home equity loans are the right strategy for you.

What Are Home Equity Loans?

Home equity is the difference between the market value of your home and what you still owe on the mortgage. So if your house is valued at 0,000 and you still have 0,000 outstanding on your mortgage, your equity would be ,000.

Home equity loans enable you to borrow against that equity. These loans are also known as second mortgages because they are a second loan (the primary mortgage being the first) that uses your house as collateral.

How Much Can You Borrow?

With most home equity loans you can borrow anywhere up to 85% of the amount of your home equity. For the case above, with ,000 in equity, the homeowner could borrow ,000.

Some lenders have more generous options, even offering to lend 100% of the amount of equity in your home.

How is a Home Equity Line of Credit Different?

A home equity line of credit (HELOC) is much the same as a standard line of credit, but it uses your home’s equity for security. With a HELOC you can typically borrow up to 90% of your home’s equity. With ,000 in equity, you could obtain a HELOC for ,000.

With a HELOC, you do not necessarily have to use all of the credit at once. You can use it as needed and pay back what you borrow, just like a standard line of credit.

On the other hand, home equity loans are one-time, lump sum loan. If you need more money, you’ll need another loan.

The general guideline is that a HELOC is best for those who need access to varying amounts of money for ongoing expenses, whereas a home equity loan is better suited to those needing a specific amount for one large expense, like a home renovation.

What About Interest Rates?

Home equity loans typically have fixed interest rates, while HELOC rates are variable. The interest rates for both are typically pegged to an institution’s prime rate, and are often significantly lower than those charged for vehicle loans, credit cards and personal loans.

What is Mortgage Refinancing?

With refinancing, you pay off your existing mortgage and obtain a second mortgage for a lower interest rate. With a “cash-out” mortgage or refinance you can borrow more than what you owe on your mortgage. You can then take the extra money and use it for expenses like tuition, home improvements and so on. Refinancing may include costs for mortgage fees and prepayment penalties.

What are the Pros and Cons?

On the plus side, home equity loans provide low-cost credit for important expenses. In extreme cases, the risks are that the home market slows and you end up owing more than the value of your home, or that you overspend and default, which means the loss of your home.

For many people the pros outweigh the cons. To be sure if a HELOC or loan is right for you, it is best to consult with a mortgage professional.

Home equity rates may vary from bank-to-bank, so doing research to find the lowest rate can mean saving thousands of dollars. Understand how to compare and determine the best home equity rates withtips and advice from an experienced financial adviser in this free video. Expert: Patrick Munro Contact: www.northstarnavigator.com Bio: Patrick Munro is a registered financial consultant (RFC) with outstanding sales volume of progressive financial products and solutions to the senior and boomer marketplace. Filmmaker: Reel Media LLC
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