Mortgage equity loans are funds that a person gets by using the money they have paid on their property as collateral for the new loan. Generally when a homeowner gets a loan of this type it is to pay for some major financial expenses. These expenses are usually related to repairs that are needed on the home, or for the cost of sending a child to college, or to help pay unexpected medical bills that were not covered by insurance.
Generally you must have good credit scores to procure a home-loan. These types of funds are often referred to as a second secured borrowing on the property. When you take out a second borrowing a lien is placed against the property. The amount must be repaid before the lien is lifted.
This type of bank loan is usually for a much shorter period of time than the first mortgage on the property is for. Sometimes people in the United States can deduct the interest they pay on these second mortgages from their personal income taxes. You can choose to pay this loan off early to save interest.
Do not confuse these loans with home equity lines of credit. A home equity line of credit is a revolving account that has an adjustable interest rate, the straight out home equity loan has a fixed interest rate, and is borrowed once in one lump sum. The period to repay these second mortgages is generally no more than thirty years. With a line of credit the borrower can get money, repay the amount, and then they can borrow again. These work a lot like credit cards work.
Generally when you are borrowing against your home, you can borrow 100% of the value of the home, minus the amount of any lien on the home. So the original amount will be subtracted from the value of the property, and this is the available amount of credit that will be offered in a second loan.