We all know what it’s like to have financial difficulties. It always seems to happen all at a time. You suddenly get a huge unexpected bill, on top of a redundancy, on top of a broken appliance, on top of five different birthdays and your anniversary to boot. And you were planning to go on vacation! If this is the situation you find yourself in, remember that you still have your home, your greatest asset of all. And if you have a home, then home equity loans for Florida residents may be available to you.
What Is a Home Equity Line of Credit?
Essentially, it is a type of loan in which you borrow against the equity of your home, which is the amount of money that is no longer under mortgage. Usually, you only borrow a certain percentage of the value of your home, usually between 75% and 85%, so long as you have good credit. What this means, for instance, is that if your home is worth $100,000 and your outstanding mortgage is $10,000, then you could potentially take out a home equity loan of $75,000 (assuming an 85% deal).
Home equity loans are usually not paid in full into your account. Rather, you can withdraw amounts from it, for a certain period of time, known as the “draw period”. This will be agreed with you on application, together with your monthly payments, maximum and minimum draw amounts, interest rates, repayment period, and more.
The other option you have available is to take out a second mortgage. In this case, you have all the money paid into your account in one go, and you will have monthly payments to make just as you did with your current mortgage.
Which one of the two is best for you depends on your personal circumstances.
Finding a Home Equity Loan
If you want a home equity loan, you have to take the time to shop around, just as you would with any other product. You must, therefore, receive quotes from multiple lenders, so that you can really see which option is best for you. Some things to remember include:
- That home equity loans generally come with a variable interest rate that is linked to the index. This means that you don’t always know exactly how much you will pay each month. Do also look into the cap of the interest rate, so that you know you will never pay more than a certain amount.
- That there are significant differences between home equity loans and second mortgages, and you must be carefully to not accidentally apply for one when you actually wanted the other.
With those two tips to bear in mind, you should be ready to compare the market for possibilities. Request quotes from a wide variety of lenders and make sure that you fully understand all the associated costs that come with their quote. Taking out a home equity loan is a major financial decision and one not to be taken lightly.