Take Me Back... To The Basics
The difference between the market value of a home and the outstanding balance of any liens or mortgages on the property.
What is home equity?
What is Home Equity Line of Credit?
This term refers to a legal claim or right against a property, often used as security for a debt.
What is a lien in the context of real estate?
This advantage of using a HELOC for home improvements allows homeowners to manage costs effectively and enhance their property's value.
What is the ability to borrow money as needed?
Lenders require these documents to ensure the borrower has the financial capacity to meet loan obligations.
What are income documents?
A customer can do this by paying down their mortgage and/or increasing the market value of their home through improvements or favorable market conditions.
What is build equity in their home?
This is the typical rate structure for a Home Equity Line of credit.
What is a variable interest rate?
By using the home's equity as collateral, this financial product results in a lien being placed on the property.
What is a home equity line of credit?
When used for home improvements, this is a potential benefit of the HELOC interest paid.
What is the interest may be tax-deductible?
This type of insurance is essential to safeguard the lender's collateral against unforeseen events.
What is homeowner's insurance?
This is a type of loan that allows homeowners to borrow against the equity in their home, providing a revolving line of credit with a variable interest rate.
What is Home Equity Line of Credit?
The period in which a customer can borrow money and pay back only the interest owed.
What is the draw period?
This type of lien is the primary claim on a property, while a second mortgage lien, such as a HELOC, is considered subordinate.
What is a first mortgage lien?
This common drawback of a HELOC's variable interest rate can lead to financial challenges over time.
What is the interest rate can increase, leading to higher monthly payments?
These documents are requested to confirm the legal authority over a property held in this arrangement.
What is a trust agreement?
A loan provides a lump sum with a fixed interest rate, while a HELOC offers a revolving line of credit with a variable interest rate.
What is the difference between a home equity loan vs. a home equity line of credit.
The phase after the draw period during which the borrower must repay the principal and interest on the borrowed amount.
What is the repayment period?
Before a property can be sold, this must be satisfied or paid off, as it represents a legal claim against the property's value.
What are any liens against the property?
Using a HELOC for expenses unrelated to the home can result in this financial consequence.
What is increased debt and financial strain?
This process helps lenders assess the risk associated with lending to a potential borrower.
What is a credit check?
Changes in the home's market value, the amount of mortgage principal paid down, property improvements, and fluctuations in the real estate market are examples of this.
What are factors that can affect the amount of home equity a homeowner has?
When interest rates rise, this aspect of a HELOC can lead to increased financial pressure.
What is the monthly payment?
This legal document establishes the priority of liens, allowing a HELOC to be subordinate to a new first mortgage.
What is a subordination agreement?
This is a severe consequence of failing to repay a HELOC.
Conducting this evaluation is crucial for establishing the amount of equity available for borrowing.
What is an appraisal?