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A home loan is a
type of loan in which the borrower uses the equity in their home as
collateral. These loans are sometimes useful for families to help
finance major home repairs, medical bills or college educations. A home
equity loan creates a lien against the borrower's house.
Home equity loans are most commonly second position liens (second
trust deed), although they can be held in first or, less commonly, third
position. Most home equity loans require good to excellent credit
history, and reasonable loan-to-value and combined loan-to-value ratios.
Home equity loans come in two types, closed end and open end.
Both are usually referred to as second mortgages, because they
are secured against the value of the property, just like a traditional
mortgage. Home equity loans and lines of credit are usually, but not
always, for a shorter term than first mortgages. In the United States,
it is sometimes possible to deduct home equity loan interest on one's
personal income taxes.
Here is a brief list of possible fees that may apply to your home
equity loan: Appraisal fees, originator fees, title fees, stamp
duties, arrangement fees, closing fees, early pay-off and other costs
are often included in loans. Surveyor and conveyor or valuation fees may
also apply to loans, some may be waived. The survey or conveyor and
valuation costs can often be reduced, provided you find your own
licensed surveyor to inspect the property considered for purchase.
The title charges in
secondary mortgages or equity loans are often fees for renewing the
title information. Most loans will have fees of some sort, so make sure
you read and ask several questions about the mortgage closing fees
that are charged.
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