Home Equity Loans
Home equity loan is a type of loan in which the borrower pulls equity out of their home. Do you need to cash out some of the equity in your home? The Cash Out home equity loan program is the best option to pay for some of your projects. Schell Co USA offers the best home equity loans and the lowest cash out rates. Home equity loan is based upon the loan amount in relation to the value of the property. Home equity loans come in different types and forms. Generally, Cash Out Refinance is used for several reasons. Some major expenses are paid for using Home Equity Loans such as paying off medical bills, paying off some credit card debts, home repairs or even to fund a college education.
The loan increases the lien on the borrower’s house and reduces the amount of equity they have in their home. It is commonly referred to as a “Cash Out”. Home equity loan has a different structure compared to home equity loan from other States. The maximum loan-to-value (LTV) a borrower can get for their primary residence is only 80%. For non-owner occupied homes or investment properties, it is looked at on a case by case basis. Depending on the borrower’s situation and circumstances, the loan-to-value (LTV) is determined by each individual borrower.
Cash Out’s rule on the title is also different from a regular rate and term refinance loan. There is no statute of limitation on a cash-out. Once a borrower pulls equity out of their home for any reason, the title will reflect a “cash-out” status. It will stay as such until the loan is paid in full, hence, “once a cash-out, always a cash-out rule” applies.
Types of Home Equity Loans:
Cash Out – A common misconception about a cash-out is that it’s a second mortgage. A second mortgage is totally different from a cash-out refinance loan. In a Cash Out refinance loan, the first mortgage is paid off first. The borrower can pull up to 80% of the value of their property and the whole amount becomes one whole mortgage itself. A good example is if the borrower owes $50,000 on a house that is worth $100,000. The $50,000 is paid off by the lender, the borrower gets a new loan of up to $80,000 (80%) and gets $30,000 in equity to use and fund a project or any other reason they choose to do.
- HELOC – Home Equity Line of Credit is a line of revolving credit with either an adjustable rate (ARM) or fixed. The line of credit is secured by the home itself, or the equity from the home. The revolving line of credit is deposited in the borrower’s account. The borrower can use funds from the line of credit as they deem necessary. Depending on the terms of the loan, usually, a borrower can take a set amount each time (like $5,000 at a time). This is what’s referred to as a “draw” in the HELOC. The borrower can draw any time they feel the need to use it.
Schell Co USA offers Cash Out refinance loans but not HELOC. For more information, contact our Home Loan Specialists at (866) 772-3802.