Online Home Equity Loans: A Basic Glossary
Online Home Equity Loans: A Basic Glossary
Home equity loans can be a great idea for individuals looking to
get out of debt or make necessary repairs on their homes.
During the process, you will come across a variety of terms and
acronyms. We have gathered together some of the basic terms that
you come across during your home equity loan. If you have any
questions about any of these terms, make sure to consult with
your mortgage lender.
Adjustable Rate Mortgage (ARM): This type of mortgage has an
interest rate that will change over time. Typically the
interest rate will be lower than fixed mortgage products.
Amortization: Loan payments that will cover both principle and
interest in one payment. Your lender will likely give you an
amortization schedule outlining your payment schedule.
Annual Percentage Rate (APR): This is the cost of credit on a
yearly basis.
Appraised Value: An appraiser will determine the value of your
home based on experience, market data, and other information.
Cap: This is the limit on how much an interest rate can increase
over the life of your loan.
Closing/Closing Costs: This is the final step in the real estate
transaction. This would include the delivery of the deed,
signing of the notes, and final disbursement of the funds.
There will be various fees associated with a closing, such as
attorney fees and taxes, that are called closing costs.
Depreciation: An overall loss on a property due to age, physical
deterioration, and economic factors.
Discount Point: A buyer can pay the lender a set fee for a lower
interest rate. This is usually a percentage of the loan itself.
Equity: This is the amount of money that you have vested in your
home. This can be determined by subtracting the lien amount
from the property’s value.
Equity Loan: A loan or line of credit that is based on the
amount of equity that you have in your home. Your home is
essentially used as collateral.
Fixed Interest Rate: An interest rate that remains constant
throughout the life of the loan. A fixed-rate mortgage will
have the same interest rate and payments for the length of the
loan.
Home Equity Line of Credit: Similar to a home equity loan, but
you receive a line of credit that you can draw upon at any time.
Home Equity Loan: A loan based on the amount of equity you have
in your home.
Interest: This is the cost for borrowing money.
Interest Rate: This is the percentage of the loan amount that
you must add to your principle, for the privilege of borrowing
money.
Loan-To-Value Ratio: This is the ratio between the amount of the
loan and the actual value of the home. Some loans can give you
up to a 125% Loan-To-Value Ratio.
Market Value: This is the price that buyers would be willing to
pay for your home, at the present time. This can vary from the
actual sale price of the home.
PITI (Principal, Interest, Taxes, and Insurance): This is the
usual breakdown for mortgage payments.
Principal: The amount of your original loan before interest was
added.
John Ross is a freelance author who writes articles about
financial loans including: http://www.loanchbox.com/ ,
http://www.loanchbox.com/online-home-equity-loans.html , and
http://www.loanchbox.com/home-equity-loans-fixed.html The
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beginners about home equity loans.