What is Home Equity?
A Home Equity line of credit is a personal loan that the lenders make available to the borrower using an equity that is usually a property or the home itself. Unlike mortgage, home equity loan or home equity loan, Home Equity actually refinances a property you already own.
When a property is given as collateral it is available to the creditor in the absence of payment.
The Home Equity line of credit that has grown in the personal loan scenario works the same way as a credit card but with a much lower and better interest rate.
You can withdraw and use the money as needed without incurring any withdrawal fees once the refinance is approved, the money goes straight to your bank account.
How much you can borrow using your home or some property as collateral, the amount released depends on the evaluation of the market price of the property, you will have available a part of value as loan, eg your house is worth R $ 1,000,000 reais, you can borrow up to $ 600,000 if your income allows installments that fit this amount as a refund.
Here is one more explanation ..
How does Home Equity work?
” Home Equity is a line of credit made available as a personal loan in Brazil, it is better known as a loan or loan with a guarantee property . Operations here are getting ripe, but countries like the United States and Europe, this type of credit is widespread “
Equity is the difference between the amount you owe on your home and how much it costs. When applying for credit with Home Equity, the bank requires you to get an appraisal of your property. This is as soon as the lender confirms the current market value vs, the value of your home.
This will help determine how much capital you will have made available by securing the loan with your home and how much the bank is willing to lend to you.
Some features of Home Equity
Home Equity has many unique features, one of which is repayment term, usually done between 1 to 15 years. As it was if the time in which loan was paid lifetime, borrowers have given preference for an intermediate term, up to 10 years for repayment of principal plus interest.
The value of the released in the applications of Home Equity are different and varied, but it is possible to obtain values between R $ 30 thousand to R $ 2 million, and the amount granted is limited to a percentage of the value of the property placed as collateral. The amount released is generally up to 50% of the value of the property valuation.
How much to borrow a Home Equity line of credit?
Unfortunately, as stated in the paragraph above, lenders will not lend you 100% of the value of your equity. This is due to the fact that if for some reason you are unable to meet the repayments of the installments adjusted to your income, there is a difference amount to give you room for the bank not to get the loss.
If necessary, the lender can also sell your property to recover your costs and expenses. The lender usually sets a limit of about 50/60% in the Home Equity credit modality.
Why apply for Home Equity?
By presenting your property as collateral to get a personal loan , the first benefit is the lowest interest rates on the market to get money at interest, the second are the longer payment terms.
The average real estate loan rate is 1.15% per month or 16.4% per year and 27.2% per year compared to the payroll loan. With regard to revolving loan on credit card, overdraft and personal loan has no comparison, the annual rate of these last informed modalities start 132.1% per annum, according to data from the Central Bank.
What are the pros and cons of Home Equity Loan?
There are both both the pros and cons in using your home or property as a source for obtaining credit. It is always good to know both sides of the coin before making the decision to make the request.
See the short list with the reasons that we understand is in favor and also against the prospect of using a Home Equity line of credit these days.
- You are seen as a less risky borrower because you are using your property as collateral for the loan.
- You will have the application of lower interest rate. This is because the lenders will see it as a less risky investment than most other loan, eg: loan to negative and restricted.
- The downside of using a home equity loan line is that if your finances are tight for any reason, your recurring income has declined or your investments have failed, you may risk losing your home. However, this is the worst case scenario possible.
Why Do People Get Hire Home Equity?
There are several reasons why people may decide to hire Home Equity as a personal loan . We have made a list based on current issues with some common reasons why people choose to apply for Home Equity to borrow money:
- Deployment or Business Startup
- Debt and debt consolidation – debt repayment
- Investments in securities, stocks and shares
- Using as input to another property
What if I have restricted and denied?
If you have a credit history provided with negative and some restrictions recorded, it will depend on the lender or institution that is reviewing your request.
Just as there are lenders willing not to take into account their restrictions, there are those who use punctuation and history as an approval factor. Find out which lender accepts your current credit status.
Another point to consider is the fact that you have applied for a claim at a lender and had the loan declined, nothing prevents you from moving forward and making another repurchase at another lender, however the chances will be less.
Should I use a broker to help me hire Home Equity?
If you already have a broker, they will be able to analyze your profile and identify possible lenders and also problems in your registration – it can be a good one.
However, there are some companies in the Brazilian market that do all the heavy lifting for you just just you perform the registration that they come in contact with and begin the process, step-by-step.
They will help you identify potential problems and arrange solutions so that everything goes well and the operation is a success, both for you and for the lender.
Is Home Equity with Credit Restriction Possible?
It is impossible to do so, but when getting a line of credit refinancing your property you do not know exactly what you want when performing this type of loan, you need to be smart about how you will use the money and what the cost for your finances after acquisition of this new debt.
Home Equity is a credit with cheaper interest rates and with longer terms than the other various modalities. The money granted can be used for any purpose.
However, like any financial transaction involving credit, the consumer needs to assess what the greatest risks are in order to know whether it is worthwhile to continue or opt for another way that fits the situation more favorably.
Because of this, whether in Home Equity, payroll deductible loan or credit without consultation, making the right plan for the cost of this new debt is a crucial step to living a life without financial complications.