Home equity loans are a type of mortgage loan which differ from a first mortgage, otherwise known as a first lien that allows a borrower to purchase a property. These loans originate from a property owner’s equity and although first and second mortgages differ quite a bit, they still use many of the same terms. Some terms that you see with a home equity loan that you may also see with a first mortgage, but may differ in some meaning may come across as:
An estimated value of the property that is determined through a written analysis by a qualified appraiser. While an appraisal can be used to help a first mortgage borrower determine the condition of the property, an appraisal through a home equity loan helps a lender determine the qualification status of the borrower.
This term refers to the increase in value of a property due to market conditions. An appreciated value is the exact amount that your home is worth. When acquiring a first mortgage, a home value’s may be negotiated. Re-financers may find that the market value of their homes is more set in stone.
4. Break-even point
The point at which this term refers to is when the homeowner decides to refinance based of the notion that they will have an increase in savings.
5. Cash-out refinancing
Refinancing your home for more than you owe and using the cash for the purpose of paying off debts or financing home renovations.
6. Closing Costs
8. Credit ReportA borrowers credit report is defined as a report that a lender obtains from one or more of the available credit sources to determine your creditworthiness. Credit report show all of your borrowing and delinquency history.
9. Equity or owner’s interest
The amount that a home equity loan or second mortgage borrows against is the fair market value of your home – the current amount left on your mortgage.
10. Home equity loan
The definition of the loan itself states that this type of loan is a second mortgage secured against the properties equity total that allows a homeowner to tap into their home equity to obtain a lower interest that one would usually get on another unsecured loan.
11. Home equity line of credit
A lock-in is a lender’s guarantee for a specific interest rate that you can obtain within a specific time period. Lock-in periods usually are 30 days prior to closing.
14. Mortgage Refinancing
Refinancing is when you pay off the remainder of your first mortgage with the proceeds you get from your second. Doing this allows existing borrowers to get a different mortgage product (example: alternate from 30-year fixed to 15-year fixed), land a lower interest rate, obtain money to renovate the home or pay off more debt with the remainder you may have left.
A document that shows property ownership.