When homeowners are ready to refinance their real estate, lower their monthly payments on property, or work out a loan with a new lender, some turn to California home equity loans. Home equity loans are an important piece of affording the American dream to live and own your own home.
California home equity loans are even more important because, as you may or may not know, California is not only the second most populated state, but it is the state with the highest real estate averages. Having high priced real estate means that California residents have to spend more time thinking about the financing decisions than do residents in other states. While home values are significantly higher than that elsewhere in the United States, the loan maximums on many private real estate loans are not much higher. Thus, many California residents cannot get the same kind of treatment that residents of other states might receive.
California Home Equity Loans
California homeowners can decide between two different types of home equity loans to extract the home equity in their home at a very reasonable interest rate. These loans are as follows:
Second mortgage – A second mortgage is very simple. In a second mortgage, a homeowner simply takes out another mortgage on the same home, and repays the debt with a series of monthly payments. A second mortgage is an amortizing loan just like your first mortgage. As payments are made on an amortizing loan, the interest and principal are included. Over time, the balance of the loan will drop with each new payment, eventually paying off the second mortgage in a period of 5-30 years, depending on the mortgage you decide to take, and the size of the second mortgage.
Second mortgages have the benefit of being fixed-rate, but you can choose a variable rate as well. Typically, those who want a sure monthly payment and reasonable lending terms will choose a fixed-rate second mortgage because then the borrower does not have to worry about changes in interest rates, nor the possibility of a higher or lower monthly payment.
Home equity line of credit – A home equity line of credit is an open-ended loan which allows you to pay more or less on your mortgage as time goes on. A home equity line of credit is a very inexpensive way to finance a purchase, as the home equity line of credit allows you to borrow money when you need to and pay back the loan as you see fit.
Also known as a HELOC, your loan will allow you to pay interest only (usually the minimum monthly payment is only the interest charged on your account) or increase your payments to reduce the principal. Many people choose to use a HELOC because they offer up to 5 or 10 years of constant use. After the 5-10 year period, the loan is then supposed to be rolled into an amortizing loan like a second mortgage, or paid off. During the phase of the loan where you can use the line at your convenience, the loan will have a variable interest rate, much like a variable rate mortgage, other credit line, or credit card. However, the interest rate on a HELOC is usually far lower than other types of loans including credit cards, used or new car loans, or other consumer debt.
The simple fact of the matter is this: a California home equity loan is the single best way to borrow money for any number of expenses—college tuition, a new car, home renovation, or other projects for which you need the flexibility to make small monthly payments. A home equity loan from a California lender is easy to get, as long as you have enough home equity for the amount you wish to borrow. Plus, just like any other mortgage loan, the interest on a home equity line of credit, or home equity loan, is tax deductible.