Home Equity Loan HELOC News
Recently, home equity loans in the United States have increased by 9% to 12% annually. The amount of money borrowed by home equity line of credit (HELOC) and home equity loan has averaged $187 billion per year for the past 5 years. Much of this money has gone to pay off debts at higher interest rates, such as credit-card debt. In April, 2007, home-equity loans averaged 8.1% interest.A first time home owner loan would likely be higher, particularly for a bad credit home loan purchase. These individuals are not likely to be involved in refinancing or obtaining a home equity loan & line of credit.
Many borrowers are now opting for a fixed-rate home equity loan instead of a variable-rate home equity line of credit. The total amount of outstanding fixed-rate home loans is $290 billion.
Some homeowners with a line of credit are doing home equity loan refinancing into a fixed-rate mortgage or fixing the interest rate on their existing home equity line of credit. When they refinance home equity loan, they roll their home equity loans into the mortgage in order to pay the lowest possible interest rate. Of course, borrowers have to be aware that this move may extend the years until they own their homes free and clear, and they may have to deal with prepayment penalties. Quite often, such debt consolidation will save the homeowner money each month.
Home equity loans, like mortgages, are an inexpensive form of credit with the added advantage that interest payments may be tax-deductible.
Out of concern for the credit-worthiness of many applicants, some mortgage lenders are tightening their standards on no-documentation loans and piggyback mortgages (regular mortgage plus home-equity loan / line of credit). An excellent credit score (FICO score) is now needed to borrow the full 100% of the value of a home, but everyone else can still borrow a lesser amount. Bad credit home loan refinancing can still be done, but the borrower may need to look harder for a receptive lender.
In order to maintain growth in HELOC and home equity loans, lenders are advertising more and adding incentives for borrowers.