Secured Home Equity Loan

Secured home equity loans are also referred to as lines of credit and are a form of revolving credit that allows a borrower to pledge their house as collateral or security for debt repayment. This type of financing is commonly used by the homeowner to pay for large items such as education costs, improvements on the house, or medical bills. Borrowers tend not to take out a secured home equity loan for everyday living expenses (unless laid off). This financing allows a specific limit (usually up to the available equity in the house). Since it uses the house as collateral, there are certain tax benefits that can be utilized by the homeowner. "And ye shall eat in plenty, and be satisfied, and praise the name of the Lord your God, that hath dealt wondrously with you" (Joel 2:26).

Lending limits are usually determined by the following formula: 75% of appraised value of property minus balance owed on mortgage. For example; a $200,000 appraised X .75= $150,000 - $120,000(balance owed) = $30,000 (the maximum secured home equity loan limit). Some lending limits are 125% of the property's appraised value minus the balance owed. For example; a $200,000 appraised value X 1.25 = $250.000 - $120,000(balance owed) = $130,000. This may seem like a dream come true for homeowners who do not have very much equity in their homes. In order to receive low secured home equity loans rates, the borrower must have good to excellent credit, or a score of 700 and above. It is advised that those interested in applying for any financing to obtain copies of their report from all three nationally recognized reporting agencies; Equifax, Experian, and TransUnion. These reports are free to the individual requesting them and can either be downloaded online or sent through the regular postal mail. Once the report is received, borrowers should review it for inaccurate information.

Potentially damaging information could be on anyone's report if they don't periodically check it. When applying for financing, the borrower should provide proof contradicting the inaccurate info on the report, so the interest rate is not raised. If all the information is correct on the report, and the score is lower than desired, it is recommended to evaluate for areas which can be fixed to improve credit quickly. One of the fastest ways to improve a credit score is to pay down credit card balances to at least 20% of their limits. This can raise a credit report score up to 30 points in only 30 days. Once the score is raised, secured home equity loans rates will drop, allowing the borrower to either enjoy lower monthly payments, or apply for any secured home equity loan in greater amounts.

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