Home Equity Mortgage

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Home Equity Mortgage refers to mortgage that is given by a lender by keeping the borrower's house as collateral. Home Equity Mortgage is like an emergency fund that is used by the borrower at the time of exigencies such as loss of job, medical emergencies, or weddings.

Home Equity Mortgage has increased all over the world in the last few years. Home Equity Mortgage is being provided by many banks and building societies and most of them allow the borrower to maintain the Home Equity Mortgage with a zero balance amount. The borrower is then able to use the mortgage only during the time of an emergency. Another kind of the Home Equity Mortgage that is also available to the borrower is the fixed rate mortgage that has to be taken in a huge sum. The lending bank charges interest from the borrower which is based mainly on the prime rate and has been in the range of 5%-8% in the last few years.

The lenders of Home Equity Mortgage usually limit the mortgage to 80% of the borrower's home value. Also, the lenders charge low interest rates from the borrower in the beginning and then the regular interest rate is charged at a later stage. Many banks also charge the borrower an inactivity fee which means that the borrower has to pay a certain amount of money to the bank even when he is not borrowing any money from the bank. This inactivity fee adds added pressure on the borrower.

The advantages of Home Equity Mortgage are that it provides small funding for immediate ongoing expenses. It is also easily available and so helps the borrower to meet emergencies. The disadvantages of Home Equity Mortgage are that a very high rate of interest is charged from the borrower and this puts added pressure on him to pay back a bigger amount of money. Also, many times the borrower is unable to pay back the mortgage loan, as a result of which the borrower may also lose his house as the Home Equity Mortgage is given by keeping his house as collateral.

Home Equity Mortgage has helped innumerable borrowers to meet immediate emergencies by providing quick mortgage. So in the future, various banks and housing societies that offer Mortgage Home Equity are expected to launch attractive schemes in order to help the customers.

Last Updated on 5/26/2011