Applying for a home equity loan is quite easy. If you own a house and you are willing to tie it up with the creditor, you might receive approval in no time. You might encounter some mistakes in the process though. These are some of the potential errors you need to avoid.
You intend to refinance your first mortgage
Most mortgage companies will look at the total loan amount which includes the sum of the first and second loans even when you are currently refinancing the first loan. Your lender might ask you to pay off both the mortgages first or close the home equity line. The rules might be different with every company though.
Failure to understand the hidden costs
This loan is unique since there is no need to repay the amount right away. The property’s value, when sold after you die, will go to the creditor to pay for your loan. The remaining amount will go to any of your family members indicated in the document you signed. However, you might also need to pay hefty insurance costs and other charges because of this decision. Usually, loans secured against property require high insurance fees.
Choosing the current bank
You might think that applying for a home equity loan from your current bank is the best option. The truth is that you will find several equity release firms out there. Try shopping around until you feel satisfied with your choice. Check the details of the loan before you agree to it.
Failure to check your credit rating first
Like any other loan, you need to check your credit rating first to receive the best rates and terms. If you have serious credit issues, especially at this age, you might not have the conditions you expect. The good thing is you can continue looking around for a bank or lender that will offer you the best rates regardless of your credit rating.
Not consulting with an advisor
You need help from your advisor to make the best decision regarding this loan. You might think that you already know the process, but it is more complicated than you think. You need to inform the advisor about your intention and your current financial status. Your advisor will then analyse the information provided and let you know what the best decision is as you move forward. Your advisor might even tell you to not pursue this plan after checking out your documents. You can get help from quality advisors at http://www.55plusequityrelease.com.
Take your time before deciding if this type of loan is the best option for you. Again, you are tying your property up with it. Although you are not losing it after obtaining the loan, you are essentially giving it up and might not have anything else left for your family. As long as you choose the right creditor, you will not have issues with this type of loan. You also need due diligence to confirm the information provided by your advisor.