Home equity loans are one of the most convenient ways of obtaining money which can be used at the borrower’s discretion. These loans are taken against the equity of the home or the home is the collateral against which the loan is given. Credit lines are also available which can be taken against the equity of the home. These are Home Equity Lines of Credit (HELOC). Home equity loans are the best while considering consolidation of debts.

In the current society home is the largest asset of a consumer. Thus mostly home is used as collateral for taking loans when important things like education, medical bills and home improvements are the reasons. The home equity loans give tax benefits to the borrower. These come with very low rate of interest and therefore borrowers can expect low monthly repayment installments too. But before going in for a home equity loan there are certain things that have to be done.

All lenders do not give the same terms in a loan. They would differ from lender to lender. Thus a little bit of shopping around is very much required. Online lenders are many and there might be difficulty in deciding on the right one. The choice is of utmost importance since the wrong person can get you a bad deal and this might cost you more in terms of higher monthly repayment installments.

Thus searching online for a lender would require certain skills like checking out annual percentage rate (APR) offered. This is the annual cost of credit and is normally expressed in percentage. This cost is exclusive of closing costs and other fees and is calculated on the basis of rate of interest alone. Lenders trend to lure borrowers by offering a low interest rate initially since equity loans are mostly of the variable rate type. Beware, this introductory rate would be very low but would only be valid for the first six months or so.

Loan officers would demand checklist of loan approvals, monthly pay stubs from employer, W@ forms of the previous two years, mortgage statements or coupons, insurance policy information of the homeowner, current mortgage information, social security card and drivers license. Once these items are ready the loan approval process would be a cake walk.

Home equity loans have closing costs and include, up front charges like points, application fees, closing costs, appraisal fees, attorney fees, title search fees, mortgage preparation and filing fees, title and property insurance, and taxes. The closing costs can include many other but would definitely have the above mentioned expenses added. Of these many can be wavered by negotiating with lender like attorney fees, application fees etc.

The option to pay back the loan would include the usual, interest only payments, minimum payments, balloon payments etc. These choices are offered by lenders on their discretion. Truth in Lending Act mandates the disclosure of important terms and other costs of the home equity plans like APR, payment terms, variable rate features etc. Additional disclosures required would b intimated before application process.

Home equity line of credit or HELOC have been very convenient for many people. When people opted for consolidation of debts there was no better way but to apply for a HELOC. Now the situation is such that banks and financial institutions do not have money to let people borrow money through their credit lines. The new government has granted billion of funds but the financial institutions and banks are unwilling to spend it on credit lines. The main reason is that they want to avoid getting into trouble once again. The customers are in a very bad financial situation. Thus there is no guarantee that the money they borrow through credit lines would be repaid back.

With home values falling lenders have resorted to cutting credit limits on home equity loans and credit lines. Home owners are being caught unawares and some have been forced to cancel remodeling, and other such plans. But seems that lenders cannot reduce or withdraw credit lines legally.

Recently a Cleveland law firm filed a class action lawsuit against a mortgage company in the country. The lender had slashed the customer’s home equity lines of credit. These credit lines have to be maintained by paying annual fees to the lender. The lender in this case the mortgage company had suspended the use of the customer’s lines of credit on the basis if the real estate trends. Moreover the customer was not reappraised before the suspension.

The Truth in Lending Act, Regulation Z determines the lender’s right to either suspend or cancel home equity line of credit. Under this act there are three situations outlined which can lead to cancellation of the customer’s privileges. These are

• Significant decline in home value.
• Change in financial situation of borrower making it clear to the lender that be might not be able to meet financial obligation.
• Borrower has been defaulting the HELOC agreement.

Thus if the home value falls to such an extent that difference between credit limit and equity available on the house is halved then the lender has the right to modify the credit limit.

According to Regulation Z the lender in not required to re appraise the property. But the lender should have facts to back his changes to home equity lines of customers. This regulation actually gives the banks and financial institutions complete freedom to either suspend or restrict the home equity lines of credit of customer if he is convinced. The legal case mentioned above is more complicated since the banks charge annual fees for the service and maintenance of HELOC and the bank also went ahead and suspended credit lines on the basis of fall in home prices without even appraising the value of property individually. The customer in the case mentioned actually claims that his property value has increased rather than decreased. Thus the case still not solved.

There should be more clarity as to the actions that banks can take so that customers are prepared.  The outcome of the case might decide the home equity practices in the future.

We, Americans have a flair for really big things. We like big cars, aircrafts, burgers & sausages, apartments, refrigerators & ovens, Godzilla’s, Armageddon’s etc… But among other things we also have big credits and debts. Though much has been said about our gasoline-guzzler cars and large burgers, no discussion threw out plans to end our current credit crunches. Reversing our likeness from big entities to looking towards Micro Equity maybe an answer.

Micro Equity is a successful model in third world countries. But the very success of this model in under developed countries raises apprehensions of its success in a developed country such as the United States. In the United States, more than 37 million people live below the poverty line; approximately 74 percent of them are located in major metropolitan areas. A wide variety of social, historical, cultural, educational and structural factors contribute to the persistence of poverty in the world’s richest nation. A growing fiscal deficit curbs government spending in a big way. This calls for identification of target areas where micro finance can help.

Grameen Foundation, a successful micro model from Bangladesh has footsteps in the United States too. Their partner micro-finance institutions in United States are: The Plan Fund, Dallas, Texas and Project Enterprise, New York. Success stories emerging from micro equity loans are huge. Among them is Fred Deluca, the founder of Subway Restaurants, who began this billion-dollar business with a loan of $1,000 in 1965.

Since disbursing its first loan in 1997, Project Enterprise (PE) has made more than 400 loans totaling more than $800,000 and provided more than 1,400 low-income and minority entrepreneurs with business training. The PLAN Fund encourages local partnerships to secure the resources needed to reach growing numbers of low-income Dallas families. It has served more than 1,000 micro businesses, extending loans in amounts averaging $1,400 in addition to business training and networking opportunities. Such micro loan disbursing funds try to provide the same resources and contacts which are available to affluent classes.

Micro equity loans are advantageous for low income groups due to the fact that they are collateral- free. In new market realities, where the government spending is increasing with low returns, a larger section of the population is facing the gun. Taking an equity loan in such a scenario is risky. It is prudent to mitigate this risk by taking small loans target-based loans instead of collateral guarantee loans again homes or other real estate property.

Micro Equity is a financial instrument born in the under developed countries and has been tested over the years. It is a fundamentally strong equity model which American populace can gradually accept. It is a suitable alternative in these tumultuous times of recession. With Barack Obama coming to Presidency, there are definite hopes and people are looking up to economic matters advancement. In such a scenario, this option can also gain some good grounds

People in need of home equity loans without having any home equity need not worry. They can avail the 125% home equity loan. This is a second mortgage according to which money exceeding twenty five percent of home value can be borrowed. If your home is worth hundred thousand dollars and if you have taken a loan of hundred thousand dollars already, then the new loan would allow an additional borrowing of twenty five thousand dollars.

Many online lenders offer this 125% loan. The qualifications and guidelines for these loans vary from lender to lender as does with all other types of loans. The thing of importance here is that credit score should be good. The credit score would determine the maximum amount in cash that you qualify for and the loan amount that would be approved. Some of the lenders also require that the borrower has stayed in the house to a minimum of three months for application of the 125% home equity loan. Property appraisal is not compulsory since they evaluate the property on its purchase price if the borrowers have been occupying the house for twelve months or so. If you have lived for more than a year then the documentations required for the application process includes tax assessment papers of the current year, a simple appraisal, an automated value model can be used. An automated value model is an assessment of the house which is computer generated. This is based on sale of houses in the neighborhood.

The working of the loan is such that once the home is evaluated the outstanding balance in the previous mortgage is deducted from the home value and the balance amount would be the maximum available through loan. The lenders also check out the income of the borrower and other financial liabilities the borrower has so as to assess his capacity to pay back the loan raised on non existent equity.

This loan is a very good method for loan consolidation. This loan makes it very convenient to pay off credit card bills, consumer loans and other bills by combining all of them into one small monthly payment. Cash can be withdrawn and paid back in low monthly installments. Tax exemptions are very lucrative in these types of loans and should be considered the silver lining of the loan. The loan amounts to almost 125% of the value of borrower’s home and it is very fascinating. Borrowers with good credit score and in need of cash should definitely try this loan.

In these difficult financial times it is necessary to ascertain our need for extra cash as really mandatory and something which cannot be done without before going forward and taking a loan. Loan is a burden since it has to be paid back that too with interest thus it is a liability. If our financial position is good but we still need some extra cash and we have means to pay it back then and only then should one venture out to obtain a loan in these times.

The current economic situation should teach people a lesson in managing their resources rather than resources managing them. One should be in proper control of ones resources. Excessive spending should be curbed and vacations postponed if finances are not very safe. If you decide to go for the vacation now and pay later then you are on the way to trouble. There are techniques that can be employed to make gains and achieve goals by changing spending habits and repositioning habits thus giving more control of situations and also make available more resources that can be spent for friends and family.

Time is money. This is the most undervalued resource that every one possesses. Management of time if done effectively and consistently would help in making financial progress. Spare time can also be utilized for the further progress in your financial status.

• Invest wisely. Investments would yield very high returns if done wisely and methodically. Detect the best type of investment that suits you. This should be done by assessing your financial capability and your personality. Research and shop around for various types of investments that can be done. Either do the research yourself or appoint a broker and a financial planner. There are options like stocks, bonds, shares, mutual funds, money market funds, annuities etc in the purchase sector. These investments have to be continuously monitored and face fluctuations most of the times. Thus spare time would have to be used for this purpose. If done properly purchase investments can yield substantial amount of profit by way of money.
• Real estate investment is another very lucrative sector where huge profits can be reaped. Buying of property should be done very carefully. The papers of the property that you are buying should be checked thoroughly and the property appraised. The property once bought can be improved and then sold. The improvement and renovation done on the property would increase the price of the property and thereby give way to financial gain. Sometimes even rentals can be considered so that a steady income is available as well as the property can be sold off when the market recovers and once again you can profit by it and these type of investment pay for their mortgages by themselves in a couple of years.
• The third method to make financial progress is to learn some new skill so that something new can be tried out. The time wasted in self pity and blaming bad luck, situations should be taken into our hands and rectified by ourselves. Active control of any situation would resolve by itself. There are many avenues available for those interested in doing something. Any interest would find classes and a little browsing on the internet would give you all the details to pursue it further. There are distance education courses offered by universities, part time, courses, and evening classes in your neighborhood that you could be interested in. All that you should do is to look around. There are many courses being offered online that are easy to pursue and benefit from.

Home equity loan can be availed from sources other than the conventional mortgage companies, banks and financial institutions. Most of the people think that the lender who offered you the primary mortgage is the only option while considering a home equity loan. They do not see beyond their friendly neighborhood lender. They believe that the best rates would be available to them through this portal. Unfortunately, this is not the case so, and borrowers might have to oblige a loan which is not the best for them. Borrowers should shop around and research the market before accepting any kind of loans offered by the lender who has given the first mortgage. It would be beneficial to keep all options open and weigh the pros and cons carefully before deciding.

The most common places people approach while thinking of a home equity loan are the banks, financial institutions and mortgage companies. Very few people or none at all know that credit union offer very good home equity loans at low rates across the nation. Credit union are sources of mortgage funding is a knowledge very few posses. One has to become a member to avail a loan from here but the membership fee is very less. The advantages of becoming a member are many. Credit unions are institutions that have full service capital.

Thus when in search of home equity loans at low rates looking everywhere is necessary. Some of the lenders might lure you into a refinance of existing loan. A home equity loan is any time better than refinancing the home mortgage. The mistakes made while selecting the loan type is made even by very educated people. The reason is that there are many different types of loans in the market and it is not humanly possible for people fro other professions to have a know how of all the various types.  Thus mortgage consultants and brokers are employed to help the common people through the maze of home loans and its types.

Home equity loans offered by financial institutions have slightly higher interest rates as compared to banks, mortgage companies and credit unions. This could be the reason as to why people with bad credit also get loans from financial companies. These people are usually turned away from credit unions and banks. Thus while shopping for low rates for your equity home loans, financial institutions should be at the bottom of the list. If you have access to credit union then this is the first place you should visit. The rate of interest offered here would definitely be the lowest for a home equity loan.  Sometimes it is necessary to compare other factors also to decide on a loan that would ideally suit one person. The factors like term period, maximum repayment term, percentage of equity available on the home, prepayment penalty, application fees, appraisal and other associated costs.

The crux of the matter is to not depend solely on your lender but to do some home work yourself before availing the home equity loan.

Home equity lines of credit are saviors in more ways than one. They can be used for anything at will and withdrawn whenever required.  There are people who take equity lines of credit for paying their children’s college fees. Definitely it is money put to good use though federally guaranteed student loans are available too. Private student loans should be considered only as last options and never before.

Home equity loans are easily available and therefore can be considered as a source of money for expenses like college education. Most families would find it more convenient and flexible when compared to other student loans. These loans have very low interest rates and are adjustable rate loans and the current rate is only around 5% and is much lower when compared to PLUS loan at 8%.  Moreover HELOCs have no application fees. Some of the lenders levy an annual fees amounting to $80 for HELOC.  The flexibility of payments is by far the most attractive feature of an HELOC. Only the interest for outstanding balance has to be paid monthly. There is provision to repay accordingly up to a period of ten years.  HELOC is beneficial to the parents since they can take advantage of the tax exemptions that come with it. If there is enough equity on the house it could be used to pay for your child’s college education.

The students and their families are left to choose between private finance, PLUS loans and equity loans to finance college education. Among all this the choice of equity loan would be the best. Private finance for college education would have very high interest rates and might become unaffordable as the term of the loan progresses. They are cut throat loans and are best avoided. PLUS loan have a rate of interest around 8.5% and are usually extended to parents with excellent credit scores. They levy a 4% interest as fees when money is given out to the student’s college periodically. The flexibility of repayment is greatly reduced in PLUS loans when compared to HELOC. There is no need to pay when the student is studying but interest accrues the minute the loan is taken. Regular payment towards interest and principle should be made once the student graduates. Tax exemptions on private finance and PLUS loans have more stringent income limits. The tax benefits are only for parents whose joined gross income falls between the ranges of $60,000 to $75,000.

The present economic crisis and housing market fiasco has brought the problem of no equity to parent’s door steps. Home equity line of credit is taken against equity in the home and in the event of its non existence the loan cannot be taken. Due to the pathetic condition of the families with less equity they are being turned away by banks and financial institutions. Many accounts have been frozen making them impossible to be used for college fees and other bills. People who already have HELOCs should withdraw the money and put it in good use.

The equity market or the stock market is a place where securities or equities also known as shares are traded. Even those stocks that are traded privately are listed on the equity markets. 36.6 trillion US dollars is what the present stock markets of the world are estimated at. This number is constantly on the rise with more firms listing themselves on the stock markets. Earlier, the stock markets consisted of a trading floor where traders would physically sell or buy stocks using call cards and a microphone after evaluating the information that constantly streamed in. This information would either raise or lower the price of stock and accordingly traders will buy or sell. All the stock exchanges have become electronic these days making buying and selling much easier and a lot more organised. Derivatives too are traded in equity markets though their values cannot be definitely stated. Derivatives are usually expressed as a notional value and hence cannot be compared to a fixed income security or a stock. These instruments whose value is expressed as a notional value are usually known as ‘marked to model’. These are usually illiquid assets.

Stock markets brings together buyers and sellers of stocks which belong to an organisation that has been listed in the stock exchanges of the parent country in which the country operates as well as in other countries if it has an operating branch or a subsidy there. For example, the stock markets in the United States trade in stocks that have been listed in the New York Stock Exchange or the NASDAQ. Paris Bourse and London Stock Exchange are some of the famous stock exchanges in Europe.

Traders

An equity market will have traders. These traders can be either large scale traders or small scale investors. These traders may or may not belong to another organisation. They could be traders for a particular individual also. These traders place their orders with an executive who is with the stock exchange. This person will execute the trader’s orders. Most of the trades work on an auction principle. A seller bids at a particular price of the stock and the buyer asks for a particular price. Stock exchanges create an atmosphere which facilitates the buying or selling of stocks. It also provides real time information about the stock prices. Usually in an equities market, there is a standard way in which the stock may be traded. This format varies depending on whether the stock exchange is a physical exchange or a virtual exchange. In a virtual exchange, all the trading happens through computer networks.

If it is a physical exchange, the stock member brings in the order and this is passed on to the specialist who specialises in dealing with a particular stock. He is present at the trading floor and matches and buy and sell options. After the deal is closed, the investor is notified of it and details of the deal are taped and sent to the investor.

Equity release mortgage is becoming popular with more and more seniors. This allows the seniors to tap into their equity in their homes. This would provide them with liquid cash which can be used as a supplementary income. Equity release mortgage is also known as reverse mortgage or lifetime mortgage. Only citizens of US with more than 62 years of age are eligible to avail this loan. Another important eligibility criterion is that the people applying should own property worth $80,000 to $140,000. Small outstanding amounts are allowed as mortgage balance which is repaid by the equity release mortgage.

The exact working of the equity release mortgage is as follows: the borrower is allowed a loan amounting to twenty to fifty percent of the value of property. The age is an important factor here. The younger you are the lower the amount of loan granted. The loan money can be received as regular installments or as a large lump sum or even as smaller lump sums distributed over a period of time. Interest accumulates on the amount borrowed with time. Similar to conventional loans the accruing of interest is slow in the beginning if money is received as monthly installments as compared to withdrawal of large lump sums.

The advantage of equity release mortgage is that it does not have to be repaid until it is sold. At this juncture the loan has to be repaid, interest principle and all. There are four main types of equity release mortgages: home income plans, interest only mortgage, lifetime mortgage and the home reversion scheme.

• • In home income plans owner of property takes out equity release mortgage. The lump sum of money received is used to purchase annuities which would provide a steady income for life. The annuity money is also paid towards the mortgage interest. The repayment can be done when the property is sold.
  • In interest only equity release mortgage the mortgage amount is received as a lump sum. The borrower has to pay monthly installments towards the interest. The repayment of capital amount can be done once the property is sold.
  • In lifetime equity release mortgage, the mortgage amount is given as monthly installments or as lump sums or as a combination of both. The principle, interest needs to be repaid only when the house is sold.
  • In home reversion schemes the owner only sells part of their equity to the lender. They receive a lump sum or monthly installments in return.  When the property is sold the amount corresponding to equity purchased is taken by the lender.

There are safe guards against this type of mortgages also. Safe House Income Plan guarantees that a situation where in you owe more than your property’s worth would never arise. Thus SHIP approved equity release mortgages are a safe bet. Mainly aimed at retired people or those planning to retire, the equity release mortgage is a safe haven assuring steady income as well as freedom from monthly repayment installments.

Equity, whether social or economic derives its ideology from human nature. An analysis of the human mind can give deep insights about the equity as it is practiced now. A co-relation of equity with human mind also throws up facts which help to understand market economics in a more enlightened way. Paul Ferdinand Schilder, renowned Austrian psychoanalyst proposed an interesting deduction.

“Many of our institutions, customs and habits of life, which have been created as a result of the cultural process, have become independent the moment we have created them… We deal here with a group of phenomena of social and cultural life which, although created by human beings in action, have become independent, go their own way, and cannot be easily changed at will any longer” -Paul.F.Schilder(1886-1940).

This is demonstrated in the fact that our work system, our social structure behaves independently and one successful model does not necessarily guarantees the success of the other. The psychological analysis of equity can be done only when social factors are also accounted for. This is due to the fact that, we did not devise our equity model, our ancestors did. But, starting from scratch, the current equity model can be treated to a certain degree of psychoanalysis.

Humans do not live in isolation; they form groups and tend to create economic models with shares to every member of the group depending upon their clout in the group. This

Equity model led to the growth of corporations, investment institutes, banking system, and other financial instruments. The very basic human needs drive the way our equity model develops. As these basic human needs change with changing social structure, so does the model. That explains, increasing dependence on credit, which was refrained upon a few decades back. The very idea of ownership equity is belied by the credit system.

The new global economic order calls for a new equity model. Psychoanalysis claims, this model develops on its own depending on the social structure. But the repeated failure to uplift the economy shows that the development of the equity model is stagnant. The factors which are preventing our equity model to self heal are debatable.

In the run for providing more homes, government gave away cheap credit to income groups not having the same share in the equity model. As a result, banking system crippled. Further, the government is now pumping huge amounts of cash to give back the lost ownership equity. But, psychoanalysis evidences argues against this economic theory. This is debatable since the social and economic equity largely revolves around the government in a democratic structure.

Psychoanalysis of human behavior surely tells about the equity model. But this is the irony of it, as equity also affects psychoanalysis in the reverse direction. One solution to this may be distributing ownership equity. Ownership equity is the basis of human happiness. But, to return to an absolute ownership equity is not possible in the current social structure.