Home Equity Loans
These are home loans primarily used for two purposes: home improvements and to cash out some of your equity. These loans are 2nd lien loans with a higher rate than first liens. The maximum term is 15 years and can be amortized as a 15 year loan or as a thirty year amortization payable in 15 years. The second choice has a balloon payment at the end of 15 years. This loan comes as a fixed or ARM loan and can have stated income features for those with high FICO scores at a higher interest rate. FHA also has a home improvement loan program under Title I that has a 15 year term. The FHA loan is strictly for home improvements.
Advantages:
- Low closing cost.
- Easy to obtain
- Fixed rate or ARM loans available
Disadvantages:
- Higher interest rate than a first lien loan.
- Not assumable
When Should I use this loan?
- If you need a small home improvement loan generally under $25,000.
- If you need under $25,000 cash out of your home.
You will have more closing cost for a first lien cash out refinance, but if you are trying to get more than $25,000 or if the first interest rate is now lower than what you currently have, this might not be the right loan for you.
MCA offers a product to protect you against potential mortgage fraud and over-charging. It is called the Consumer Protection Plan. A Mortgage Professional will review your initial mortgage disclosure documentation and when the loan is ready to close the MCA professional will also review your closing settlement documents to make sure you received the correct program, rate and fees as initially disclosed.
