With real estate prices soaring high, Home Loans are common in the current scenario. Reasons can be owed to easy financing, low-interest rates and relaxed eligibility. Tax concessions are also among the reasons why people prefer taking Home Loans. Home Equity Loans are availed on the property, and the value depends on its worth.
By keeping the house as collateral, loan applicants can finance their dream home. Its repayment is like a regular loan where the applicant must pay a fixed amount monthly.
The condition for a home equity loan is to own a fully built property in the applicant’s name. The applicant should also be eligible to finance the home equity loan.
The following factors decide the criteria for the decision of a home equity loan:
- The age group of the applicant
- Income of the applicant
- Minimum qualification
- Source of income or employment nature
- Financial obligation status and economic conditions of the applicant. The duration of the existence of the company (minimum three years).
These criteria play a significant role in the approval of the loan amount. The estimated Home Loan amount for which the applicant is eligible can be calculated online.
However, it requires information on the nature of employment, which includes two categories: self-employed or earning a salary. The applicant also needs to enter net monthly income, the amount of existing EMI, the tenure of the loan, and the interest rate.
Refinancing the home equity loan
Many financial institutions give their customers the provision to refinance their home equity loans. People generally refinance if they find a bank providing lower interest rates or better services.
The refinancing of Home Equity Loans comes with the benefit of paying lesser EMIs. Moreover, with fewer EMIs, customers can manage the loan period accordingly.
This is possible on the condition that the customer can carry on the payment of the same EMI. Therefore, lower interest rates and the same EMI can reduce the loan’s tenure.
The facility of top-up loans on the current loan also aids the customers. Through this, they can cash their amount and utilise it for construction or other renovation needs.
How to decide on the refinancing of a home equity loan?
Are you financially eligible for Home Equity Loans?
Here the customer can consider three factors for the judgment. The factors are credit score, minimum equity requirement and debt-to-income ratio. The credit score should be greater than 620. However, a credit score of more than 720 will earn you lower, hence the best interest rates.
The minimum equity requirement should be around 20% or more than that. It refers to the owned account balance. Another factor that makes you eligible for refinancing is the ratio of the amount you owe to the amount you earn. A 43% ratio or lower is preferred.
Do you have the required documents?
The application process for refinancing Home Equity Loans requires more than personal documents and house proof. Of course, personal documents like ID proof are pre-requisite. But in addition, insurance proof, tax returns, W-2s, pay stubs and mortgage billing will be equally important.
How do you refinance equity Home Loans?
Thorough research is required to gain maximum profit from low-interest rates and financial balancing. Utilize the provision of a Home Loan eligibility calculator and Home Loan calculator. Compare the interest rates, loan tenure and EMIs with a sound mind. Check the refinance penalty, if any. Decide accordingly!
A home equity loan is a practical option in need of a house. However, customers can consider better choices with the change in interest rates over time. In such cases, refinancing the Home Equity Loans is possible. Concerning the financial needs in mind, refinancing can save loads of amount. Performing thorough research and understanding the eligibility criteria will help the customers make wiser decisions.