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Another
Option: Home Equity Loans |
If you are thinking about a
home equity line of credit, you also might want to consider
a more traditional loan: the home equity loan. Also known
as a second mortgage loan, this product is built around the
fact that you have already paid for some portion of your home,
and can now borrow against that equity.
This type of loan provides you with a fixed amount of money
repayable over a fixed period. Usually the payment schedule
calls for equal payments that will pay off the entire loan
within that time. You might consider a traditional second
mortgage loan instead of a home equity line if, for example,
you need a set amount for a specific purpose, such as an addition
to your home.
Disclosures from lenders
The Truth in Lending Act requires lenders to disclose the
important terms and costs of their home equity plans, including
the APR, miscellaneous charges, the payment terms, and information
about any variable rate feature. In general, neither the lender
nor anyone else may charge a fee until after you have received
this information. You usually get these disclosures when you
receive an application form, and you will get additional disclosures
before the plan is opened. If any term has changed before
the plan is opened (other than a variable rate feature), the
lender must return all fees if you decide not to enter into
the plan because of the changed term.
When you open a home equity loan, the transaction puts your
home at risk. For your principal dwelling, the Truth in Lending
Act gives you three days from the day the account was opened
to cancel the credit line. This right allows you to change
your mind for any reason. You simply inform the creditor in
writing within the three-day period. The creditor must then
cancel the security interest in your home and return all fees
-- including any application and appraisal fees -- paid to
open the account. |
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