Home equity loans are very particular financing products. Although they are used to finance different personal or professional projects such as consumer loans, a home must be owned as collateral to request them. For this reason, the purposes for which this type of financing is used will vary. Let us remember that this type of financing will allow us to obtain between 30% and 40% of the current value of the PHH mortgage home that we put as collateral (€30,000 or €40,000 for a €100,000 home), which will allow us to obtain large amounts of financing. We explain when they are most useful.
Why go to home equity loans?
Mortgage-backed loans have particular characteristics that make them suitable for certain purposes that we explain later. Its long term, that we do not have to present proof of income, the large budget that we can access, its possibility of lack for five years or that it does not matter to be in ASNEF make them very interesting.
Entity Terms I’m interested
- Loans secured by a property
- For any person with a home owned free of charges
- Up to 40% of home value
- Up to 20 years of return
- From 2% TIN (3.90% TAE) – 18% TIN (19.90% TAE)
- Opening commission from 0.25%
- Possibility of initial grace period of 5 years
- Signature before a notary
- response within 24 hours
Of course, we must be very sure that we will be able to face the payment of these credits since otherwise, we run the risk of losing the house put as collateral.
1 – Refinance debts
It is one of the most common purposes. It is about putting together all the loans that we have to pay (loans, cards…) to join it in a single credit and keep a single installment to pay. By refinancing all the loans into one, we will be able to choose a new lower monthly installment than the one we currently pay.
This type of purpose is mainly used when we are over-indebted and we are looking for a way to pay less each month and cancel the rest of the credits.
2 – Finance comprehensive reforms
Houses inherited in ruins, comprehensive reforms, to revalue the property … the great reforms are expensive. Especially when it comes to the entire house or changes as fundamental as the pipes, the power lines, the structure…
In any case, regardless of the reform to be financed, it is possible to apply for a mortgage-backed loan using the same home as collateral. This will allow us to access much larger budgets than with other reform loans.
3 – Start a new business
When we want to start a business, especially in a time of uncertainty like the pandemic, it is difficult to “convince” banks to finance us. Especially when it comes to creating a new business project when our income is little or none.
Loans with a house as collateral do not require that we have an income to hire them and, in addition, they allow a grace period of up to five years. Two very interesting features for this purpose. In addition, we can use both the business premises or our home as long as they are owned.
4 – Receive inheritances
The acceptance of inheritances, according to the estate and the Autonomous Communities, is not cheap. Especially with one or more properties or when there are debts. If we do not want to be forced to reject it, home equity loans are an alternative to paying all the associated costs little by little. In addition, they will allow the home to be inherited to be used as collateral for the loan.
5 – Stop liens
If our house is under a judicial process of eviction, the loans with mortgage guarantee can be used to put the house as collateral, pay the bank and continue paying this credit little by little. By having such a long term, it is possible to obtain a very low fee. Of course, the money they give us should be used to stop the eviction, because otherwise, we will simply end up more in debt.
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