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Home equity loans are a great source of cash. However, before you plunge right into the process of drawing out a loan out of the equity of your property; you should take a look at the fine print and what it means to you.

Are you thinking about getting a home equity loan? Home equity loans might be an easy to acquire type of loan, but somehow even a seemingly great deal might turn out to be bad if the process of getting one is not done right. Make sure you understand all the language used in the loan process.

What areas of home equity loan do we need to know? Let us look at the following.

Points

How are you affected by this? Most lenders charge a part of the loan for commissions for themselves and for their sub-agents. Actually such points vary from little to exorbitant; it all depends on the company. If you are charged 1 point, this would mean 1 percent of the loan. And so 1 percent of a 100,000 dollar loan is an up front charge of 1000 dollars. Do not worry, there are lenders that do not charge points.

Interest rate terms

It it a fixed or variable loan. A fixed rate means you pay the same amount every month for the life of the loan. But on the other hand, if you have variable type of loan, you may actually have an initial good interest rate. Interest rates that go up naturally makes your monthly payments go up too in the process. So what do you want ” a home equity loan with interest rate that stays the same all throughout the duration of the loan, or one with the possibility of going up anytime? Understand that more often then not, a variable loan starts out one or two percent lower then a fixed rate. The big question is where does it stop once it starts to adjust?

Pre Payment penalties

Pre payment penalties are a fee that the lender places on you in the event you decide to pay of your loan early. These “pre-pays” can cost several thousand dollars in some cases. The reason for this is that by paying off the loan early, the lender will be missing out on the intrest payments you have agreed to pay over the life of the loan. (these interest payments are normally in the several thousands of dollars)

Late payment penalties

In some cases, while you may have a low interest rate, you may have a clause in the contract for the loan that will increase your interest if your late on a payment. In most cases this can add up to several thousands extra over the life of the loan.

Insurance

One thing you want to check for is if the home equity loan that you are prospecting has insurance costs hidden somewhere, a cost that you definitely do not want. You can have credit life insurance, which takes care of your loan in the event that you die. However, if in the case of home equity loan, if you feel that insurance is just added cost, then by all means avoid the lender that requires you to pay for them.

Your house is the last thing that you want to loose. Unfortunately even though we know this for a fact, we tend to take our mortgage payments for granted and end up loosing our homes. In this case, a home foreclosure will happen. When a borrower fails to pay his or her mortgage for a number of payments (usually 3) the lender will foreclose by selling the house or repossessing it.

More often than not lenders often lead their borrowers to believe that they don’t have other options available. There are other alternatives that homeowners can use to keep their house off the auction block. The following is a list of ideas to consider if your in the foreclosure process.

1)Short stop

This is a short refinance for the foreclosure of your property. If you don’t want a new loan to cover an existing one, you can ask the help of a friend. A borrower’s friend or relative can buy or pay off the mortgage.

2)Negotiate a payment plan

In this case the homeowner agrees to pay a portion of the amount and agrees to pay the rest in the succeeding months. The homeowner shows proof of their income and pays a down payment. This is a much easier way and most lenders agree to this plan. Keep in mind that some lenders will contract out the agreement. (normally 3 to 5 months)

3) Change of plans

A temporary change in the terms of the loan can be given when properly negotiated. These changes include amortization extension and reduction of interest rate. A foreclosure negotiator handles the job of getting these plans approved.

4) Third party sale

The property on foreclosure is sold to a third party. The proceeds will go to the mortgage lender as a settlement for the debt.

5) Friendly third party sale

The third party who buys the property sells it on foreclosure to clean the deed of other holders. Then the property is sold back to the original owners/borrower.

These are just some of the options that borrowers can use in attempts to retain their properties. Remember these alternatives are outside the original terms of the agreement. Homeowners will have to negotiate their way with lenders and banks. Preventing home foreclosure is still better than looking for a cure.

Three years ago, there was a real boom in real estate in the state of Toronto. Our family who lived there took a decision to move out, and sold our town home. The result was a nice tidy sum, enough to pay off a previous mortgage, and give a good profit. The money we got from this sale enabled us to purchase a large house in Winnipeg. We paid in cash for a house that had four bedrooms in it and seemed to have plenty of character! The relocation and parting, though not very pleasant, was worth every penny!

Coming to the house itself, the property seemed almost double in size with a sprawling house in the center! If one could speculate how much such a house would have fetched in the Toronto real estate market, probably $300,000. And if it was renovated and placed in a popular location, the sale would have been close to $500,000. We had to shell out just $65,000 for this house as it needed some repairs. But with the estate prices going up by 20% year after year, should we decide to sell it, our profits are going to multiply manifold! Yes, a few repairs had to be carried out; some are still pending. Our plans include installing a brand new hardwood flooring for the entire living area. Whatever it may be, these are just minor problems, considering the size of the house and how less we paid for it!

Toronto prices have shot up so much that people who want to buy a house have to shell out $250,000! Others have to forget about settling in a nice neighborhood or a place with good amenities, the condition of the place, etc. They can only live in town homes or condominiums. The house could be in any condition–the price would not change. The real estate listings of the city of Toronto therefore prove to be quite mind-boggling for someone who is not prepared for it!

Obviously we’re thrilled that we made our move when we did. We no longer battle through gridlock to and from work. Road rage is virtually non-existent in our city. There are tons of actual houses for sale well below $100,000 in a variety of neighborhoods to choose from. Manitoba Hydro offers several incentives for homeowners, so even if you buy a fixer-upper, you have options for installing brand new windows and high efficiency furnaces, without having to worry about high interest rates on your loan payments. And yes, we even have townhomes and condominiums for sale, but the maintenance fees are a fraction of what is demanded in Toronto’s real estate market.

Toronto real estate prices drive people away; Winnipeg prices and conditions attract people. Thus, anyone will find this a place to be comfortable in.

What is the best thing about Winnipeg is that life moves at a slower pace over here. Every one has time for each other. The children are happy with the wide open spaces. We keep in touch with family and friends, though we are far away. The silver lining on the cloud is that we took the right decision three years ago when we decided to move out here!