Getting a Home Equity Credit Line after a Bankruptcy
Mortgage rates have recently dropped, making refinancing and home equity loans attractive options again. If your first mortgage rates are good but your credit isn't, a poor credit home equity (second mortgage) loan will probably be your best bet. This way, you can continue to enjoy great rates on your 1st while rebuilding your credit with the home equity credit line.
If you haven't yet filed for bankruptcy, consider this: the new bankruptcy laws make filing for bankruptcy more difficult and much more expensive. You no longer can choose whether you file Chapter 7 or Chapter 13, and, among other new requirements, you must undergo consumer credit counseling--yet another expense. However, a second mortgage can help you keep your house by paying your past debt due debts, as well as paying off collections and judgments.
If you have filed for bankruptcy recently, you could probably still get a home equity loan. Most lenders prefer that you wait at least two years after your bankruptcy has been discharged before shopping for a loan, but some may grant you credit as early as six months after your debts are discharged. When shopping for a credit line or loan, it's important to know what type of 2nd mortgage you want.
After going through the process of a bankruptcy, most people are ready for a fresh start and a home equity line for damaged credit is an excellent place to start. HELOCs provide the freedom to use or not use money. You only get charged to pay interest on the actual portion that you accessed. For example, if you have a $100,000 credit line and you only take out, $5,000, then your monthly payment will only be the interest against the $5,000, not the other $95,000 that you haven't used.
Basically there are two options: The first option is lump-sum installment loan with a fixed rate, term, fixed monthly payments. The second option is the home equity line of credit that has an adjustable interest rate but you only pay interest against the amount you have used (not the total amount available).
Top Equity Products Requests Online:
Interest Only Home Equity Lines
Bad Credit Home Equity Loans
Home Equity Programs with Stated Income
A home equity installment loan (HEIL) is best for a one-time expense like debt consolidation. However, a credit line great for financing construction or home improvements. And, a home credit line, more properly known as a home equity line of credit (HELOC), works like a credit card, so you can borrow more than once without having to apply for a new loan. Generally, you are given special checks that you can use to write checks for each contractor against the loan amount. You only pay interest on the amount of equity you use, and under current Federal law, the interest on a second mortgage is tax-deductible up to $100,000.
The Federal Trade Commission (FTC) advises you to compare the annual percentage rate (APR)--the cost of credit on a yearly basis. Be aware that the advertised APR for home equity credit lines is based on interest alone. For a true comparison, compare other charges, such as points and closing costs, which will add to the cost of your loan. Check the periodic cap--the limit on interest rate changes at one time. And, check the lifetime cap--the limit on interest rate changes throughout the loan term. Ask the lender which index is used and how much and how often it can change. An index (such as the prime rate) is used by lenders to determine how much to raise or lower interest rates.
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