Home equity loans work best if there is a need for a huge amount. Such loans are much cheaper than personal loans or credit card loans. Blog: http://thetazero.com/news/a-brief-on-home-equity-loans

1. HOME EQUITY LOANS

2. Home Equity loans are also known as ' Second Mortgage'. A Home
Equity Loan is the best option available for taking a huge amount of
loan.

3. What is a Home Equity Loan?
A home equity loan is taken by keeping the equity or the share of the
borrower's home as collateral even when the home loan repayment is
still going on. With Every EMI some amount of principal is paid. So the
principal amount which is already paid and the down payment of the
home together forms the equity or the share of the borrower on that
asset.

4. Equity= Value of asset- Liabilities
Example:
Home Purchase price ₹20,00,000
Amount borrowed ₹18,00,000
Down payment/equity ₹ 2,00,000
5 years later
Principal borrowed ₹18,00,000
Principal repaid ₹ 5,00,000
Amount owed ₹13,00,000
Home's appraised value ₹22,00,000
Amount owed ₹13,00,000
Equity ₹7, 00,000

5. There are chances when a home may have a negative equity.
Home Purchase price ₹32,00,000
Amount borrowed ₹28,00,000
Down payment/equity ₹4,00,000
5 years later
Principal borrowed ₹28,00,000
Principal repaid ₹ 7,00,000
Amount owed ₹21,00,000
Home's appraised value ₹20,00,000
Amount owed ₹21,00,000
Equity (-)₹ 1,00,000

6. Features of Home Equity Loans
 Cheaper than an unsecured loan the loan is secured with the equity of
the home.
 Second mortgage interest is slightly higher than the house loan.
 A home equity loan allows a borrower take a loan of a high amount
which is not possible with a personal loan.
 A home equity loan comes with a closing cost which is generally 2 to
5% of the home equity product.

7.  One can go for a floating interest rate which will change with the MCLR
of the bank or a fixed interest rate which remains same all through the
tenure.
 Tax benefits on a home equity loan cannot be enjoyed by most of the
borrowers. There are many terms and conditions to qualify for a home
equity loan.
 Home equity loans are very easy to make it sanction. There is almost no
risk at the lender's end, as the loan is secured with the equity of the home.

8. The Must-Know Facts about A Home Equity Loan
Must Have Enough Equity
Equity is the share of a person in his home which he actually owns, versus
that which one still owe to the bank. So you can take a loan on your share of
the home which can be 60% to 70% of the value of the share.

9. A home equity loan comes in two forms-
i) Home Equity Loan(HEL)
ii) Home Equity Line of Credit (HELOC)

10. Risk Factor
In the unfortunate cases of non-payment or death of the borrower, the
lender has right to put the home in an auction to reimburse the loan
amount.
To get rid of this risk, one should go for an insurance.

11. Home equity loans work best if there is a need for a huge amount.
Such loans are much cheaper than personal loans or credit card
loans. Make the best use of your shares in your home and get the
desired amount.