Home Equity Loans Home equity loans are contracts evidencing agreements to lend and borrow capital secured by trust deeds on real property. Home equity loans are promissory notes secured by deeds of trusts usually on the borrowers principal residence however may be secured by a deed of trust on a property not occupied by the borrower, such as a house held for the production of income commonly referred to as a rental.
 The home equity loan is a loan based on the equity found during the property
appraisal process. Equity has been defined as the difference
between what a property is worth if it was placed on the real
estate market for sale and the remaining unpaid loan
balance.
Simply put, equity is the difference between what a property is worth and what is owed. Prospective lenders determine equity and then make loans using that equity as collateral. Many homeowners have found their property has substantial lendable equity because in many cases values in real estate have increased while, during the same time, the remaining loan they may have on the property has decreased. Homeowners use this equity value to borrow the money they need without disturbing the usually lower interest rated, long term senior loan. |
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