Wave a wide bye to the days where you had to depend on others or wait until you have saved the entire amount required to build a home or expand your business. To ease your financial pressure, loan facilities are provided by banks.
There are different types of loans given to meet specific purposes. One such loan is the home equity loan. In this article you will learn more about home equity loans and the procedures involved in obtaining a home equity loan for the self employed.
You may also read: TOP MISTAKES TO AVOID WHILE TAKING A HOME LOAN
What is a Home Equity Loan?
A Home Equity loan is that type of loan that permits a person to take a credit against the estimation of home when it is still under the home loan tenure. A home equity loan can be availed for any reason and is accessible against both residential and commercial property. If the actual value of your home is higher than that of the amount you received as loan, you become eligible to get this sort of advance.
Also read: HOW TO GET HOME LOAN EVEN WITH A BAD CREDIT SCORE?
The home equity loan amount is not restricted to any specific purposes and can be used to meet any of your requirements. This loan gives a person the opportunity to take a large amount of money as loan with their house as collateral. It is a relatively simpler method of borrowing money compared to other types of loans.
However, home equity loan, being the one taken against your home, you must realise that there are certain risk factors which are to be avoided. In the case of home equity loan, the first mortgage will be your home loan that is used to purchase your home and the second one will be the home equity loan which you procured for other needs like expanding business etc.
Fixed Rate Loans and Home Equity Line of Credit (HELOC)
There are mainly two types of home equity loans which are, Fixed Rate Loans and Home Equity Line of Credit (HELOC).
The first one is a type in which the borrower gets the payment in a single stretch. The interest rate for this remains fixed throughout the lifetime of the loan and does not fluctuate with regard to the market conditions.
Read: LOWEST HOME LOAN RATES – 2021 BEGINNING – PERFECT YEAR TO BUY A HOUSE
The second type named Home Equity Line of Credit is something similar to the credit card system. The loan allows you to borrow a part of the pre-approved amount offered by the bank.
The loan may be offered as a bundled package with a credit card allowing you to make withdrawals on the loan or through cheques. This too has a fixed time for paying the interest which means one has to settle the amount before the tenure ends.
Steps to get Home Equity Loans for the Self Employed
You might have known that for a self employed person, getting any type of loan is a big task. There are some procedures which are to be followed by a self employed person to get a Home Equity Loan. Let’s take a look at those steps.
1. Proof of Income
A self-employed person must be all set with the income proof as this is one of the necessary documents that you will have to present before the bank authorities. Various banks may request confirmation for various periods, and you should be ready to give the income statements as proof.
2.Existing Payment Dues
There are chances for you already possess a debt of a certain amount. So comes the importance of the Debt-to-Income ratio which is considered very important with regard to Home Equity Loan. As per the rules and regulations, a limit of 36% is adequate. It’s better to keep this rate lower for the trouble-free bank procedures to get a Home Equity Loan.
3.Credit Statement
It is always advised to double check your credit reports before applying for a loan. Cross check if there are any gaps or dues in the credits and if you find any, it is necessary that you settle them. The changes take two months to get updated on the report and consider applying for the loan after this time duration.
4.Current Costs
Make a detailed analysis of your current cost. Availing a loan is of course an addition to the expenses you have in the present. Apart from your personal expenses and family expenses, you must find an additional amount to pay the loan interest. Make sure that you have enough to pay the monthly installments or else you are likely to put the collateral at risk.
5.Make a Comparison of Offers Provided
There are several banks and moneylenders who provide Home Equity Loan. But there might be changes in the interest rate, tenure period etc. Study in detail about them and fix the ideal one.
You have wide options for financial support. But the thing is opting to take a loan should never turn out to be an unaffordable pressure upon you. Research thoroughly and consult with experts before deciding to take a home equity loan. Especially being a self-employed person, the home equity loan should not affect your smooth running life by placing an unbearable burden on you.
You may also like to read the below 2 articles. It will be helpful!
TIPS FOR GETTING YOUR HOME LOAN APPROVED FASTER AND EASIER
HOME LOAN TIPS FOR FIRST TIME BUYERS
OMG Properties – Home Equity Loan Assistance for the Self Employed
OMG Properties helps customers to get home equity loans for the self employed. Being one of the leading real estate builders OMG Properties has proven excellence in dealing with the client with bank loan matters and also made their dream home come true.
Contact us today, to know more about the projects from OMG Properties at the prime locations in Kerala and to book one.
