In this article we will talk about home equity loans and everything you need to know about them. It is a very specific type of loan due to its peculiar characteristics. Let’s start by defining two basic concepts.
Home equity loan (definition)
Home equity loans allow a person to borrow money using part of the value of a property as collateral. The entities that grant them take the property (floor, house or premises) as collateral for the operation. Thus, it works as a guarantee of repayment of the loan and compliance with its conditions. It is what is called: mortgage guarantee.
What is a mortgage guarantee?
The mortgage guarantee is the right that is granted over a property to a bank or financial institution with which a commitment is made in the form of debt. In the event that the commitment acquired is not fulfilled, the aforementioned property will function as a return guarantee.
With these two basic concepts, it is already quite clear what a home equity loan is. Let us now go on to explain its basic characteristics and, above all, the advantages it has over other types of loans.
Special features of home equity loans
One of the main characteristics of home equity loans is that the requirements for obtaining them are a little more flexible. It is true that it is necessary to demonstrate having a minimum income and also provide a home as a guarantee. Precisely the latter is what makes them open to a type of user profile to which other types of loans are not granted or are not so easily granted. So, if you are a pensioner, self-employed or have a temporary job, you do not have to worry, you can also access loans with a mortgage guarantee. What’s more, even if you are enrolled in the debtors list, or other delinquent files, you can request a mortgage-backed loan.
Advantages of borrowing secured property
As we have mentioned, among the most important characteristics of loans with a property guarantee is the fact that they are granted to all types of clients. This is a huge advantage for all those users who may be included in any of the defaulter files in our country. In addition, the response period by the entities is usually much faster than when requesting other types of credits or loans.
You usually don’t have to justify why you are asking for a home equity loan. And finally, and very important for a certain profile of applicants, it is not necessary to demonstrate that they have a regular income, since what is taken as collateral is the property itself. This is a great advantage for some people who cannot access other types of credits, but instead can opt to take out home equity loans.