Home Equity

Since Americans have taken advantage of the real estate and mortgage industry’s recent decade of dominance, is there a rainbow on the other side of the lending tree? According to certain financial analysts, the new phase of the lending industry calls for a forecast of a myriad of many different types of home equity loans.

Morgan Stanley prognosticates that through the year 2010, there will be a twenty percent increase in home equity loans. To attain a better understanding or rather the difference between the various home equity products, the following provides a brief understanding of the two major terms associated with mortgages.

Equity: The market value of real estate property, minus the amount of existing liens or outstanding due on the property. If you have heard the term “equity build-up” it is the reduction of the principal of the home loan or mortgage as documented by periodic payments. Over time, equity build-up takes places as more payments are made on the property. In simpler terms, it is also considered to be the difference (equity) between the property value and amount of the lien.

Home Equity Line of Credit (HELOC) or Equity Loan: Almost one in the same, an equity loan is a "home equity line of credit." The mortgage product is utilized by the homeowner who has paid down the principal of their loan. The advantage of an equity loan is that, from time to time, it allows the owner to borrow funds against the equity that exists in their property without being required to reapply for a loan.