1. What is a home equity loan?
A home equity loan, or in other words a home loan, is a loan based on the value of your fully paid off property. Home equity loans provide liquidity to property owners, homeowners, and Condominium owners by allowing them to unlock the value of their home and turn it into cash. Financing company’s such as M Lhuillier Financial Services Inc., appraise the value of the real estate asset and come up with a market value of the asset which it will then give cash to the owner for his or her personal use. This loan product is a similar concept to OR/CR Car Loans except applying to real property. Home equity loans usually have a fixed interest rate and a 1-to-5-year loan term. A typical home equity loan will allow you to borrow up to 70% of the appraised value of your property.
2. How does a home equity loan work?
A home equity loan is very similar to mortgage except you are not getting a loan to purchase a new property. You are instead in getting a loan to unlock the cash in your property, allowing you to use the funds for whatever purpose you may need it for. Most homeowners or property owners use a home equity loan for renovating their home or building a new home on the property they own. In rural areas of the Philippines, a home equity loan allows borrowers to unlock the value of their property for future development.
3. Advantages of home equity loans
Loans such as a home equity loan provide a quick and straightforward source of cash at a relatively affordable interest rate. For example, at M Lhuillier Financial Services Inc. once all documentation is submitted and the appraisal fee of Pesos 4,000.00 is paid, your money will be released in 5 days.
The term of a home equity loan is also very flexible compared to the needs of the borrower. The borrower can choose a minimum term of 12 months (1 Year) to a maximum term of 60 months (5 Years). This allows a lot of flexibility for the borrower and helps the borrower choose the right peso amount of payments every month to fit into their budget.
4. Home equity loan application requirements:
a. The requirements to apply are also very straightforward if you have a fully paid property, house, or condominium.
b. Original Title
c. Proof of Income
d. Valid Government I.D.
e. 3-Month Bank Statements
5. Interest Rate and Fees of home equity loans
At M Lhuillier Financial Services Inc. interest rates range from 1% per month to 2.5% per month depending on the type of property, its location, and the credit worthiness of the borrower. Other than interest M Lhuillier Financial Services Inc., only charges for the appraisal fee which can be deducted from the loan amount if it is approved. Lastly, under Philippine Law all fees for a loan should be disclosed on the documents shared by the lender which makes it easy for the borrower to understand where the money is going and how much in fees are being paid.
This simple fee structure and minimal interest rate makes this loan product easily acceptable for borrowers around the Philippines. With M Lhuillier Financial Services Inc.’s 3,000+ location around the Philippines you can apply for a home equity loan in almost every municipality.
6. Risks of home equity loans
Availing of a home equity loan in the Philippines is not risk free. It is easy to apply for a home equity loan and can get you into more debt. If you do not make your payments on time there is a chance that you can lose your property, home, or condominium. Therefore, it is very important to make sure that as a borrower you understand your monthly payments and how much you can afford. It is also important that you have savings to cover any shortfall of your monthly income.
At M Lhuillier Financial Services, the lending officers are very careful to make sure that borrowers can afford their monthly payments, so this helps reduce the risk of borrowers not paying. A financing company like M Lhuillier Financial Services does not want to foreclose on properties as much as possible. It is important for them to work closely with the borrower should there be any difficulties that the borrower is facing. M Lhuillier Financial Services is also very careful with valuing the
7. Summary
A loan you often get at a bank are called a mortgage and a home equity loan is slightly different to a mortgage because it is not a loan used to acquire a new lot but rather a loan to unlock the cash you have in your property.
If you are in need of a large amount of cash in a relatively short period of time a home equity loan may be the right option for you. The application process is relatively easy, the requirements are simple, and the repayment terms are flexible.
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