Home Equity Loans are special kind of loans in which the borrower or homemaker may borrow the loan amount against home equity as per his necessity using a credit card or chequebook. In other words it is a line of credit, which allows one to borrow money using their home as collateral. The difference between home equity loans and standard loans is that the borrowing may be done over a stretch of time thus preventing excess borrowing and limiting interest costs. These loans are ususally considered as second trust deed or second position liens although they can also be held in first or third position. The equity is based on a calculation by the subtraction of amount owned on the home from the current market value. For instance, if the market value of the house is Rs.50, 00,000 and has an outstanding mortgage of Rs.10, 00,000 the homeowner has quity worth Rs.40, 00,000.
The maximum amount of home equity loans the bank offers is around 60% to 65% of the actual property of the value. However the amount of loans can rise upto Rs.10 lakhs to Rs.15 lakhs for the residential and commercial properties. The repayment is process is also quite flexible and is carried out through Equated Monthly Instalments or EMIs. The repayment span can stretch upto 10-15 years depending upon the policies of the bank. The interest charged by banks for home equity loans can be fixed as well as fluctuating according to the market conditions prevailing in the current times. The advantages of home equity loans are many and they include:
The application process of home equity loans is also very easy and the indivdual or the professional or the company can apply by simply filling up the application form. The documents that are required for the approval of home equity loans are different in case of self employed professionals and salaried individuals. The requirements for a salaried customer are application form with photograph, the latest salary slip, Form 16, residence and identity proof, the bank statement of last 6 months, processing fee cheque. The requirements of the business men vary by only 4 documents that is the proof of educational qualification, proof of business existence with the complete business profile and last three years income tax return, personal and business bank statements of the last three months and the income statement and balance sheet of the last three years. Rest of the documents remains the same. All the banks that provide home equity loans include HDFC Bank, Bank of India, IDBI Bank, ICICI Bank, State Bank of India, Standard Chartered Bank, Bank of Baroda, Development Credit Bank, Citibank, Union Bank of India and UCO Bank. The terms and conditions may vary from bank to bank.