Consolidating debt with a home equity loan

Obligations include credit card payments, student loans, car payments and child support.This target ratio is 45 percent or less based on Freddie Mac standards.Lenders don't want to get caught with second-position loans if the market values drop dramatically.If the price drops too much, the equity loan might not recover any funds in a foreclosure.An home equity loan is a loan against the equity in the home.Equity is the value of your home minus other mortgage loans.Lenders prefer consolidation of debts because you are eliminating one debt to reduce payments.

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Lenders need your tax returns, as well as recent income verification from your job, business or retirement benefits.For example, if your home's fair market value is 0,000 and you have 0,000 left on your mortgage, your equity is 0,000.Based on the home's equity, a bank will loan you an amount as a lump sum or a revolving line of credit for you to access on demand. Equity loans are second positions, meaning they are second to the primary mortgage.These loans are often used to consolidate other debt, do home repairs, pay for school or even take a vacation.Mortgages are typically taken when you purchase the home, allowing you to buy the home over an extended period of time.

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