Texas Home Equity Loan

If you are seeking a home equity loan in Texas, it is helpful to obtain as much information on the subject as you can before you begin the loan process. Equity is basically defined as the amount the homeowner has paid on their mortgage. Because the value of the home is used as collateral, home equity loans are considered low risk by lenders. Low risk loans of this type are often subject to lower interest rates. Usually, a lender is allowed to borrow up to 80 percent of the equity in their home. It should be noted that lenders with less than 20 percent equity are not eligible for a home equity loan in Texas.

As previously mentioned, home equity loans carry relatively low rates of interest. The rates vary depending on numerous factors. One is the credit score and history of the borrower. Borrowers with high credit scores are far more likely to get low rates, while borrowers with low credit scores who are approved will be given higher rates. To secure the lowest rate possible, check with a variety of lending institutions to see which one offers the lowest average rate on their home equity loans.

There are closing costs associated with home equity loans, just as there are with traditional mortgage loans. The closing costs for a home equity loan must be 3 percent or less of the loan amount. You may also have to pay points, also known as prepaid interest. There is no cap on the amount of prepaid interest the way there is with the closing costs. Because of this, it is important to review all documentation from your lender carefully so you know exactly what you are paying for. The lender should also go over all the fees and charges with you in detail.

If you discover that you have been overcharged by your lender, they must have the opportunity to correct the overcharge before litigation can be pursued. It is required that you send a letter in writing which states the overcharge. The lender may then issue a corrected loan agreement and refund the borrower for the amount of the overcharge. If the lender refuses the overcharge, the borrower can then pursue litigation. In Texas, there is a consumer helpline that can help you in this situation. The toll free number is 800-538-1579.

You are only allowed to have one home equity loan at a time, and this can be a first or second lien. If your home is paid off and has no liens, the equity loan will be a first lien (or mortgage.) If you have an outstanding mortgage from which you get a home equity loan it will be a second lien. Anyone looking for a home equity loan in Texas should be aware they can also acquire a credit line with as much as 50 percent of the equity in their home.

Home equity loans can be refinanced but there is a waiting period of one year. This is because of a decision by Texas voters to protect consumers against paying more closing costs and points. In general, the less you refinance, the better. Money from a home equity loan in Texas can be used however the borrower wants. If loan payments are not made there is a possibility the home can be foreclosed upon. So before you acquire a home equity loan be sure you are able to make the payments. If you need credit but don’t necessarily need a large sum of money at one time, consider the aforementioned home equity line of credit.