What is a Home Equity Loan?
Introduction: To understand better about the Home Equity Loans financial agreement we should first understand what home equity is. The difference between the market value or price and the original value or mortgaged price is known as the equity. In this case it is the difference between the market rate and the mortgaged rate of the house or home in concern. The Home Equity Loan is based upon this difference in price.

That is this difference or home equity is the collateral or the surety for the Home Equity Loans. The loans are used to get credit or loans for other personal uses. In case the debtor fails to pay back the money the home is taken over by the credit grantor who would sell it and get the money that is the difference between the market value and the mortgaged value. Thus there is a very good advantage for the creditors in case of the Home Equity Loans.

Closed and Open end Home Equity Loans: The Closed end Home Equity Loan means that the loan amount is fixed and the person cannot borrow more than the stipulated amount that is in the agreement. The person can borrow a lump sum or a total amount and cannot borrow further afterwards. The maximum limit credit decision that the person can take as a loan is based upon various other factors too like the appraised or calculated value of the home, the credit report and credit history of the person, and also the personís income.

These factors basically represent the personís ability to repay the loan or credit that he has acquired. The home equity is the best collateral or surety that a person can provide since the value of the home usually rises and only rarely does it go down. Hence it is also possible to borrow more than the equity value and this is known as over-equity loans. This is different than a chattel mortgage.

The Open end Home Equity Loan is similar to that of the closed end Home Equity Loan and it is possible to borrow money over a varied period of time. This initial amount is fixed by the debtor and the creditor and the choice of amount is also based on the above situations too. The Open End Home Equity Loan is available to be repaid over more than 30 years and with variable interest rates. The interest for this type of loan is also very minimal and can be easily paid by the people.

The Canadian Regulations have a regulatory body to overlook the operation of the banks and also regulate the interest rates that have become and becoming higher each day. The market value of the homes was also in the rise and based on this aspect many had taken Home Equity Loans but now due to recession the home rates are toppling down along with the creditorís faith in retrieving their loans that they have given. The Home Equity Loans have also been ordered to be regulated by the federal regulatory body of the government of Canada. What is a Home Equity Loan?

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