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Get Your Home Working for You with Homeowner Loans

By Charles Hopkins Published 10/26/2007 | Loans
If you need some cash for whatever reason - perhaps to finance a child's education or to remodel your home to increase its value on the real estate market - and you own a home, then you're in luck.  The special circumstance of being a homeowner means that you can seek out and be approved for homeowner loans to obtain the cash you need.

What are Homeowner Loans?

Homeowner loans are types of secured loans, the most common variety of lending.  'Secured' means that the loan is backed with collateral, in this case, the borrower's house.  Lenders like secured loan deals because it minimizes the risk to them in case the borrower defaults, then they can issue a lien, seize the property and can sell it off to recoup at least part of their loss.

For borrowers, the hazard of losing one's home through repossession is balanced by the fact that since the deal has the security of being collateralized behind it, the lender can afford to give them lower interest rates on the deal than they otherwise could if the loan were unsecured (to illustrate, a type of common unsecured loan is that represented by a credit card).

What You Need to Consider

There are several factors that you need to consider when getting a homeowner loan.  These include the amount you want to borrow, the interest which is going to be charged, the value of your house, and the amount of any outstanding debts against it such as the balance of the mortgage still to be paid.

If you are not sure of the value of your property, there are a number of things you can do to ascertain it:

1.    Look around for transactions of properties similar in your local area.  How much they have been selling for recently?  You can get an idea of the market value of your home this way.  You can also obtain this information by browsing the real estate ads in a local paper or from a real estate agent.
2.    How much did you buy your house for?  How much have real estate prices risen since then?  This should give you an idea of the approximate value of your house.
3.    The surest way is to hire a surveyor to assess your property's value.  This costs money, but the estimate is more likely to be an honest one than a real estate agent's who may find it in his or her interest to raise the valuation.

Lower interest rates are not the only advantage to homeowner loans.  The security also enables the borrower to obtain a larger amount than an unsecured loan and also to get more favorable repayment terms.  Because of the competitive nature of the lending market, with companies vying with each other for customers, lenders will often modify their deals as close as possible to suit your needs and get your business.  You can choose to pay more per repayment, and pay off the loan in a shorter time or spread out the loan over a longer period of time.  You can get fixed interest rate loans or adjustable rate loans.  Each has its advantages and disadvantages, so be sure to consult with an independent professional before you make your final decision.