A New Take on First-Lien Home Equity Lines on Home Services

Jan

A New Take on First-Lien Home Equity Lines

posted by admin in Home Loan Services

Home mortgage lenders are following the lead of enthusiastic infomercials by touting some compelling advantages of a new generation of first-lien home equity lines of credit.
Compare Home Equity Rates
Compare rates from up to 4 lenders for home equity
GO %26raquo;

Borrowers who have great credit have always been wooed by lenders with the best interest rates and low, or no, closing costs. Now, independent lenders are also launching innovative home mortgage financing programs that allow good credit borrowers to speed up the payoff and lower overall interest costs, without changing their spending habits.Liens, lines, and loansA first-lien home equity line of credit functions exactly as a conventional home equity line of credit (HELOC), except that it has a first-position lien on the home. Essentially, this means that if you default on the loan and the home is sold, the lender who holds the line of credit is first to be repaid. This is different from conventional HELOCs, which place the equity line in a second-lien position, behind a first home mortgage loan. The new generationA new generation of first-lien home equity lines of credit allows borrowers to use idle cash to lower their loan balance. This reduces interest expense. This breakthrough is made possible by a stroke of innovation that combines the equity line of credit with daily checking account capabilities. Here’s how it works: Borrowers deposit their entire paycheck into the equity line account, and then pay regular expenses with draw-downs from that account. The initial deposit immediately reduces the loan balance. As regular expenses are paid, the loan balance goes up in small increments. The interest you pay is calculated based on the average daily loan balance, which is dramatically lowered by your initial deposit and subsequent lag before other bills are paid. Extra cash left in the account at month’s end, after expenses and interest payment, functions like an extra principal payment. Borrowers with excellent credit, positive monthly cash flow, and good saving habits can potentially save hundreds of thousands of dollars in interest by paying off their home in record time. These benefits are realized even though this program carries a slightly higher, adjustable interest rate. The new first-lien home equity line won’t make housecleaning effortless or help you lose weight while you sleep. But if you fit the mold, this loan program could change your financial outlook and significantly hasten your retirement. Think of it as your financial diet plan-a lien cuisine.