Wooden Baby

A homeowner loan is a secured loan that uses the equity that you've built up in your home as collateral. Equity, if you're not familiar with the term, is the amount that you've invested in your home while making payments on your mortgage; it is often represented as the difference between how much you still owe on your property and the total value of the home.

A number of banks, finance companies, and other lenders offer good deals on homeowner loans, letting you borrow money based upon the available equity of your house. In order to help you decide whether a homeowner loan is right for you and your specific situation, please consider the following information.

Advantages

When you apply for a homeowner loan, you're likely to be offered a much lower interest rate than you would for some other loan types due to the nature of the collateral that is used to guarantee loan repayment. Many of the closing costs and other fees for the loan are generally paid up front, but with the right lender you may be able to incorporate these costs into the loan itself.

Additionally, you may find that there are some tax advantages to be had with this type of loan that you would not be eligible for otherwise. Careful planning can help make your homeowner loan flexible to your specific needs, enabling you to repay the loan at your own pace so that you can save money while getting out of debt sooner.

Disadvantages

Depending upon the lender, some homeowner loans can have steep penalties for paying off the loan too early, up to 10% of the amount borrowed. Some loans, known as "balloon loans", allow you to only pay a smaller amount each month such as the interest that has accrued; the problem with this is that when the balloon payment comes due at the end of your loan term, you'll have a much larger amount to pay than you might be expecting.

You may also find that some of the opening costs, closing costs, broker fees, and other costs and charges that are associated with this type of loan are more than you are expecting, and in most cases these costs are due out-of-pocket before the loan is ever issued.

Cost of Your Loan

The total cost of your homeowner loan will depend on a number of factors, including your personal financial situation, your credit history, the amount you wish to borrow, your monthly and annual income, and the repayment terms. These factors can affect the interest rate that you are charged, the terms by which the loan must be repaid, and the additional costs and charges that are included with your loan.

In order to get the best deal on the loan that you take out and make sure that you don't have to pay more overall for your homeowner loan, you should take the time to shop around and compare the offerings of various lenders so that you can determine which one has the best loan deal for you.

Bill Stone writes for Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

The 30-year mortgage average rate was 6.43%, down from 6.47% the week prior. The 15-year mortgage was also down to 6.11% from 6.16% the week prior. One year ago, the 30-year rate was 5.74%, while the 15-year averaged 5.32%.

"Although 30-year mortgage rates are about three-fourths of a percentage point higher than they were last year, it's good to keep in mind that rates have dropped from the high of 6.80% reached just eight weeks ago," said Frank Nothaft, chief economist for Freddie Mac.

"And with short-term interest rate increases seemingly on hold, for a while at least, interest rates over all should not experience any big shifts in either direction," he explained.

"The risk to our forecast of relatively stable mortgage rates is that inflation will unexpectedly heat up, causing bond markets to raise their expectations that the Fed will intervene by raising short-term rates. In that case, mortgage rates will again start to rise," he continued.

The one-year adjustable rate mortgage also say a decrease, falling to an average of 5.60%, down from 5.63% one week earlier. One year ago, the ARM was at 4.46%.

The five-year hybrid was also down, averaging 6.10%. One week ago, it was at 6.14%.

The 30-year mortgage came with an average fee of 0.5 point. The 15-year fixed had a fee of 0.4 point, while the one-year had an average fee of 0.7 point.

The Federal Reserve will meet next week to discuss inflation risks and the growth of the economy.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!