A loan that is given by the banks in which the person borrowing the loan uses as collateral, the equity that is in their homes is called the Home Equity Loan. The Home Equity Loans in Singapore help the household to finance college educations, medical bills and also helps in renovating their homes. A lien is created against the house of the person borrowing the loan in case of the Home Equity Loans. Very good credit history is a pre-requisite for most of the Home Equity Loans in Singapore and considerable loan-value as well as combined loan-value ratios.
These mortgages are known as the second mortgages as the home equity loans are sanctioned against the property-price. Lines of credit and the Home Equity Loans are generally for shorter durations than the 'first mortgages'.
Closed-End Home Equity Loans
In the Closed-End Home Equity Loans system the person borrowing gets a lump sum amount at the closing time and are further not allowed to borrow. The pre-requisites for this type of loans are income, the price of the collateral and credit-history. This type of loan usually has fixed rates and can be gradually liquidated.
Open-End Home Equity Loans also called the 'home equality line of credit' is a type of loan where the persons borrowing have the options to select how frequently and when to borrow against the equity in their properties and the lender initially sets a limit to the line of credit depending on conditions similar for the 'closed-end' loans system.
The Fees for Home Equity Loan
In case of the home equity loans the following fees may be applicable
The home equity of families residing in HDB flats Singapore that are occupied by the owner in 2003 was 3.3 times more than their annual income and it was around $154,000.
About 71% of the HDB flat owners who belonged to the lowest income group had a minimum of $ 100,000 in their flats as compared to 72% in case of other income-groups. About 7.8% of the people belonging to the lowest income groups had more than $250,000 equity in their flats. For the highest income group it was 22% whereas for the middle-income group it was 15%.
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