The new loan exceeds the total amount of money needed to repay the existing first mortgage and any additional liens. The borrower receives the cash balance of the loan. Closing costs - Costs incurred by the borrower in the course of finalizing a home equity loan. Collateral - An asset pledged as security in a loan. In a home equity loan, the home is the collateral.
Lenders use it to determine whether to approve a loan and to set the terms.
A person with a good credit report is likely to get a better interest rate than someone with a poor credit report. Credit score - A number, roughly between 300 and 800, that reflects the credit history detailed by a person s credit report. Lenders calculate this number with the assistance of computer systems as part of the process of assigning rates and terms to the loans they make. By taking a credit card balance at 18 percent interest and moving it to a home equity line with 8 percent or 9 percent interest, people may save thousands of dollars. Home equity line interest is usually tax-deductible too, magnifying the savings.