Explaining home equity for first-time buyers

Home Equity basically means the money a person invests on his home. The home’s equity goes up when a person makes payments on the home or purchases a home by means of a loan and makes payments thereby adding to the home’s equity. With the home’s equity as collateral, a person can get different kinds of loans like equity loans and withdrawals from a home equity line of credit. In this article I wish to discuss the implications of Home Equity vs. Line of Credit.

What is Home Equity?

Home Equity is the value in terms of money the owner owns in his or her home. The home equity grows with the down payment on mortgage that the holder makes on the home or when there is an increasing trend in the value of the property; in both ways, it is his or her equity that grows in value.  Besides this, the home equity in the house grows up when the owner pays his credit on the property.


Home equity loans are generally personal loans. Here borrower has to pay a certain amount of money typically at a predetermined rate of interest to the lender and over a time period. This is not similar to the consumer loan wherein the equity of the home is used as collateral for loan.

Home Equity Line of Credit

Generally home equity line of credit is to some extent riskier than the usual home equity loans. This is just same as a credit card wherein the individual is provided a line of credit over which he can withdraw money. The loan taken by the person is secured by the home’s equity. In most cases, the money will be given at an uneven rate of interest and keeps changing depending on the existing market rates. It is because of this variation in the rate, the borrower sometimes ends up paying high interest.

Home Equity vs. Line of credit

Almost all the loans that are secured against a home’s equity are secured loans, the security here being the home’s equity. Home

Equity loan is better than the Line of credit, because the interest is comparatively lesser. Along with the advantage comes the draw back; if the borrower fails to pay back the money at the right time, then the lender can place a lien on the home or sometimes even opt for foreclosure. But in the case of the line of credit, it doesn’t pose such risks and the only problem being that the interest rate is not fixed and varies depending on market rates.

First time home buyers

When we plan to build a home, there are several hassles that we have to overcome. The most important hassle would be to obtain a loan. People believe that it is very difficult to obtain loans for first time home buyer. But the fact is that banks offer first time home buyer loans for those who are in need. They provide all guidance and support for the first time home buyers.

It is not necessary that you should stick on to first time home buyer loan. You can also opt other types of loans. But the loans for first time home buyers are really easy to acquire. For some people, they are perfect, but for others it can be a wrong decision.


  • When you prepare to apply for a loan, you need to make sure that you have all supporting documents with you. If the documents that you have are genuine, you can definitely apply for the loan with confidence. You need to have copies of tax returns for the past three years, your payment slip for salary from the employers, your proof of current employment, your previous income information and other related documents showing all your debts.

  • You can search all possible resources to enquire about the best loan provider. You can search online, in the local newspaper or by other methods. When we finally decide a particular lender, try to consult them and apply for a loan. Since there are banks that offer loans for first time home buyer, acquiring a loan will not be difficult. You can take an appointment and meet the manager and provide all your documents to convince them.
  • You can apply for a pre- approval for home loans. It will help you to decide an amount with which you can purchase a home. This will help the buyer to make an estimate amount with which the home can be bought.
  • For some people, finding loans are really hilarious. You need to ensure that you are connected with the complete loan formalities. You can clear all your doubts and anxiety about the loans. Make sure that you have regular contact with your lender. Make sure that you follow the instructions provided by them. If you are fulfilling all the requirements that they have mentioned, acquiring home loans will not be a difficult task.