An equity loan means the loan provider takes a percentage stake in the property in return for payment of the principal and interest on the loan. There are many different types of equity loans, all depending on the types of equity you have and whether you intend to remain in the property after the loan is fully repaid.

Your mortgage lender may be able to help you understand the different types of equity loans available to you and the advantages and disadvantages of each, he may also be able to give you options to refinance mortgage later on.

Equity loans that involve the mortgage are usually most popular. There is always a small chance that the value of your home can increase during the loan term, but this is rare, and it will almost certainly be very expensive for you.

However, there are also equity loans that involve only a second mortgage, usually called a debt to equity mortgage. This is also a very popular type of loan, but it usually involves high initial costs. This type of loan is most suitable for people who expect to own their home for longer than three years.

Types of equity loans include:

Borrower owned loans Loans that are backed by the equity in the borrower’s home.

Loans that are backed by the equity in the borrower’s home. Principal and interest only loans Loans that use money in the borrower’s account. The principal and interest are not added to the mortgage value.

Loans that use money in the borrower’s account. The principal and interest are not added to the mortgage value. Loan to value loans Loans where the mortgage value is determined by the loan amount. Loans where the mortgage value is determined by the loan amount. Maximum monthly amount for maximum monthly payment Loan to value Loans that provide maximum monthly payments, but do not provide a fixed amount of money to the borrower each month. Loans that provide maximum monthly payments, but do not provide a fixed amount of money to the borrower each month. A mortgage contract Mortgage contracts are legally binding agreements between the mortgagor and a lender. They do not need to be registered in the Land Registry. For example, a mortgage contract could be used by a car dealership to finance a car, but not by a seller of land. This is usually because the terms are intended to be flexible. For example, if the sale price is the same for the vehicle loan and the land contract, the car dealer could refuse to loan the land contract.