Owning your own home has many benefits -- from old-fashioned pride of ownership to the equity you can build up as you make mortgage payments. Because life is full of expenses, some homeowners choose to use this equity to pay for other pursuits or obligations. When you're short on cash, a home-equity loan can come to the rescue. When it's time to settle a home-equity loan, let the lender know you're ready to pay it off in full.
Read the terms of your loan in your loan paperwork. The terms will indicate the interest rate, the payment schedule and the term of the loan. Check to see whether there are any prepayment penalties for paying off the home-equity loan early. The ending date of the term of the loan is the date on which you must finish paying off the loan.
Contact the lender and provide notice that you wish to settle the home-equity loan. Ask the lender for the adjusted amount that remains due on the loan -- minus applicable interest and plus any prepayment fees. If the lender has a form for this notice, request it. Some lenders make this form available on the bank website for customers to submit online. If the lender requires written notice, draft a simple notice that includes your name, address, loan identification number and your desire to pay off the loan. Submit the notice according to the lender's policy.
Give the lender the payment due to settle the loan.
Request written confirmation of the settlement of the loan. File this notice in your personal financial records.
- Because a home-equity loan is a lien on your mortgage, you must settle these types of loans before selling your house.
- Defaulting on a home equity loan may be cause for foreclosure on your home, according to the U.S. Department of Treasury "Help With My Bank" website.
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