Well 95% of us needs a loan to build home. there are two type of people who will be looking for home loan first who have home to pledge and other who don't have. Firstly for those have home property to pledge We call it home equity loan and here your home is kept as collateral instead of any other property. This is very much like second mortgage as here it affects your home ownership.

The value of home equity is calculated buy subtracting the present value of your home and the mortgage you have on that home. Like if the value of your home is £300000 and mortgage is £150000. So in that case you are only left with ownership of worth £150000 in your home.

Home equity loans are being classified as:-

• Home Equity Line of Credit
• Second Mortgage Loan

Here are few advantages of the home equity loans.

• The other major advantage of home equity loan is the saving on tax. Regardless how you spend your first £100,000 you are entitled to get the tax benefit on that. Other kind of loans don't have this kind of tax benefit.
• The primary advantage of home equity loan is that you get the cheapest rate of interest. This is because you are pledging your home with lender so there is a very very less risk of default.
• Some disadvantages of the home equity loans.
• As with home equity loan your home is with the lending company you cannot default. If you do you will loose your home.
• You have to pay some good money for the cost accrued in getting the loan.
• Putting your home with the lending company as the loan guarantee will reduce your home ownership margin