A home equity loan/line of credit allows you to USE the money
you've already
invested in your home to finance larger debts at a lower interest
rate than most
revolving credit options. For example, a home equity loan can
help you remodel
your home, send a son or daughter to college, or consolidate
any outstanding
loans.
The interest on home
equity loans and line of credits are usually
tax deductible!
To find out what your current equity is worth, simply subtract
your outstanding
mortgage balance from your home's current value. Depending
on the appraisal
and loan program, your equity may be worth more than you originally
thought.
Usually, you can choose from the following equity-based financing
that's best for
your situation:
- Home Equity Loan: a fixed rate loan that you usually receive
as a lump
sum. Repayments are similar to a fixed rate mortgage - your
repayments
will be the same every month.
- Home Equity Line of Credit (HELOC): a revolving line of
credit that is
similar to a credit card, as you're able to withdraw and
spend what you
like, up to your maximum credit line. Also, as you pay back
a withdrawal,
the repaid funds will be available for future use
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