Home equity line of credit: Do you really want one?
We all know by now that home owners have a hidden savings account...its called HOME EQUITY.
Home equity is the value of your home minus the remaining mortgage balance which is outstanding. While you live,and sleep in your home worrying about debts or wishing you could refurnish the living room you may be sitting on the cash that will grant your wishes.
Would You Want an Equity Line of Credit?
With a typical loan, which deposits a set amount of money in your account and begins charging you interest and payments at a fixed rate until repaid, a line of credit acts sort of like a credit card account. You do not need to pay interest on the full amount you have access to -- only on the amount you have used.
Using an equity line of credit (also known as a Home Equity Line of Credit or HELOC) gives you greater flexibility with the least cost. Not only can you access the credit only as you need it, but your monthly payments will reflect only the balanced used. The less used the lower your payment.
A HELOC is a great his if you don't want to spend a large amount in one place..as well as if you want access to that credit agian, once it has been repaid, without asking for another loan.
Do I have limits on what I can use the loan for???
We can all find lots of uses for a line of credit loan...but here are some of the most common examples.
Consolidate Debts
Use the home equity line to reduce or consolidate your other debt. Not only will this help your credit score...but it can help reduce your interest payments as well.
Take care of your "second" on your home.
Use the equity line to pay off or down your second...in some cases paying down will also allow you to reduce the interest rate. (which is normally higher on a second)
Travel, remodel, or Addon
Cover the cost of an addition, redecorate, or go on a trip...all at a interest rate lower then most credit cards.
Ok...so whats the Down Side?
While the before mentioned information sounds great...whats the rest of the it look like.
Some types of debt wont allow you to use a HELOC on them. Some student loans...or small business loans.
Other items like cars and vacations may seem like a good idea to buy with your home equity line of credit, but with the ability to pay only the interest you may find the motivation to pay off the debt is lacking and end up owing for items that have lost their value or were consumable. Plan to pay off the debt quickly for the most advantage.
A Second mortgage (or refinancing) may or may not be a good idea depending on interest rates and your repayment terms. While lines of credit take advantage of current low interest rates you may find that your regular loans protect you better from fluctuating rates if you will not be paying the loan down in the next few years.
We all understand the freedom and relief that comes from having access to extra funds. For both those emergencies, as well as last minute purchases. However its important to understand the risks as well as benefits. - 23217
Home equity is the value of your home minus the remaining mortgage balance which is outstanding. While you live,and sleep in your home worrying about debts or wishing you could refurnish the living room you may be sitting on the cash that will grant your wishes.
Would You Want an Equity Line of Credit?
With a typical loan, which deposits a set amount of money in your account and begins charging you interest and payments at a fixed rate until repaid, a line of credit acts sort of like a credit card account. You do not need to pay interest on the full amount you have access to -- only on the amount you have used.
Using an equity line of credit (also known as a Home Equity Line of Credit or HELOC) gives you greater flexibility with the least cost. Not only can you access the credit only as you need it, but your monthly payments will reflect only the balanced used. The less used the lower your payment.
A HELOC is a great his if you don't want to spend a large amount in one place..as well as if you want access to that credit agian, once it has been repaid, without asking for another loan.
Do I have limits on what I can use the loan for???
We can all find lots of uses for a line of credit loan...but here are some of the most common examples.
Consolidate Debts
Use the home equity line to reduce or consolidate your other debt. Not only will this help your credit score...but it can help reduce your interest payments as well.
Take care of your "second" on your home.
Use the equity line to pay off or down your second...in some cases paying down will also allow you to reduce the interest rate. (which is normally higher on a second)
Travel, remodel, or Addon
Cover the cost of an addition, redecorate, or go on a trip...all at a interest rate lower then most credit cards.
Ok...so whats the Down Side?
While the before mentioned information sounds great...whats the rest of the it look like.
Some types of debt wont allow you to use a HELOC on them. Some student loans...or small business loans.
Other items like cars and vacations may seem like a good idea to buy with your home equity line of credit, but with the ability to pay only the interest you may find the motivation to pay off the debt is lacking and end up owing for items that have lost their value or were consumable. Plan to pay off the debt quickly for the most advantage.
A Second mortgage (or refinancing) may or may not be a good idea depending on interest rates and your repayment terms. While lines of credit take advantage of current low interest rates you may find that your regular loans protect you better from fluctuating rates if you will not be paying the loan down in the next few years.
We all understand the freedom and relief that comes from having access to extra funds. For both those emergencies, as well as last minute purchases. However its important to understand the risks as well as benefits. - 23217
About the Author:
Doc Schmyz has done real estate deals all over the US and Canada. He built a free free website shares Real estate investing information for all over the US. Find Real estate investing information by state
posted by X - Men @ 3:00 AM
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