Home Equity Loans

Home Equity Loan$


A new car, home improvements, debt consolidation, a dream vacation; one of these could be the reason you are considering a loan. Perhaps a home equity loan would be the most practical type of loan for your personal financial situation.



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A home is a source of great pride and satisfaction; it can also be a source of equity. Equity refers to the cash value that has accumulated in your home since you began making regular payments. It is the difference between what your home is worth and your outstanding mortgage balance.



Why do people opt for a home equity loan? Simple, the interest rate is lower. Your rate will depend on your credit history, earnings, etc. but will typically be lower than credit card rates or a personal line of credit.



Another reason is the ability to have a longer repayment term because it is secured by the largest asset you possess, your home! A home equity loan could be amortized for up to 15 years, if approved by your lender. Since your home is the collateral on the loan, it must be paid back before you decide to sell. Also keep in mind that should you default on the loan, the lender could foreclose on your home. Be sure this is the right time for you to take this financial risk and that you can afford to make the payments. A home equity loan or line of credit does require your collateral to be your primary residence.



More reason to consider this financial tool…many times a home equity loan is tax deductible (contact your tax professional for more information).



What is the difference between a home equity loan and a home equity line of credit? A loan is a one-time funding to you. You will receive the funds you’ve borrowed and will re-pay it in predictable monthly payments. Should you need more money, you are not able to access the funds you have already paid back. You would need to apply for another loan.



A home equity line of credit is a revolving, variable-rate line of credit that allows you to access some of the funds again once you have paid them back. For example if you borrowed $8,000 and have re-paid $5,000 of it, you can use that $5,000 again if the need arises. With a line of credit your payments can vary depending on the current amount you have borrowed; the rate may also fluctuate.



Keep in mind the terms, rates, and features will vary by lender. Protect yourself, save money…shop around, compare, and negotiate!