| Once you have built up equity in your home, you have | | | | demand" source of funds that you can access and |
| the privilege of applying for a home equity line of credit, | | | | pay back as needed. You only pay interest if you |
| which allows you to borrow the money you need. | | | | carry a balance because these line of credits are |
| Most financial insititutions ( banks, savings and loans ) | | | | essentially a revolving line of credit, like a credit card |
| have entered the home equity market, so you have | | | | but with a much lower rate because the line of credit |
| plenty of options when you shop for the best loan. In | | | | is secured by your home. Like other mortgages, the |
| effect, a home equity loan is a second mortgage on | | | | home equity loan requires you to go through an |
| your home. You usually get a line of credit up to 70 | | | | elaborate process to qualify for an open line of credit. |
| percent or 80 percent of the appraised value of your | | | | You will usually need a home appraisal and must pay |
| home, minus whatever you still owe on your first | | | | legal and application fees and closing costs. Because a |
| mortgage. For example, if your home is worth $100,000 | | | | home equity loan is backed by your home as collateral, |
| and you owe $20,000 on your mortgage, you might | | | | it is considered more secure by lenders than |
| receive a home equity line of credit for $60,000 | | | | unsecured debt, such as credit card debt. Further, |
| because your lender would subtract your $20,000 | | | | because the loans are less risky for banks, you benefit |
| owed on the first mortgage from your $80,000 worth | | | | by paying a much lower interest rate than you would |
| of equity. You will qualify for a loan not only on the | | | | on credit cards or most other kinds of loans. Home |
| value of your home but also on your creditworthiness. | | | | equity loans can therefore offer extremely attractive |
| For instance you must prove that you have a regular | | | | rates when the prime interest rate is low, but subject |
| source of income to repay a home equity loan. The | | | | you to much higher interest costs if the prime shoots |
| difference between the two kind of credits is easy: | | | | up. You can tap the credit line simply by writing a |
| the home equity loan has a fixed rate and the home | | | | check, and you can pay back the loan as quickly or as |
| equity line of credit has a rate that fluctuate and it's | | | | slowly as you like, as long as you meet the minimum |
| better indicate to consolidate other debts than the | | | | payment each month. |
| credit cards. The home equity line of credit is an " on | | | | |