| The most common type of home equity loan is the | | | | than once over the life of the loan. The borrower is |
| term loan. This loan is set for a fixed amount of time, | | | | usually given special checks that he or she may use to |
| anywhere from five to fifteen years. Such loans are | | | | write checks against the loan amount. The borrower |
| typically granted for up to 80% of the value of the | | | | may borrow a little at a time, or borrow all of the loan |
| home, but some lenders will lend up to 125% of the | | | | amount at once. Unlike the term loan, the interest rate |
| home's value. | | | | on lines of credit tends to be variable. This type of loan |
| Is this type of loan right for you? The term loan works | | | | works best for recurring expenses - a complicated |
| best for those who need to borrow a fixed amount of | | | | remodeling project accomplished in several stages, or |
| money for a specific purpose - paying for a wedding, | | | | a recurring educational expense such as annual tuition. |
| a home remodeling project, a fixed educational | | | | Each type of loan has its advantages and |
| expense, or debt consolidation. This would give the | | | | disadvantages; you simply need to decide if you want |
| borrower a fixed repayment schedule, where he or | | | | a fixed interest rate and fixed payments, or more |
| she would pay a set amount of money each month | | | | flexibility in terms of when and how you pay. Your |
| for a specific period of time. | | | | needs will determine which type of loan is best for you. |
| An increasingly popular alternative to the home equity | | | | Either way, under current Federal law, the interest on a |
| loan is a line of credit. This type of loan works like a | | | | second mortgage is deductible from your income |
| credit card, and has a revolving line of credit, in which | | | | taxes up to $100,000. |
| the borrower may borrow against the principal more | | | | |