| s a type of loan under which a property owner uses | | | | repayment terms. |
| his residence as collateral security and can get | | | | There Are Two Types of Home Equity Loans |
| prearranged amount against the property. The loan | | | | 1. The standard home equity loan, |
| allows you to use into your home's built-up equity. | | | | 2. The home equity line of credit (HELOC's) |
| Home equity is the actual difference between the | | | | In a standard home equity loan, a pre specified amount |
| amount your home could be sold for and the amount | | | | of money is loaned in a lump sum for a specified |
| that you already owe on the mortgage. Assume that | | | | period of time and the same amount of interest is paid |
| the market value of your home is $200,000 and you | | | | every month. It is also called a term loan, a closed-end |
| owe $70,000 on your mortgage, then you have | | | | loan or a second mortgage installment loan. |
| $130,000 equity available on your home. Remember | | | | HELOC works similar to a credit card because it has a |
| that if you have more than one mortgage taken on | | | | revolving balance. A HELOC allows you to borrow up |
| your property, then all of them have to be considered | | | | to a certain fixed amount for a specified period of the |
| for calculating the outstanding dues. | | | | loan which is set by the lender. During that time period, |
| A home-equity loan is a good way to borrow money | | | | you can withdraw as much money as you need. As |
| for two main reasons: | | | | you clear the principal, you can use the credit again, like |
| 1. The interest rate is one of the lowest loan rates a | | | | a credit card. |
| borrower can get. | | | | These loans are repaid in a shorter period of time than |
| 2. The interest you pay on the loan is tax-deductible. | | | | the first mortgages. They often have a repayment |
| Thus it is sometimes recommended by many to | | | | period of 5 to15 years. |
| replace other consumer loans whose interest is not | | | | The loan could be either a fixed interest rate or a |
| tax-deductible, such as auto loans, credit card debt, | | | | variable interest rate. |
| and medical debt with the Home Equity Loan. | | | | Homeowners often use a home-equity loan for home |
| Caution: If you don't repay the debt, you can risk losing | | | | improvements or debt consolidation or to pay for a |
| the home and be forced to move out. Do act with | | | | new car or to finance their child's college education. |
| care and make sure you are able to fulfil the | | | | |