| Home equity is the difference between the market | | | | home equity for a period of time that is set by the |
| value of your residential property and the mortgage | | | | lender. During this period, you can withdraw funds as |
| amount that you continue to owe. Home equity loans | | | | per your requirement anytime, within the overall loan |
| allow you to borrow additional money, using your | | | | limit assigned to you. You can choose to repay the |
| residential property as collateral. It is not necessary for | | | | principal with interest or the interest alone. If you repay |
| the home mortgage to have been paid off completely | | | | the entire principal or part of the principal, you can use |
| to obtain a home equity loan. In other words, home | | | | the credit again, just like a credit card. The interest rate |
| equity debt is a second mortgage. It allows you to turn | | | | on home equity lines of credit is a variable that |
| the unencumbered value of your home into cash, | | | | fluctuates through the loan period. |
| which could then be spent on debt consolidation, home | | | | A typical home equity line of credit is split into the draw |
| improvements or any other expenses. | | | | period and the repayment period. During the draw |
| There are two kinds of home equity debt. The first | | | | period you can draw credit and the monthly payments |
| kind is called a home equity loan and the other kind is | | | | can cover only the minimum interest costs, if you so |
| called home equity lines of credit, or HELOCs. In a | | | | desire. During the repayment period, you are not |
| home equity loan, you receive a one-time lump sum | | | | allowed to draw further credit and your monthly |
| that is to be paid off over a specific amount of time. | | | | payments must include repayment of the principal |
| The rate and the monthly installment amount remains | | | | along with the interest. |
| the same until the end of the term. Once the money | | | | Interest rates on home equity loans and home equity |
| for a home equity loan has been received, you cannot | | | | lines of credit are pegged a little higher than normal |
| borrow any further amount using your home as | | | | mortgage rates. The repayment period for home |
| collateral. | | | | equity loans and HELOCs is usually shorter than the |
| Home equity lines of credit works more like a credit | | | | original mortgage, with a typical repayment period |
| card. You are assigned a loan limit based on your | | | | being 15 years. |