| Many people have heard about an equity loan called a | | | | equity loan is that you can be approved to borrow up |
| Home Equity Line of Credit but are not really clear | | | | to the amount of equity in your home, but you are not |
| about what they are. They are a very common and | | | | required to take the amount out as a borrowing all at |
| popular type of loan than allows homeowners to draw | | | | once. What this does is create a line of credit that you |
| on the growth in their homes and are usually referred | | | | are able to draw against whenever the need arises. |
| to as a HELOC. A HELOC can give people the | | | | The benefit of utilizing such loans is that you only pay |
| flexibility and convenience that is similar to a credit card | | | | interest on the portion of the equity line of credit that |
| account, but with much lower interest rates. | | | | you have actually used. Many people take this |
| While a HELOC can be considered a type of home | | | | approach when they borrow to do home |
| equity loan, it does have some unique features that | | | | improvements. Rather than taking out the whole |
| make it a bit different. They also have some specific | | | | $100,000 up front for improvements and being charged |
| benefits that often make it the most attractive form of | | | | interest right away, many homeowners only pay for |
| financing for people who have some growth in their | | | | improvements as they are completed. |
| homes. | | | | Other homeowners use a HELOC equity loan when |
| Home equity is the value of the "unencumbered" | | | | they need to purchase a big ticket item such as a car |
| portion of a homeowner's property. In simple terms, it is | | | | or if they need to cover some type of emergency. |
| the difference between the fair market value of your | | | | This provides people with the flexibility that credit cards |
| home and the balance of any mortgages that have | | | | offer, but at a much lower interest rate because the |
| been taken out against the home. If you have a home | | | | borrowing is secured against the home. |
| with a fair market value of $220,000 and the balance | | | | Most lenders provide easy ways for homeowners to |
| of all your mortgage loans is $120,000 in total, then you | | | | be able to use their home equity line of credit. Most |
| have a home equity value of $100,000 that you can | | | | provide a set of checks that can be used just like the |
| borrow against to take out a borrowing off your | | | | checks attached to your checking account. Nowadays, |
| house. | | | | many lenders also provide a debit card so their |
| The value in a property will build up in two different | | | | customers can easily access the funds. |
| ways given sufficient time. The first way that the value | | | | In addition to the lower interest rates and the |
| increases is when the balance of any kind of equity | | | | convenience that lenders provide for these equity loan |
| loan, such as a mortgage or HELOC, is reduced | | | | arrangements, the interest paid on a HELOC is tax |
| through regular payments. The second way is through | | | | deductible. This can provide additional savings and is |
| the appreciation of property values which can be quite | | | | one reason why many homeowners exclusively use |
| substantial over the course of many years. | | | | their home equity line of credit for any financing needs |
| The unique thing about the HELOC type of home | | | | they have. |