| Home equity is the difference between what you owe | | | | deductibility. Many times, home owners can deduct up |
| on your mortgage and the fair market value of your | | | | to 100% of the interest they pay on mortgage loans |
| home. Cashing out on home equity for debt | | | | off their taxes. |
| consolidation is continuing to gain popularity. The typical | | | | If you need to draw equity from your home and the |
| way to cash out on home equity is to either refinance | | | | rates on your first home are lower than the current |
| an existing first mortgage or take out a second | | | | rates, it will probably be cheaper to get a second |
| mortgage. | | | | mortgage even though interest rates are higher. If you |
| Many people wonder why the interest rates for | | | | have a specific purpose for the loan that requires a |
| second mortgages are higher than those for first | | | | specific amount of money, a home equity loan, also |
| mortgages. The reason for this is a second mortgage | | | | known as a home equity installment loan (HEIL), may |
| is a subordinate loan secured by the same property | | | | be your best bet. Home equity lines of credit |
| as the first mortgage. Thus, if the mortgage isn't paid | | | | (HELOCs) are useful for those who have an |
| and there is a foreclosure on the property, the first | | | | occasional or on-going need for money because |
| lender is paid off before the second lender. As a result, | | | | interest is only charged on the amount of equity used. |
| second mortgages entail more risk for the lender. To | | | | Compare the annual percentage rate (APR), the cost |
| offset the risk, lenders charge higher interest rates for | | | | of credit on a yearly basis, when shopping for a |
| second mortgages than for first mortgages. | | | | second mortgage. Unlike home equity loans that include |
| According to BankRate, second mortgage and home | | | | the total credit costs for the loan, the advertised APR |
| equity lines of credit have become increasingly | | | | for home equity credit lines is based on interest alone. |
| common since the mid-1980s as property values have | | | | For a true comparison of credit costs, compare other |
| soared and homeowners have learned about | | | | charges, such as points and closing costs, which will |
| managing personal debt. Among the reasons for this | | | | add to the cost of your loan. |
| surge in popularity: attractive interest rates and tax | | | | |