| Cash can be hard to get, at times, and the debt can | | | | deductible, and is often based on the entire amount of |
| pile up, but if you own your own home it may be much | | | | the equity of the home. Generally, it is at a higher rate |
| easier than you think. A home equity loan allows you | | | | than the first mortgage, and usually has a maximum of |
| to take out a loan based on the built up cash value of | | | | 15 years to pay it back. Many homeowners use a |
| your home. Here is what you need to look for in order | | | | balloon payment with this type of mortgage, or a large |
| to get a good deal on a home equity loan. | | | | payment that is due at the end, in order to keep their |
| How It Works | | | | payments low. |
| A home equity loan is worth the amount of money | | | | Line of Credit |
| that you now have invested in your house. For | | | | This type of home equity mortgage gives to the |
| instance, if you house is worth $250,000 on the | | | | homeowner a credit line that they are free to draw on |
| market, and you still have $155,000 on your existing | | | | - when needed. The ceiling amount is pre-approved by |
| mortgage, then you have an equity value of the | | | | the lender, and then they are free to draw out money |
| difference - $95,000, in this case. That means that | | | | as they need it - or if they need it. Up to 100% of the |
| many lenders would be glad to give you a loan worth | | | | equity value can be borrowed, and interest is only paid |
| up to $95,000, as a second mortgage, or home equity | | | | on the amount borrowed. The rate of interest, though, |
| loan. | | | | will vary, depending on what the rates are at the time |
| Two Kinds of Mortgages | | | | you withdraw any money. These loans are generally |
| When you apply for a home equity loan, there are two | | | | held open for up to 30 years. |
| kinds that you might get. The first kind, called a home | | | | Like with any other loan, you need to take the time to |
| equity loan, simply gives you the money - like any other | | | | shop around in order to ensure that you get the best |
| loan. You are free to use the money as you want. | | | | deal. Not only should you compare interest rates, but |
| The other kind is called a home equity line of credit, | | | | also the various fees that are involved. Separate the |
| often referred to as a HELOC. Both of these are also | | | | actual loan from the fees and compare them other |
| referred to as second mortgages, since they are | | | | loans - fee against fees and loan costs. Do not make |
| secured by the house itself. | | | | the assumption that since the home equity loan has no |
| The Simple Home Equity Loan | | | | closing costs, that they are not in there somewhere - |
| A home equity loan, or second mortgage usually is tax | | | | they are. |