A Guide to Home Equity Lines of Credit
by: John Mussi
It seems as though you can't turn on the television or read the newspaper without seeing some advertisement for lenders offering home equity loans or lines of credit. Perhaps you aren't really in the market for a loan, but after seeing all of the commercials and ads have begun to wonder about getting a line of credit. Maybe you want to do some home improvements, or are looking for a way to pay for some of the extra expenses that come up in your life.
It's important that you understand exactly what home equity lines of credit are and exactly how they work before you begin looking for one, however... after all, you don't want to get in over your head without even knowing how you got there.
Defining Home Equity Lines of Credit
The first thing that you need to know when working with home equity lines of credit is exactly what they are. As the name implies, a home equity line of credit is an amount of credit granted by a bank or other financial institution that uses the equity that you have built up in your home or other real estate as security to guarantee that anything charged to the line of credit will be repaid. This line of credit acts just like any other credit card or credit line, with the only major exception being the nature of the security used for the credit line.
Common Uses of Home Equity Lines of Credit
Since home equity is usually quite high in value, the amount of credit that can be established in a credit line based upon it also tends to be quite high. This can open individuals up to credit limits that they have never had before, which they can use for a variety of different purposes. Many individuals who take out credit lines based upon the equity in their house or other real estate use the new credit for larger projects, such as home improvements or debt repayment.
These lines of credit might also be used to pay for college or other educational expenses for individuals or their children, or may simply be used as the means for financing the vacation that a person has always wanted to take but has never really had the money.
Obviously, the choice is up to the homeowner... but it's important to keep in mind that whatever is borrowed against a home equity line of credit will have to be repaid with interest.
Applying for a Home Equity Line of Credit
A home equity line of credit can be applied for at any bank or a variety of non-traditional or specialty lenders who deal with home equity. Even most online lenders are able to grant this type of credit line. Treat the credit line application as though it were a mortgage or equity loan, and take the time to shop around for the best interest rate and credit terms.
Compare the various quotes that you receive from various banks and lenders, making sure that you carefully consider the benefits and drawbacks of the various credit terms that you are offered.
When you submit your final application to the bank or lender of your choice, it should be because you have decided that it is the best overall deal among all of the offers that you received instead of simply being the offer that had the lowest interest rate.
You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:
About The Author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.
Wednesday, January 10, 2007
Equity Line Of credit
Refinancing Your Home Equity Line Of Credit {HELOC}
by: Brad Stroh
These days, borrowers use Home Equity Lines of Credit (HELOCs) to assist with all sorts of expenses. Some of the most popular reasons for taking out a HELOC are college tuition, medical expenses, home remodeling, and debt consolidation. Because the interest is tax-deductible, a HELOC can be a very attractive option when you need to borrow money. You may also take out a HELOC at the same time that you secure your first mortgage when buying a home in order to finance a greater percentage of what the home is worth without the need for mortgage insurance.
Whatever the circumstance were when you took out your HELOC, the time may come when you decide to refinance it. The factors pertaining to why and how you go about refinancing your HELOC will be as individual as you are. Make sure you have clear goals as to why you are refinancing, and be certain those goals can be met by the program you choose.
One reason to refinance a HELOC, and the first one that comes to most people’s minds, is the interest rate. This may or may not be a good reason depending on a few factors. Your HELOC carries an adjustable rate; therefore if rates go down, so should your payment amount. If rates are steadily rising, however, and especially if they’re expected to continue to rise, refinancing your HELOC back into your first mortgage, or into a closed-end second mortgage with a fixed rate, might make the most sense.
If you originally took out your HELOC for a project or expense such as college tuition or home remodeling and that project is now completed, you may just be looking to refinance your first mortgage and your HELOC into one loan with a low fixed rate to avoid the potential for a rising rate and increasing payments in the future. Having a single loan with a fixed rate offers you the satisfaction of knowing that your payment amount will never go up.
Conversely, if you’ve come to the conclusion that you need to be able to draw more from your HELOC than you’d first thought, you can refinance it or, more correctly speaking, take out a new HELOC for a greater value. Keep in mind that you’ll have to pay additional closing costs, and that unless you can start making much larger payments, it will take you longer to pay back the larger HELOC amount. You should carefully consider your needs and options before opting for a HELOC with a larger credit line.
When the time comes to refinance your HELOC, don’t hesitate to consult with a financial planner or a loan officer. These professionals can advise you on whether your reasoning is financially sound and about the kind of program you should choose to meet the needs and goals you’re setting for yourself.
About The Author
Brad Stroh is currently co-CEO of Freedom Financial Network and http://www.Bills.com. If you would like more of Brad’s articles, please visit the Bills.com information on http://www.Bills.com/loans/.
by: Brad Stroh
These days, borrowers use Home Equity Lines of Credit (HELOCs) to assist with all sorts of expenses. Some of the most popular reasons for taking out a HELOC are college tuition, medical expenses, home remodeling, and debt consolidation. Because the interest is tax-deductible, a HELOC can be a very attractive option when you need to borrow money. You may also take out a HELOC at the same time that you secure your first mortgage when buying a home in order to finance a greater percentage of what the home is worth without the need for mortgage insurance.
Whatever the circumstance were when you took out your HELOC, the time may come when you decide to refinance it. The factors pertaining to why and how you go about refinancing your HELOC will be as individual as you are. Make sure you have clear goals as to why you are refinancing, and be certain those goals can be met by the program you choose.
One reason to refinance a HELOC, and the first one that comes to most people’s minds, is the interest rate. This may or may not be a good reason depending on a few factors. Your HELOC carries an adjustable rate; therefore if rates go down, so should your payment amount. If rates are steadily rising, however, and especially if they’re expected to continue to rise, refinancing your HELOC back into your first mortgage, or into a closed-end second mortgage with a fixed rate, might make the most sense.
If you originally took out your HELOC for a project or expense such as college tuition or home remodeling and that project is now completed, you may just be looking to refinance your first mortgage and your HELOC into one loan with a low fixed rate to avoid the potential for a rising rate and increasing payments in the future. Having a single loan with a fixed rate offers you the satisfaction of knowing that your payment amount will never go up.
Conversely, if you’ve come to the conclusion that you need to be able to draw more from your HELOC than you’d first thought, you can refinance it or, more correctly speaking, take out a new HELOC for a greater value. Keep in mind that you’ll have to pay additional closing costs, and that unless you can start making much larger payments, it will take you longer to pay back the larger HELOC amount. You should carefully consider your needs and options before opting for a HELOC with a larger credit line.
When the time comes to refinance your HELOC, don’t hesitate to consult with a financial planner or a loan officer. These professionals can advise you on whether your reasoning is financially sound and about the kind of program you should choose to meet the needs and goals you’re setting for yourself.
About The Author
Brad Stroh is currently co-CEO of Freedom Financial Network and http://www.Bills.com. If you would like more of Brad’s articles, please visit the Bills.com information on http://www.Bills.com/loans/.
Equity Line Of Credit
How A Home Equity Line Of Credit Can Help Your Finances
by: Thomas Erikson
A home equity line of credit unlocks your home’s value so it can work for you. Owning your home can provide you with a financial resource that can help you with your financial needs. Since equity is the value of your home minus the remaining mortgage outstanding, you may be sitting on the cash that you can use to improve your financial situation, renovate your home or go on that vacation you’ve always dreamed of. Why Would You Want a Home Equity Line of Credit? A line of credit is not like a typical loan which provides a lump sum of money to you and then begins charging you interest at a fixed rate until repaid. Instead, it acts like revolving credit (much like your credit card). You only use as much or as little as you want and you only pay interest on the amount you have used. Also, like a credit card, when the debt is repaid you still have access to the credit. In contrast, with a typical loan, you would be paying interest on the full amount of the loan. And when a loan is paid off, you no longer have that credit available to you – you would have to reapply for a new loan. The main feature of a home equity line of credit is providing you greater flexibility at accessing credit with the least cost. Not only can you access the credit only as you need it, but your monthly payments reflect only the balance you used. So the less you use of it, the lower your payment. Some lines of credit require you to only the interest as the minimum payment. This feature can be helpful when finances are tight. (Be careful, it takes discipline not to use this feature to fuel spending habits). A home equity line of credit is great when you don't have a large fixed amount to spend in one place. While you can find many uses for your line of credit, here are some more common reasons for obtaining a home equity line of credit. Consolidate Debt One of the more important uses for your home equity line of credit is to consolidate debt. You can eliminate the stress of multiple bills and also receive a more favorable interest rate or tax benefit. Second Mortgage You may come across a time when you find your mortgage interest rate higher than your home equity line of credit’s interest rate. If that is the case, then using your line of credit to pay off the existing mortgage for better interest rates makes sense. Home Renovations, Additions You may use your line of credit for renovating or building that new addition to your home. You pay less interest than you would if you used a credit card and that makes it a wise financial choice. When Should You Not Use a Home Equity Line of Credit? Before making hasty decisions with your new found money source, it’s important to evaluate the additional risk. Some debts have features that you may not be entitled to if you switch them to an equity line of credit. A perfect example is your student loans. They are subject to special conditions that if changed by you, can cost you. You need to check into your student loan terms and conditions before considering moving them. With the feature to pay only the interest you may lack the motivation to pay off the debt and end up paying only the interest for a long time. When this happens, you end up owing for items that have lost their value over time. It makes more financial sense to avoid using your line of credit to buy items that depreciate and focus on items that will increase in value overt time. Also, make plans to pay off the debt quickly for the most advantage. Lines of credit take advantage of current low interest rates which means they are subject to fluctuating interest rates. If you need larger financing that will take a long time to pay off, you may find that regular loans protect you better. A fixed rate loan can provide piece of mind knowing that your monthly payments are not going to increase as interest rates go up. Using your finances wisely can give you great relief and freedom. Before taking on any financial obligations it is important to understand the risks as well as the benefits.
About The Author
Thomas Erikson is co-founder of http://www.your-debt-consolidation-loan.com which provides http://www.your-debt-consolidation-loan.com/home-equity-line-of-credit.html information and solutions.
by: Thomas Erikson
A home equity line of credit unlocks your home’s value so it can work for you. Owning your home can provide you with a financial resource that can help you with your financial needs. Since equity is the value of your home minus the remaining mortgage outstanding, you may be sitting on the cash that you can use to improve your financial situation, renovate your home or go on that vacation you’ve always dreamed of. Why Would You Want a Home Equity Line of Credit? A line of credit is not like a typical loan which provides a lump sum of money to you and then begins charging you interest at a fixed rate until repaid. Instead, it acts like revolving credit (much like your credit card). You only use as much or as little as you want and you only pay interest on the amount you have used. Also, like a credit card, when the debt is repaid you still have access to the credit. In contrast, with a typical loan, you would be paying interest on the full amount of the loan. And when a loan is paid off, you no longer have that credit available to you – you would have to reapply for a new loan. The main feature of a home equity line of credit is providing you greater flexibility at accessing credit with the least cost. Not only can you access the credit only as you need it, but your monthly payments reflect only the balance you used. So the less you use of it, the lower your payment. Some lines of credit require you to only the interest as the minimum payment. This feature can be helpful when finances are tight. (Be careful, it takes discipline not to use this feature to fuel spending habits). A home equity line of credit is great when you don't have a large fixed amount to spend in one place. While you can find many uses for your line of credit, here are some more common reasons for obtaining a home equity line of credit. Consolidate Debt One of the more important uses for your home equity line of credit is to consolidate debt. You can eliminate the stress of multiple bills and also receive a more favorable interest rate or tax benefit. Second Mortgage You may come across a time when you find your mortgage interest rate higher than your home equity line of credit’s interest rate. If that is the case, then using your line of credit to pay off the existing mortgage for better interest rates makes sense. Home Renovations, Additions You may use your line of credit for renovating or building that new addition to your home. You pay less interest than you would if you used a credit card and that makes it a wise financial choice. When Should You Not Use a Home Equity Line of Credit? Before making hasty decisions with your new found money source, it’s important to evaluate the additional risk. Some debts have features that you may not be entitled to if you switch them to an equity line of credit. A perfect example is your student loans. They are subject to special conditions that if changed by you, can cost you. You need to check into your student loan terms and conditions before considering moving them. With the feature to pay only the interest you may lack the motivation to pay off the debt and end up paying only the interest for a long time. When this happens, you end up owing for items that have lost their value over time. It makes more financial sense to avoid using your line of credit to buy items that depreciate and focus on items that will increase in value overt time. Also, make plans to pay off the debt quickly for the most advantage. Lines of credit take advantage of current low interest rates which means they are subject to fluctuating interest rates. If you need larger financing that will take a long time to pay off, you may find that regular loans protect you better. A fixed rate loan can provide piece of mind knowing that your monthly payments are not going to increase as interest rates go up. Using your finances wisely can give you great relief and freedom. Before taking on any financial obligations it is important to understand the risks as well as the benefits.
About The Author
Thomas Erikson is co-founder of http://www.your-debt-consolidation-loan.com which provides http://www.your-debt-consolidation-loan.com/home-equity-line-of-credit.html information and solutions.
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