The Basics of Home Equity Lines of Credit
Do you have equity in your home? How does a home equity line of
credit differ from a home equity loan? How easy is it to get a
home equity line of credit? These are basic questions to ask if
you are thinking about applying for a line of credit linked to
your home’s equity.
What is equity – Equity is the difference between the
monetary value of your home and the amount you owe on your home.
If you have been living in your home for more than two years and
making payments that include both principal and interest, you
probably have equity in your home.
What is a line of credit – A home equity loan is a set
amount paid in one lump sum. A home equity line of credit is
also a set amount however you do not receive it all at once. You
can use a home equity line of credit at the time and in the
amount that you need it. As you pay down on what you have
borrowed you can borrow on it again. Depending upon your
specific line of credit, you may be required to make an initial
withdrawal. There may also be a minimum amount for each
withdrawal and/or a fee for each withdrawal. A home equity line
of credit usually has a variable rate so your payments will
fluctuate depending on how much you have borrowed and what the
current interest rate is.
Qualifying – A home equity line of credit uses your home
as collateral for the loan. Most home equity lenders will loan
you up to 85% of the value of your home. The 85% includes both
mortgages. If you first mortgage is for 75% of the value of your
home, the money available from your home equity line of credit
would be 10% of your home’s worth.Here are our recommended home equity loan lenders online:
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