Home Equity Loans

Home Equity Loans

A Home Equity Loan allows a homeowner to borrow money by leveraging their equity, or the amount of money they have invested into owning their home. It can either be a fixed rate mortgage or an adjustable rate mortgage which can be acquired as a lump sum or used a revolving line of credit. In other words a home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, medical expenses or other expenses.

There are two kinds of equity debt: home equity loans and home equity lines of credit. Home equity loans are provided in lump sum, and they are paid off in equal monthly installments over a set of period. Home equity lines of credit have revolving balances and work like a credit card.

You may be putting your most valuable asset at risk, if you agree to a loan that is based on equity you have in your home. Those with low incomes or poor credit should be careful when borrowing money based on their home equity.

Equity is the difference between how much the home is worth and how much you owe on the mortgage.

Usage of Equity loans and Credit lines

Making repairs to a house can make the home safer and more comfortable. Make sure you apply for the loan before putting the home on the market, if you want to spend equity money to prepare the house for the sale.
Credit card interest rates often are more than 10 percentage points, higher than rates on home equity loans and credit lines. It is best to use cash instead of carrying cards.
Low interest rates also make equity loans an option when financing a car or some high-price purchased.