Home
Equity Loans
The
equity you have in your home, is the part of the house that actually belongs
to you, the rest, of course, belongs to the bank.
Lets
suppose you took out a mortgage for $150,000.00 to purchase a home worth
that exact amount. Three years later, real estate prices in your area
have boomed, and your house is now worth $200,000.00.
The
difference between what you owe, and what the house is worth, is $50,000.00.
This fifty thousand dollars is the equity you have in your home, this
is the part that is yours.
The
equity in your home is an excellent source of cash,
and people use the equity in their home for all sorts of things. Such
as college tuition, remodeling
parts of their homes, the purchase of boats and cars, or even taking their
families on a nice vacation.
There
is also the home
equity line of credit, which is secured by a second mortgage on your
home, also referred to as the HELOC.
The
HELOC is
nice because you don’t have to use it right away, and there is no
type of payment or penalty for not using it until you want to.
People
have heloc’s for many reasons, a lot of times just for piece of
mind. They like knowing they have a line
of credit that they have immediate access to in case of an emergency,
or if they suddenly need a new car, the cash is readily available.
The
HELOC comes with a check book, and you don’t make any kind of payment
until you use it. Once you use it, you begin to pay it back on a monthly
basis in installments. (Usually interest
only for the first ten years). Once it is paid off, you have access
to the entire amount once again, and will for the life of the loan.
One
of the greatest benefits to home equity loans is that they are tax
deductible, so keep this in mind at tax time.
Another
(similar) explanation of Home Equity Loans
Refinancing
Securing
the Best Mortgage Rate
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