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Home Equity Loans

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


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