A
home equity loan or line of credit allows you to
borrow money, using your home's equity as collateral.
If you have lived in your home for a reasonable amount
of time, you may be considering refinancing.
Refinancing can be done in a few different ways.
One of the most popular recently has been the home
equity loan.
A home equity loan is a loan used to pay off your
existing mortgage at a lower rate.
Also, when refinancing with a home equity loan,
you have the option of liquidating some of the
equity you have established in your home through
monthly mortgage payments and appreciation.
Lets suppose you owe $125,000.00 on the mortgage
to your home, but your home is worth $200,000.00.
This means you have $75,000.00 worth of equity
that you can liquidate.
Realistically, you could get a home equity loan
for $150,000.00, pay off your existing mortgage,
and have $25,000.00 left for home improvement,
a new car, college tuition, etc.
Home equity loans also come in the form of a line
of credit, better known as a home equity line of
credit.
The difference between a home equity loan and
line is that the line comes with a variable rate,
which means it will adjust with the prime rate,
so be careful when deciding.
The home equity credit line can also be re-tapped
once it has been partially paid off, or paid off
in full, which makes for much convenience.
Before deciding on how you want to go about doing
your refinancing, be sure to educate yourself as
much as possible about the mortgage industry.
Also, shop around for the best rate and program
that fits your needs and budget. The mortgage industry
is a competitive one, so let them fight for your
business.
We will explain what home equity is, what collateral
is, how these loans and lines of credit work, why
people use them, and what pitfalls to avoid.
