When seeking to understand what an equity line of credit is, it is important to first understand what home equity is.
It is basically how much of your home you have actually owned. It is calculated by looking at the current market value of your house minus your outstanding mortgage balance.
If you have a house that has been appraised for $100,000 and you own 50,000 on your mortgage, you have $50,000 in equity. If you no longer owe anything on your mortgage and your mortgage is paid off, then you have 100% equity in your home.
So what is a equity loan?
This is a loan that is borrowed against what you already own in your home. Though just because you own 50% equity, it doesn't mean that you'll be given that much. Your debt, income and credit history will also be evaluated. These loans offer tax savings due, because the interest paid on the loan is tax-deductible. They're often used to consolidate debt, to finance college educations, large vacations, home repairs or even a second home. The most common option is to make regular payments toward both the interest and the principal. Many of us are looking for the best company that offers great deal in terms of mortgage loan.
There are two basic types of equity loans.
Traditional, AKA a second mortgage, gives borrowers a lump sum of money that must be repaid over a designated period of time.
The second type is an equity line of credit. This provides borrowers with a credit card or checkbook to use to borrow funds. With this, if you have $20,000 in equity you can use the credit card or write checks up to that $20,000 amount. It's kind of like a secured credit card. The benefits of this type of loan are that you don't begin accruing interest until you make a purchase with your line of credit.
Most home equity lines of credit are only available for a certain time period, 10 years for example. There will also be limitations on how you use your credit. Some plans may require you to borrow a minimum amount each time you borrow and they may require you to keep a minimum amount outstanding. some lenders refer to a second mortgage as a loan used for purposes of adding value to your home.Some plans may also require that you take an initial advance when the line is set up.
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Frequently Asked Questions
Mr david i have read every single answer you have ...
By: malaga | 24-07-2008
mr david i have read every single answer you have given about mortgages i wish there more honest people like you ,thank you for sharing your intellegence, i wish you will take on saxon mortgages the are the worst company out there,the way they treat thier customers ,there is about 40 of us with different heart wrenching stories about this company trying to file a class act against them, we wish we would have read your advice before we all started dealing with them. thank you and may god bless
How to buy a house if I'm disabled? I'm a 46 year ...
By: Liz | 24-07-2008
How to buy a house if I'm disabled? I'm a 46 year old women who is disabled due to chemo and radiation. My rent is getting to high. A friend told me that there are programs to help if you are disabled. How to find them? Where are they?
Jumbo Refi
By: Billybob | 24-07-2008
My credit score is 750. I have my home for sale in this market and I owe about $550.000 I want to refi and cashout $100,000 for the new biz and pay bills till the house sells. My problem is I have been a sub S corp for 25 years and resently expanded so my w2s show a loss. My home has been assest for taxes @ 1,2M where can I get a jumbo refi with all this?
Signs of a Bad Mortgage
By: Sobe | 24-07-2008
I just purchased a foreclosed home. We were suppose to close tomorrow on it. Just found out the lending company does not close on foreclosures unless it is on a Monday or Tuesday. At this point we cannot shop for another lender. I was told by my broker my file is a tough one and we are stuck with this lender. Is this a sign of a bad mortgage already? It is an FHA loan, which the good thing is the interest rate will be fixed.
Where can i find out if i have a judgement on my record
By: Patricia | 24-07-2008
where can i find out if i have judgements on my record?
PMI Question
By: zomble1243 | 24-07-2008
we purchased out home a year ago and our pmi (private mortgage insurance) is 642.00 a month they told me I could refinance in 3 months and have the house reappraised and as long as I was at 80% they would remove it..Guess what they will not refinance me because I was late due to the PMI and now I am stuck with PMI in the amount of 642.00 a month till I pay my mortgage on time for 24 months which will never happen cause we can't afford it..Is this legal?
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