Home Equity Products

If you need to refinance your home in order to receive a lower rate, or because you have need of the extra money that will be generated in your home's equity, there are mortgage loan options that you can take advantage of. Home equity loans and lines of credit are designed as something of a reward system to allow those homeowners who have made wise choices in their mortgage loans over the years to reap back some of that wisdom in the form of a cash or credit line payment. The home equity loan and line of credit are used by tens of thousands of Americans each year and put to good use if they are managed properly and repaid in a timely manner. Since a home is most likely to be your biggest asset in life, you should only consider using the equity in your home for major items that you require such as improving your property, paying off large bills, or education expenses. If you are already a homeowner, look no further for information on how you can put your home's equity to use for you:

Home Equity Lines of Credit

A home equity line of credit or HELOC, is a type of second mortgage that uses your home's equity as collateral for a line of credit (best thought of as a credit card) that can be spent and repaid, spent and repaid again as often as you like and you are on good terms with the lender, following the rules of your loan. Home equity lines of credit are set by a certain percentage of the equity value in your home, such as 75% for example. Your home's equity will be established by a recent appraisal paid for by you or some lenders will pay for the appraisal under the right circumstances. Your ability to repay the loan will also be considered when deciding the size of or whether or not to offer you a home equity line of credit.

Most home equity lines of credit are set for a fixed period of time during which you may borrow from the line as long as there is equity available for it. Ten years is a common term for this, and once the ten years is up, your home equity line of credit can no longer be accessed by you (but any outstanding charges must still be repaid), or perhaps the lender will allow you to renew the line of credit for an additional term if you wish. Most home equity lines of credit offer their borrowers checks that they can use to pay for items, but some also offer credit/debit card options as well. Other limitations, such as a requirement that you only borrow a minimum amount (perhaps $500) each time you borrow from your home equity, or that you must borrow a certain number of times per year in order to keep your account open, may also apply. Home equity lines of credit are often tied to adjustable interest rates which are set by various market factors.

Home Equity Loans

The attractiveness of a home equity loan is not hard to see. Rather than receiving an open line of credit such as with a home equity line of credit, a home equity loan is a flat amount that you borrow against the equity in your home - a one-time payment that may be up to 80% of the value of the equity in your home in most cases. Some lenders offer home equity loans that are 100% or even up to 150% of the equity of your home, but you are well-advised to stay away from these types of loans as they could take hold of your home for a very long time. A home equity loan is usually offered on a fixed interest rate, so you do not have to worry about market factors changing the amount that you owe. Used properly, such as for a kitchen remodel or adding an addition to the home, a home equity line of credit can actually be a very valuable investment move since your home's value will increase significantly over what it was when you were offered the loan, even as you are repaying it.