Home Equity
Discover The Smart, Money-Saving Way To Borrow
So, if you’re looking for extra money for home improvements, your children’s education, bill consolidation, an auto, boat or recreational vehicle… look no further! If you own your own home… it’s all around you.
The minute you bought your home you began accruing equity in it. Equity is the portion of your home that you own free and clear. Part of it comes from your down payment, part from the portion of your mortgage you’ve already paid back and part from how it’s increased in value as the price of homes in your area rises.
If you’ve lived in your home a few years or more, you may be surprised at how much equity you have. And it’s yours, waiting to be tapped for those special needs.
But there’s more to home equity borrowing than knowing you have a strong source of untapped funds. Home equity borrowing is often less expensivethan credit cards and personal loans. That’s because the amount is secured by your own home – the safest collateral.
There are tax advantages, too. When April 15th rolls around, you can deduct the qualified interest on the credit secured by your home. (Only borrowing for qualified purposes is deductible, so be sure to check with your accountant or tax advisor.)
In this section we’ll explain to you the different types of Home Equity Borrowing and help you decide which kind is best for you.
We’ll also show you how to calculate your monthly payments and how to determine how much equity is available to you. you’ll learn how to apply. And we’ll give you some tips for better borrowing.
Understanding Home Equity Borrowing
Home Equity credit is always just that… borrowing secured by the equity in your home. It’s basically a second mortgage. You’ve probably heard of three different types of home equity credit: Home Equity Loans, Home Equity Credit Lines, and Home Improvement Loans.
Here’s the difference…
Home Equity Loans are installment loans. You receive the entire amount of the loan immediately and repay a portion of the amount plus interest monthly.
Home Equity Credit Lines are revolving loans that work a little like credit cards. You borrow when you need to, up to your line of credit (the maximum amount of credit available to you). You repay a portion of the total balance, plus interest, each month.
Home Improvement Loans are a form of Home Equity Loans. The money disbursed may be used only for home improvements. In some States however, where Home Equity borrowing is not available, an unsecured Home Improvement Loan may be offered to you.
Reverse Mortgages are a type of first mortgage. They allow you to live off the equity in your home. The money borrowed, plus interest, is taken out of the value of the home when it’s sold. This type of loan may be an option if you’re a retiree with little income and a large amount of equity in your home. Use caution making this kind of arrangement, though. We’re all living a lot longer these days.