Line Of Credit Home Equity

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Line Of Credit Home Equity Article______________________________________________________________________________________________ equity line of credit (or HELOC) is a form of revolving credit in which your home serves as collateral. Many homeowners use their HELOC usually only for major items such as education, home improvements, or medical bills. With rates normally signficantly lower then credit cards, many borrowers use HELOCs to pay off high interest rate credit card debt. Interest on a HELOC may be tax deductible (consult a tax advisor for your individual state laws for details). With a HELOC, you will be approved for a specific amount of credit-your credit limit-meaning the maximum amount you can borrow at any one time while you have the plan. To determine your maximum credit line, the lender will look at your LTV (Loan to Value ratio) of your mortgage(s). They will also look at the your ability to repay by looking at your income, debts (everything that shows up on your credit report) as well as your credit history. With some plans, borrowers can use a credit card to borrow money and make purchases using the line. However, there could be limitations on how you can use the line. Some HELOCs may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Depending on how the credit line is setup, the borrow may have to take an initial advance from the line. Home Equity Loans vs. Lines of Credit If you are thinking about a home equity line of credit you also might want to consider a more traditional second mortgage loan. If, for example, you need a set amount for a specific purpose, such as an addition to your home. In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges. You cannot, however, simply compare the APR for a traditional mortgage loan with the APR for a HELOC because the APRs are figured differently. The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges. The APR for a HELOC is based on the periodic interest rate alone. It does not include points or other charges.
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equity line of credit (or HELOC) is a form of revolving credit in which your home serves as collateral. Many homeowners use their HELOC usually only for major items such as education, home improvements, or medical bills. With rates normally signficantly lower then credit cards, many borrowers use HELOCs to pay off high interest rate credit card debt. Interest on a HELOC may be tax deductible (consult a tax advisor for your individual state laws for details). With a HELOC, you will be approved for a specific amount of credit-your credit limit-meaning the maximum amount you can borrow at any one time while you have the plan. To determine your maximum credit line, the lender will look at your LTV (Loan to Value ratio) of your mortgage(s). They will also look at the your ability to repay by looking at your income, debts (everything that shows up on your credit report) as well as your credit history. With some plans, borrowers can use a credit card to borrow money and make purchases using the line. However, there could be limitations on how you can use the line. Some HELOCs may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Depending on how the credit line is setup, the borrow may have to take an initial advance from the line. Home Equity Loans vs. Lines of Credit If you are thinking about a home equity line of credit you also might want to consider a more traditional second mortgage loan. If, for example, you need a set amount for a specific purpose, such as an addition to your home. In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges. You cannot, however, simply compare the APR for a traditional mortgage loan with the APR for a HELOC because the APRs are figured differently. The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges. The APR for a HELOC is based on the periodic interest rate alone. It does not include points or other charges.