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Home Equity Loan - allows you to borrow money, using your home's equity as collateral.
A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, or other expenses.
Tips On Home Equity Loan:
So far, you have learned what equity loan is and that there are two kinds of equity debt:
home equity loans and home equity lines of credit, or HELOCs. Equity loans are
provided in a lump sum, and they are paid off in equal monthly installments
over a set period. Home equity lines of credit have revolving balances and work
like a credit card. Rates for equity debt tend to be relatively low, and the
interest payments are tax deductible. There is another way to extract
cash from a home's equity, and that's the cash-out refinance, which
shares the same rate and tax advantages that equity loans and credit lines have
Uses
of a Home Equity Loan
As your home appreciates in value, it may make sense to use your new home
equity to get cash through a refinance for a variety of purposes. You could:
- build an addition to your home
- pay for college,
- invest in or start a new business,
- consolidate your high interest consumer debt,
- or simply take a much needed vacation.
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