Home Equity Line of Credit
This program allows you to have access to the equity in your home through a line of credit. It is secured against your home and you can access these funds when you want at a much lower rate than most loans or lines of credit available. You are only required to pay the interest payments and will have the flexibility to pay it off when you want without penalty.
What is a Home Equity Line of Credit?
Home equity is the difference between the value of your home and the unpaid balance of any current mortgage. Home equity increases with time as you pay your mortgage down and as the value of your home increases.
Once you have built up this equity in your home, you can generally use up to 80% of the appraised value of your home. And, like credit cards, you make minimum monthly payments on the amount borrowed and you do not have to pay off the full balance each month. But you do have the advantage of paying it down as much as you want, when you want, without penalty.
You work hard to build equity in your home and should have access to it when you need it.
The Advantage
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Easy access to low interest funds when you need them
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Major household renovations
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Purchasing a second property
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Consolidating higher-interest debt
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Financing the purchase of a vehicle
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Education costs
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Travelling
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Pay off as much as you want when you want
Should I use the Equity in my home?
The main reason to take out a home equity line of credit is to get the money, use it, and then pay it off. A big worry is that it could take years to pay off a home equity line, and people could wind up taking away from their financial future.
Life has a way of changing unexpectedly. We never assume that we will ever lose our job, get divorced, get sick, that real estate prices will always go up and not down, and interest rates will go down and not up. Be sure to have a very specific purpose for using the equity in your home and a very specific course of action to repay it within a very specific time period.
Keep in mind, If you have a house with no mortgage on it and you want to move to the other end of the country, you can sell your house and move. If you have a mortgage and a home equity line of credit, now you have to make sure you sell the house for enough that you can pay off all the debts against the house.