Home equity loans and lines of credit let you borrow a certain amount of money using your home as collateral. This could mean that if you will not be able to repay your loan, the lender could sell your property to get back the money they lent you. These two are also known as second mortgages. The reason for using second mortgages varies which could include health expenses, college fees, bill consolidation and home repairs. When it comes to loans, these two types are preferred. Nonetheless, before you proceed on your second mortgage, make sure to differentiate between a home equity loan and a line of credit. Home equity loans are structured the same as your first loan. To borrow with this kind of loan, you should make a one-time option of the amount you want to borrow, close it and receive a check for the amount you choose. Payments are structured over a period of years. Upon completion of your payments, the home equity loan will be fully paid. However, if later on you decide that you want to borrow additional money, you should arrange for an additional loan with additional closing costs. This kind of loan has fixed rates that do not go up and provide a straightforward repayment plan.
A line of credit on the other hand allows you to borrow money again and again. It is the same as a credit card but the interest you pay could be tax deductible. You also have to close on a line of credit just once. In case you decide later on to withdraw additional money, you can do so up to the loan value. For example, if you close for $60,000 and pay back over a period of time $13,000 for the principal amount the $13,000 could be withdrawn any time. You will continue to make payments to the amount you owe the same as a home equity loan. Nevertheless, the full amount of the loan is always available to be drawn so long as the amount you owe and you borrow do not exceed original amount of your line of credit. Payments for home equity loans are the same every month while in a line of credit it could vary and based on rates of interest, amount borrowed and whether the loan is in a draw period or repayment period. Bear in mind that you can only borrow up to the amount the equity of your home, thus if you owe less or much of the worth of your home, you will not be able to acquire a home equity loan or line of credit. The main advantage of borrowing against the equity of your property is that the interest you pay could be deducted from your taxes. However, keep in mind that if you are cannot pay the loan back, you could be forced to sell your home.
Before making your choice between these kinds of loans, make certain to consult a financial planner or loan officer to determine which is the right one for you. Save more with these homes East Phoenix Valley Foreclosed Houses, enjoy more space in 4 Bedroom Homes in East Phoenix Valley and green homes in Energy-Efficient Homes in East Phoenix Valley AZ
A line of credit on the other hand allows you to borrow money again and again. It is the same as a credit card but the interest you pay could be tax deductible. You also have to close on a line of credit just once. In case you decide later on to withdraw additional money, you can do so up to the loan value. For example, if you close for $60,000 and pay back over a period of time $13,000 for the principal amount the $13,000 could be withdrawn any time. You will continue to make payments to the amount you owe the same as a home equity loan. Nevertheless, the full amount of the loan is always available to be drawn so long as the amount you owe and you borrow do not exceed original amount of your line of credit. Payments for home equity loans are the same every month while in a line of credit it could vary and based on rates of interest, amount borrowed and whether the loan is in a draw period or repayment period. Bear in mind that you can only borrow up to the amount the equity of your home, thus if you owe less or much of the worth of your home, you will not be able to acquire a home equity loan or line of credit. The main advantage of borrowing against the equity of your property is that the interest you pay could be deducted from your taxes. However, keep in mind that if you are cannot pay the loan back, you could be forced to sell your home.
Before making your choice between these kinds of loans, make certain to consult a financial planner or loan officer to determine which is the right one for you. Save more with these homes East Phoenix Valley Foreclosed Houses, enjoy more space in 4 Bedroom Homes in East Phoenix Valley and green homes in Energy-Efficient Homes in East Phoenix Valley AZ
The equity is the difference between what you owe on your house and what it is worth. You have access to this dollar value and can borrow a percentage of the home's value to pay the closing costs, consolidate bills, home improvement projects, finance a child's education or whatever your need may be. In Texas the percentage is 80% of the appraised value.Mortgage rates Houston
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