Homeowners may also want to look into setting up a home equity line of credit. If interested in this type of loan, a home owner can open a line of credit based on the equity of the home, from which funds can be drawn for a predetermined length of time. A home equity credit line is a good choice for borrowers who manage irregular or unexpected expenses.
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Though technically not a home equity loan, some home owners use cash out refinancing in which a loan is taken out for a large amount that will cover the amount owed on the first mortgage with money based on the equity left over. Generally, the second loan should be taken out at a much lower interest rate than the first or else the homeowner may lose money in the bargain. A good example of this would be a home worth $180,000 with a mortgage of $100,000 at a 9% interest rate. If the new loan is for $130,000 at 5%, you have borrowed $30,000 against your equity of $80,000, but may come out better off in the long run because of the low interest rate.
Whether for home improvement or for debt consolidation, home equity loans are a smart way to borrow. Apply online for free to contact a home equity loan expert.
A home equity loan allows homeowners to borrow up to 85% of the value of their home. The amount of equity that a particular home holds is the total selling price of the home minus the total of the mortgage. The home owner may consider that a loan based on equity is unlike money received from other loans. This 85% percent is something that the homeowner already owns, so the financial risk usually associated with a loan is lessened in this set of circumstances.
Two major advantages of home equity loans are that payment of interest is tax deductible and that interest rates are very low. As a result of these advantages many borrowers use home equity loans to pay off high interest credit cards and loans.