When seeking to understand what an equity line of credit is, it is important to first understand what home equity is.
It is basically how much of your home you have actually owned. It is calculated by looking at the current market value of your house minus your outstanding mortgage balance.
If you have a house that has been appraised for $100,000 and you own 50,000 on your mortgage, you have $50,000 in equity. If you no longer owe anything on your mortgage and your mortgage is paid off, then you have 100% equity in your home.
So what is a equity loan?
This is a loan that is borrowed against what you already own in your home. Though just because you own 50% equity, it doesn't mean that you'll be given that much. Your debt, income and credit history will also be evaluated. These loans offer tax savings due, because the interest paid on the loan is tax-deductible. They're often used to consolidate debt, to finance college educations, large vacations, home repairs or even a second home. The most common option is to make regular payments toward both the interest and the principal. Many of us are looking for the best company that offers great deal in terms of mortgage loan.
There are two basic types of equity loans.
Traditional, AKA a second mortgage, gives borrowers a lump sum of money that must be repaid over a designated period of time.
The second type is an equity line of credit. This provides borrowers with a credit card or checkbook to use to borrow funds. With this, if you have $20,000 in equity you can use the credit card or write checks up to that $20,000 amount. It's kind of like a secured credit card. The benefits of this type of loan are that you don't begin accruing interest until you make a purchase with your line of credit.
Most home equity lines of credit are only available for a certain time period, 10 years for example. There will also be limitations on how you use your credit. Some plans may require you to borrow a minimum amount each time you borrow and they may require you to keep a minimum amount outstanding. some lenders refer to a second mortgage as a loan used for purposes of adding value to your home.Some plans may also require that you take an initial advance when the line is set up.
Author Resource:-
Learn what a home equity line of credit is. Eddie Lamb owns http://www.LiveMortgageFree.com a website devoted to helping homeowners, first time buyers or tenants to Live Mortgage Free.
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