Line
of Credit. Home Equity Line
of Credit. Home Equity Loans.
A combination of a line of credit and equity loan secured by real property. A
maximum loan amount is established based on credit and equity. A mortgage is recorded
against the potential borrower뭩 property for said maximum loan amount. The potential
borrower has the right to borrow, as needed, up to the amount of the credit line.
There
are two types of home equity loans: term, or closed-end loans, and lines of credit.
Both are sometimes referred to as second mortgages, because they're secured by
your property, just like your original (first) mortgage. Home equity loans and
lines of credit are usually for a shorter term than first mortgages. The most
common type of mortgages runs 30 years, while equity loans typically have a life
of five to 15 years. A home equity loan, sometimes called a term loan, is a one-time
lump sum that is paid off over a set amount of time, with a fixed interest rate
and the same payments each month. Once you get the money, you cannot borrow further
from the loan. To see current home equity loan rates.
A home equity line
of credit (HELOC)
works more like a credit card. You are allowed to borrow up to a certain amount
for the life of the loan -- a time limit set by the lender. During that time you
can withdraw money as you need it. As you pay off the principal, your credit revolves
and you can use it again. Let's say you have a $10,000 line of credit. You borrow
$5,000, but then pay back $3,000 toward the principal. You now have $8,000 in
available credit. This gives you more flexibility than a fixed-rate home equity
loan. Credit lines have a variable interest rate that fluctuates over the life
of the loan. Payments will vary depending on the interest rate and how much credit
you have used. When the life span of a line of credit has expired everything must
be paid off. A lender may or may not allow a renewal. Your
Collateral
Property could be leveraged to secure the loan.
Madison
Hunter, Inc. is a licensed Real Estate Broker with the California Department of
Real Estate License# 01444750 |
