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Home Equity

Home Equity

Benefits of a Home Equity Line of Credit

  • Lower your monthly payments
  • Save on taxes
  • Choose your payment option
  • Set your repayment schedule

What is Home Equity Loan?

If you’re thinking about making some home improvements or looking at ways to pay for your child’s college education, you may be thinking about tapping into your home's equity. A home equity loan is a loan for a fixed amount of money that is secured by your home. You repay the loan with equal monthly payments over a fixed term, just like your original mortgage. The amount that you can borrow usually is limited to 85 percent of the equity in your home. The actual amount of the loan also depends on your income, credit history, and the market value of your home.

Home-equity loans come in two varieties - fixed-rate loans and lines of credit - and both types are available with terms that generally range from five to 15 years.

Closed-End Home Equity Loan (Fixed-Rate Loans)

A Home Equity loan is secured by your home and enables you to access a portion of your available equity in the form of a single payout and a fixed interest rate with fixed monthly payments. The payment and interest rate remain the same over the lifetime of the loan. Your home equity loan proceeds are paid out as a one-time lump sum, and you can’t borrow funds on the loan again, even if you repay them.

The home equity loan checklist

  • Cancellation/early payoff fee: Fee charged if the loans is closed before a certain date (if less than 3 to 5 years from the date opened, it could cost from $500 to $1,000).
  • Minimum loan amount: The minimum amount a lender requires you to borrow.
  • Up-front fees: Some fees are charged by the lender to set up your home equity loan like application/and or appraisal fees.
  • Automatic payment discount: Discounted interest rate offered by some lenders if you establish automatic payments from an account also held by that lender.

Open-End Home Equity Loan (Home-Equity Lines of Credit)

A home-equity line of credit (HELOC) is a variable-rate loan that works much like a credit card and, in fact, sometimes comes with one. The amount you borrow is based on the difference between the debt secured by your home and its market value. You can use the money whenever you need it, with no fixed schedule. Borrowers are pre-approved for a certain spending limit and can withdraw money when they need it via a credit card or special checks. Monthly payments vary based on the amount of money borrowed and the current interest rate. Like fixed-rate loans, the HELOC has a set term. When the end of the term is reached, the outstanding loan amount must be repaid in full.   

 

  Equity Loan HELOC Cash-out Refinance

 

Fixed or adjustable?

Fixed

Adjustable(can have an interest only option)

Either(can have an interest only option)

Why choose this?

You prefer the security of a fixed-rate loan.

You want to keep your existing mortgage.

You prefer a line of credit over a lump sum.

You want the lowest rates on your loan.

You need the money fast.

You already want to refinance to take advantage of lower rates.

You need more than $100,000.

Why not choose this?

The rates are higher than their HELOC counterparts.

Rates are adjustable, so they may rise over time.

You want to keep your existing mortgage.

You need the money fast.