Understanding Home Equity Loans & Second Mortgages

It could be your home improvement project which you are planning. Or you want to simply consolidate your debt or use your home equity. If you are a homeowner then a home equity loan or line of credit will help you get the cash you need.

As we all know that there are two types of home equity loans. The variable rate home equity line of credit and fixed rate home equity loan which is also known as second mortgage. In both you get the loan against your property.  And it interest rates are lower then traditional credit cards or conventional loans. Your loan will be decided on such factors like your income, debt, your home value, how much you owe in your mortgage and your credit history. The interest being paid on these home equity home loans is generally tax deductible.

However, be fore finalizing the loan suitable to our needs, you should know the difference between two.

Home equity line of credit

Revolving credit has got another form known as Home equity line of credit which I similar to credit cards. These types are good if you are planning to meet ongoing expenses like home improvement, tuition payments or simply needs them to go on vacation. A home equity line of credit allows you to get the funds however up to a pre-decided limit whenever you are in need. You can also lock in your your rate and set up a fixed–rate loan option with fixed monthly payments. A minimum payment  you have to make each month, with the option to pay off as much of the line as you want. And, the balance payment , your funds  will be available for you to use again. Below we have mentioned few points on what  you should expect with a home equity line of credit:

1. Lower rate in comparison to traditional credit cards or loans

2. You don’t have to pay any closing costs

3. You can enjoy an easy access to your funds via telephone, online banking or can visit local banking center

4. Flexible monthly payment options – with interest – Only payments or a percentage of your outstanding balance or total line amount. Interest may be up to 100 % tax deductibles

Home equity loan (or second mortgage)

In this loan you get a one time lump sum of money up front and have a fixed monthly payment that you pay off over pre-decided time period. A home equity loan will be very useful when you use it for specific, one-time purpose like buying a car or doing major renovation. Here are few points that you should look for in a home equity loan:

a. Fixed rate

b. Pay no closing costs*

c. Receive one, up–front lump sum payment

d. Fixed monthly payments

e. Interest may be up to 100% tax deductible*

If you use the home equity loans and lines in a judicious manner then the interest rates are much lower in comparison to using credit cards or conventional loans. The interest being paid by you is often tax deductible. However, you should consult a tax advisor about your particular case.

About HUS

HelpUSell Properties is a website based on real estate services providing articles and resources in different topics such as 2nd mortgage, property for sale, appraisal, refinance mortgage rates, foreclosure, housing market, bad credit, and more for home owners and future home owners.

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