Home Equity: Using Your Home’s Riches Can Be a Sensible Move
Many homeowners have accumulated a wealth of equity in their home. Record year-over-year-over-year home price increases have dramatically increased the value of our homes, some by double, quadruple or more. To figure out how much equity you have, subtract your mortgage balance from the home’s current market value. The difference is the amount of your home equity.
If you don’t know the current market value of your home, give your real estate agent a call and he or she will be able to provide this information. And don’t forget that your real estate agent also is a good source for information about local home equity loan specialists.
There are two ways to tap into your home equity, through a home equity loan or a home equity line of credit. Homeowners are attracted to these types of loans because they offer lower, sometimes significantly lower, interest rates, and in most cases, the interest is tax deductible up to $100,000.
The Home Equity Loan is a lot like your first mortgage. It allows you to borrow a sum of money under terms and conditions similar to those outlined in a typical fixed-rate 30-year mortgage. The interest rate is fixed and so is your monthly payment, which pays down both the interest and principal. The cash you receive is in one lump sum and the average loan term is 15 years.
This type of loan is best for large, one-time purchase. For example, to pay for an expensive home repair or upgrade, to buy a car or to consolidate a large amount of high-interest credit card debt.
Using a home equity loan to pay off credit car debt can be a sensible move, but it also can be risky. If you decide to take a home equity loan to consolidate high interest credit card debt, it may be a good idea to also attend a money management seminar that focuses on resisting maxing out those cards again.
The Home Equity Line Of Credit, also known as a HELOC, is a flexible program that borrowers use much like a pre-paid credit card account. A HELOC includes a draw and a repayment period, each set when the loan closes; a typical schedule could be a five-year draw period and a 10-year repay period.
Draw periods allow the borrower to withdrawal money as needed. These borrowers must make a minimum monthly payment that covers the variable interest rate. The borrower controls the rate at which the principal is paid. If the borrower chooses to make a payment on the principal balance, the revolving credit account increases the borrower’s limit by the amount of the principal paid down. During the repay period, the borrower’s spree is up and he now must replay the balance of the loan over the loan’s remaining term.
This type of loan is best for a homeowner who will intermittently need relatively large sums of cash, for example to cover quarterly college tuition bills or some other expenditure that requires large but infrequent payment installments. While your access to the money works much like using a credit card or savings account, take care to avoid depleting your credit line for impulsive purchases and be cautious when spending home equity funds.
For all your real estate needs go to www.RenoIsHome.com.
If you don’t know the current market value of your home, give your real estate agent a call and he or she will be able to provide this information. And don’t forget that your real estate agent also is a good source for information about local home equity loan specialists.
There are two ways to tap into your home equity, through a home equity loan or a home equity line of credit. Homeowners are attracted to these types of loans because they offer lower, sometimes significantly lower, interest rates, and in most cases, the interest is tax deductible up to $100,000.
The Home Equity Loan is a lot like your first mortgage. It allows you to borrow a sum of money under terms and conditions similar to those outlined in a typical fixed-rate 30-year mortgage. The interest rate is fixed and so is your monthly payment, which pays down both the interest and principal. The cash you receive is in one lump sum and the average loan term is 15 years.
This type of loan is best for large, one-time purchase. For example, to pay for an expensive home repair or upgrade, to buy a car or to consolidate a large amount of high-interest credit card debt.
Using a home equity loan to pay off credit car debt can be a sensible move, but it also can be risky. If you decide to take a home equity loan to consolidate high interest credit card debt, it may be a good idea to also attend a money management seminar that focuses on resisting maxing out those cards again.
The Home Equity Line Of Credit, also known as a HELOC, is a flexible program that borrowers use much like a pre-paid credit card account. A HELOC includes a draw and a repayment period, each set when the loan closes; a typical schedule could be a five-year draw period and a 10-year repay period.
Draw periods allow the borrower to withdrawal money as needed. These borrowers must make a minimum monthly payment that covers the variable interest rate. The borrower controls the rate at which the principal is paid. If the borrower chooses to make a payment on the principal balance, the revolving credit account increases the borrower’s limit by the amount of the principal paid down. During the repay period, the borrower’s spree is up and he now must replay the balance of the loan over the loan’s remaining term.
This type of loan is best for a homeowner who will intermittently need relatively large sums of cash, for example to cover quarterly college tuition bills or some other expenditure that requires large but infrequent payment installments. While your access to the money works much like using a credit card or savings account, take care to avoid depleting your credit line for impulsive purchases and be cautious when spending home equity funds.
For all your real estate needs go to www.RenoIsHome.com.
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