Using Home Equity as a Source For a Line of Credit
A home equity line of credit with a low interest rate is the best of loans for those in need of cash quickly. A home equity line of credit offers the borrows the ability to cash in on what is available to them due to diligently making mortgage payments. If you have been in your house for a good period of time, or if your house has appreciated significantly, you will have a great deal of equity from which to borrow from. The tax benefits and low interest rate also provide the borrower motivation to secure a loan through these means rather than typical credit cards.
The Security involved with a HELOC
Home equity lines of credit, otherwise referred to as a HELOC, is truly a home equity loan. These types of loans require the borrower to pledge property as collateral or security for the loan. Lenders compete diligently for this type of business and will offer a credit line with the lowest rate of interest based on your credit score. You will have to repay this loan in monthly payments, similar to the mortgage on your home. A HELOC is another alternative to refinancing.
HELOC and Home Equity Loan Alternative
An alternative to home equity credit lines is for the homeowner to apply for a second mortgage. A second mortgage generally is disbursed in a lump sum, as opposed to a credit line that can be drawn from as needed. Additionally, a second mortgage can be obtained with a fixed rate, with fixed monthly payments and a maturation date. Bear in mind a second mortgage can be dangerous should you fall behind on your payments. To default even on a second mortgage could cause you to lose your house.
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