Home Equity Line Of Credit, Second Mortgages

If you need to borrow money to pay off debts or make a major purchase, a home equity line of credit (HELOC) can be useful. A HELOC is a form of revolving credit secured by the equity in your home. This is an open ended loan that can be paid down or charged up for the term of the loan, much like a credit card. The interest rate fluctuates (typically monthly).

With a HELOC, we will approve you for a specific amount of credit - the maximum amount you may borrow at any one time under the plan. In determining your credit limit, your income, debts, credit history and other financial obligations will be reviewed. An appraisal in usually required on your home to determine the home's market value. Your credit limit will be based on a percentage of your home's appraised value, which is then subtracted from the balance owed on your existing mortgage.

Some of the advantages that a home equity line of credit offers over a home equity loan is that you do not need to take the entire amount of the loan all at once. If you took out a $20,000 loan, you get all $20,000 at one time. With a HELOC, you can use just $5,000 now and save the rest for when you needed it. That way you make payments on what you need today versus making payments on the entire amount.

One downside to HELOC's is that the interest rate can change over time so your payments can go up or down depending on what's going on in the market.

Home Equity Lines Of Credit can be used for many different things such as:

• Doing repairs to your home 
• Going on a much needed vacation 
• Debt consolidation 
• and more. . . 

You do need to have pretty decent credit to get a HELOC. Most lenders require a score of 620 or better in order to get approve. The good thing is that most people meet the credit requirement.

When you take out a HELOC, you pay for many of the same expenses as when you financed your original mortgage, such as an application fee, title search, appraisal, attorneys' fees, and points (a percentage of the amount you borrow). 

Most HELOCs have a fixed period (5, 10, even 20 years) during which you can borrow money. Typically, you will use special checks or a credit card to draw on your line. You will be required to make a minimum payment each month usually the interest that accrued during the draw period. However, the interest you pay is usually tax deductible. At the end of your "draw period," you will be required to pay off the loan, making monthly payments on the principal and interest.