A home equity line of credit is a loan that is taken against the equity in your home. In practice, however, it operates more like a credit card than a mortgage. The collateral on the loan is your house and, depending upon where you live, local lending laws will regulate how much you can borrow.
The interest charged on a HELOC is usually equal to the prime rate plus an additional amount charged by the lender. The better your credit rating, the more attractive the interest rate generally will be. Therefore, it pays to shop around and find the best deal in town. At MortgageLoan.com, we can help you connect to a lender who can help you meet your specific needs.
Home Equity Line of Credit vs. Credit Cards
How is a home equity line of credit different from a card line of credit? First, you're borrowing against the equity in your house. Whereas your credit card limit might top-out after you spend a few thousand dollars, a HELOC might be worth almost as much as your house. If, for example, your home equity line of credit is $150,000, you can borrow that amount and use it for whatever you want.
Your HELOC will have an adjustable rate, and the rate is normally calculated based on the going rate at the time you withdraw funds. You decide when you want to use the HELOC, and then access your credit line by writing a check or using a special debit card.
Debt Consolidation through a HELOC
One of the most popular uses of a home equity credit line is to consolidate high-interest credit card balances, and pay them off before the penalties, interest payments, and annual fees become an unwieldy burden. Many homeowners go into debt while paying for necessities, like furniture, landscaping, and appliances. Soon, they have maxed-out their credit cards, and the outrageous interest rates charged by credit card companies accelerates until the debt is out of control. By using a HELOC, it's possible to pay off all credit cards, and replace them with a single, easy-to-manage loan. And the HELOC can be paid off gradually, over a long period of time.
The interest charged on a HELOC is usually equal to the prime rate plus an additional amount charged by the lender. The better your credit rating, the more attractive the interest rate generally will be. Therefore, it pays to shop around and find the best deal in town. At MortgageLoan.com, we can help you connect to a lender who can help you meet your specific needs.
Home Equity Line of Credit vs. Credit Cards
How is a home equity line of credit different from a card line of credit? First, you're borrowing against the equity in your house. Whereas your credit card limit might top-out after you spend a few thousand dollars, a HELOC might be worth almost as much as your house. If, for example, your home equity line of credit is $150,000, you can borrow that amount and use it for whatever you want.
Your HELOC will have an adjustable rate, and the rate is normally calculated based on the going rate at the time you withdraw funds. You decide when you want to use the HELOC, and then access your credit line by writing a check or using a special debit card.
Debt Consolidation through a HELOC
One of the most popular uses of a home equity credit line is to consolidate high-interest credit card balances, and pay them off before the penalties, interest payments, and annual fees become an unwieldy burden. Many homeowners go into debt while paying for necessities, like furniture, landscaping, and appliances. Soon, they have maxed-out their credit cards, and the outrageous interest rates charged by credit card companies accelerates until the debt is out of control. By using a HELOC, it's possible to pay off all credit cards, and replace them with a single, easy-to-manage loan. And the HELOC can be paid off gradually, over a long period of time.
Home Equity loan rates
Home equity loan rates fluctuate daily just as all mortgage rates. They also rise in tandem with interest rates set by the Federal Reserve, which has raised rates 15 consecutive times since rates hit 40-year lows in 2004. Home equity rates are important, however, if you are serious about entering into a home equity loan you must examine any particular loan program in its entirety. Most home equity loans come with variable interest rates, some come with low introductory rates that can jump up after a set time period, and few come with fixed rates. Home equity loans and their rates and fees differ greatly from program to program so it pays to speak with several lenders and expose yourself to a number of different programs. Mortgageloan.com can put you in touch with the loan professionals you need to compare rates, loan programs, and perform the necessary due diligence to find the right home equity loan program.
Money costs money, but how much?
With all the different ways home equity loans are structured it can sometimes be tough to understand how much money you are spending on the actual loan. Some loans have upfront fees while others have a balloon payment at the end of the loan's life. Home equity loan rates can fluctuate greatly throughout the life of the loan as most home equity loans are not fixed. Many offer very low introductory rates that can jump up after that introductory period is over; be sure to understand the periodic cap and lifetime cap, they are the limits that specify the amount the interest rate can change during one period and the entire life of the loan respectively.
When looking at different home equity loan rates check the Annual Percentage Rate (APR) which indicates the cost of credit on a yearly basis. Remember that the advertised APR for home equity loans is based on interest alone, to get the full picture you must look at all fees associated with the loan such as points and closing costs. This is especially important when looking at a home equity credit line versus a traditional 2nd mortgage, where the APR includes the total credit costs for the loan.
Differing rates, programs and more
The range differing home equity loan rates and the programs in which they are structured can be quite exhausting. This is why when choosing a home equity loan it really pays to speak with multiple loan professionals and expose yourself to several programs. Compare home equity loan rates today with MortgageLoan.com's free quote service to put yourself on path to finding the right home equity loan for you.
Home equity loan rates fluctuate daily just as all mortgage rates. They also rise in tandem with interest rates set by the Federal Reserve, which has raised rates 15 consecutive times since rates hit 40-year lows in 2004. Home equity rates are important, however, if you are serious about entering into a home equity loan you must examine any particular loan program in its entirety. Most home equity loans come with variable interest rates, some come with low introductory rates that can jump up after a set time period, and few come with fixed rates. Home equity loans and their rates and fees differ greatly from program to program so it pays to speak with several lenders and expose yourself to a number of different programs. Mortgageloan.com can put you in touch with the loan professionals you need to compare rates, loan programs, and perform the necessary due diligence to find the right home equity loan program.
Money costs money, but how much?
With all the different ways home equity loans are structured it can sometimes be tough to understand how much money you are spending on the actual loan. Some loans have upfront fees while others have a balloon payment at the end of the loan's life. Home equity loan rates can fluctuate greatly throughout the life of the loan as most home equity loans are not fixed. Many offer very low introductory rates that can jump up after that introductory period is over; be sure to understand the periodic cap and lifetime cap, they are the limits that specify the amount the interest rate can change during one period and the entire life of the loan respectively.
When looking at different home equity loan rates check the Annual Percentage Rate (APR) which indicates the cost of credit on a yearly basis. Remember that the advertised APR for home equity loans is based on interest alone, to get the full picture you must look at all fees associated with the loan such as points and closing costs. This is especially important when looking at a home equity credit line versus a traditional 2nd mortgage, where the APR includes the total credit costs for the loan.
Differing rates, programs and more
The range differing home equity loan rates and the programs in which they are structured can be quite exhausting. This is why when choosing a home equity loan it really pays to speak with multiple loan professionals and expose yourself to several programs. Compare home equity loan rates today with MortgageLoan.com's free quote service to put yourself on path to finding the right home equity loan for you.