Home Equity Line Credit

Home equity as a source of a line of credit
A loan with a balloon payment, that is a large payment at the end of the loan term, may result in your borrowing more money to pay off the debt. It may also put your home at risk, if in the course of the original loan you are deemed ineligible for refinancing. In the event that you sell your home, the conditions of most loans will require you to pay off all debts on your credit line at that time. While home equity loans provide you with ready cash quite easily, you tend to borrow more freely as well.

Home equity line of credit and home equity loans

Certainly second mortgage plans place an extra future burden on your home or property, in terms of an added mortgage. But the money lent is usually given as a lump sum, not as advances through continuous charges to a card or checking account.

Under the right conditions, that also might be available to you with a credit card, or an unsecured credit line allowing you to write checks whenever you need the funds. Information about loans for specific items, such as auto purchases or tuition fees, is available at your request.

Five points to consider when choosing a HELOC

• Watch out for financial penalties - The borrower should be able to pay off the HELOC without fear of any additional costs.
• At closing, all fees related to your HELOC application should be refunded.
• Shop around to find a Home Equity Line of Credit that adjusts quarterly in increments of 0.5% or less.
• Flexibility is important, so find a HELOC loan that is able to convert to a fixed rate loan.
• Outline a worst case scenario with your lender. Try to find a HELOC loan with a lifetime rate cap, whilst ensuring your lender doesn't try to impose any HELOC account maintenance or check writing fees. If your lender attempts this, sever all ties with him!

•  Home Equity Stories

  First, determine how much money you’ll need to set aside in case you lose your job, or encounter unforeseen medical expenses. Do you know how much money you spend each month? If not, make a list of all the money it costs to maintain your current lifestyle. Don’t forget to include items that you pay for on a yearly basis, like insurance and taxes. If you pay them once each year, divide the cost by 12 and add it to your monthly tally. 
  Make a list of all the money that you have in savings accounts that are liquid and readily 

  • available. You may have money in retirement accounts, including a 401(k)s and traditional and Roth IRAs. But you don’t want to tap them, because the more you withdraw, the less you’ll have when you’re ready to stop working. However, because you can borrow from them under certain circumstances.