What is Home Equity

Home equity is the amount of money you have already paid against the value of your home. A simple formula for determining your home equity is to subtract the amount of the mortgage balance from the current fair market value of your home. In other words, your equity increases as your mortgage balance decreases. If your home has been appraised for $200,000.00 and you owe $125,000.00 on your mortgage, your equity is $75,000.00.

Actually, there is a bit more to it. For example, consider the fact that many homeowners have liens or second mortgages on their homes. These amounts must also be subtracted from the appraised value to determine home equity accurately.

Many people put their established equity to work for them. They borrow against it and use the money for improvements to the home, for college tuition for their children, or for things like investments in business ventures such as purchasing additional property.

This is typically done through a home equity loan or a home equity line of credit. A home equity loan is a secured loan based on the amount of equity you have in your home. You may be able to borrow almost the full amount of your equity, but remember your home is the collateral for such a loan. This type of financing should be considered carefully, and the homeowner must read all the fine print and discuss all fees before securing such a loan.

A home equity line of credit is usually about 75% of the appraised value of the home minus the balance due on the current mortgage as well as any other liens. A home equity line of credit can be used at any time for any purpose, but there are several fees associated with a home equity line of credit. Choose a lender that offers competitive rates and does not eat up a large chunk of your loan with assorted fees.

It is a good idea to seek financial advice from a professional before securing a home equity loan or line of credit, since you could lose your home if you fail to repay the amount borrowed --including applicable fees and interest-- as promised.

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Home Equity Line Of Credit | Articles

Home Equity Scams to Watch Out For

By:

MortgageLoan.com | July 15, 2008

Arming yourself with information is the best way to protect yourself from some common home equity scams.

All By Yourself: Sell Your Home without a Broker

By:

Greg Mischio - MortgageLoan.com | July 07, 2008

In a declining real estate market, anyone selling a home is desperately trying to squeeze home equity dollars out of a sale. More sellers are deciding to be their own brokers-a bold move that has equal amounts of risks and rewards.

Scarce Solutions for the Home Equity Loan Freeze

By:

Tom Kerr - MortgageLoan.com | July 02, 2008

News : Has the credit crunch hit your home equity line?

Lenders are shrinking these lines of credit, making it harder for Americans to finance major expenses.

By Kathleen Connell

from the June 16, 2008 edition

For many high school seniors, spring graduation marks the start of the transition to college. It is also the time when parents finalize their college-financing plans. Unfortunately, those preparing to write large checks this fall to cover college expenses are faced with an increasingly limited college-loan market. In particular, many must deal with an unexpected tightening of a popular source of college financing: the Home Equity Lines of Credit (HELOC)....

read all from csmonitor.com

Home Equity Line Articles and Advice from bills.com

The Basics of a Home Equity Line of Credit
The equity you’ve built up in your home can come in handy, but only for a few carefully chosen purposes. Learn more about how to use a home equity line of credit to your advantage.
Home equity line of credit basics

How to Shop for a Home Equity Line of Credit Loan
Not all of the offers you receive to apply for a home equity line of credit will be good for your lifestyle. Learn more about what to look for.
Home equity line of credit loans

Home Equity Loan or Home Equity Line of Credit
When choosing between a second mortgage and a home equity line of credit, learn the differences between the loans before you make your decision.
Home equity loan vs. line of credit

When to Refinance Your Home Equity Line of Credit
If you have a variable interest rate on your home equity line of credit, you might consider refinancing. Find out the details on how to refinance and when to do it.
Refinancing a home equity line

Mortgage | HELOC.. : News from bankrate.com

Taxes on home equity

You can deduct the interest on up to $100,000 of home equity debt that is used for any purpose.

Interest Rate Roundup

See rates from our national survey of mortgages, home equity loans, auto loans, credit cards and CDs.

Interactive: State, national home equity rates

Whether it's a fresh coat of paint or a total home renovation, sooner or later it comes down to paying for it.

5 bad equity-borrowing moves

Tapping your home equity is not always a wise money move. In some cases it's always a bad move.

More home equity news from bankrate.com »

Article : Bad Credit Home Equity Line of Credit - 3 Benefits of an Equity Line of Credit

By Carrie Reeder

Acquiring a home equity line of credit with poor credit has several benefits. Moreover, because lines of credit are secured, getting approved is simple and fast. There are many options available to homeowners hoping to get their hands on extra cash. While refinancing is a top choice, creating a new mortgage entails additional costs and fees. Here are three reasons why a home equity line of credit is advantageous.

Ability to Consolidate High Interest Debts

Consolidating debts and having one low monthly payment is a huge perk of home equity lines of credit. If you have a low credit rating or excessive debts, your credit card interest rate is probably 18% or more. Furthermore, creditors have the power to gradually increase rates.

Home equity lines of credit have low, fixed rates. While a homeowner may not become completely debt free, a home equity line of credit enables them to payoff credit card balances. Because of a low rate, home equity lines of credit can be paid in full within a few short years.

Home Equity Line of Credit: Easy Access to Funds

Home equity lines of credit are similar to revolving credit accounts. Upon approval, the lending institution will establish a line of credit up to your approval amount. To access funds, homeowners are provided checkbooks or ATM cards. Whenever you need to borrow money, simply write yourself a check or visit the nearest automatic teller machine and withdraw funds.

Lines of credit allow homeowners to borrow what they need. If paying off debts, make payments using your equity line of credit checkbook. After creditors receive and deposit payments, the funds are deducted from your available credit. Likewise, you may withdraw money for home improvements, college tuition, car repairs, and so forth. Although lines of credit are useful, and may improve your financial standing, avoid borrowing too much money. Failure to repay a home equity line of credit puts a property owner in jeopardy of losing their home

Deduct Interest Paid on a Home Equity Line of Credit

Homeowners who obtain a home equity line of credit have a huge tax advantage. The interests paid on home equity lines of credit are 100% deductible. To qualify, the funds must be allocated towards making home improvements, debt consolidation, college tuition, and other large expenses.

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3-Benefits-of-an-Equity-Line-of-Credit&id=137576

Article : Refinance Home Equity Line Of Credit - Options For Paying Off A Line Of Credit

Submitted By: Carrie Reeder

Refinancing a home equity line of credit can save you from rising interest rates. They can also help you develop a payment schedule that fits your budget needs. And if you consolidate your home equity loan with your first mortgage, you can save even more on rates.

Options For Paying Off Your Line Of Credit

A home equity line of credit with its open terms and rates, makes it an ideal candidate to refinance. The easiest option for refinancing is to roll over the loan to a second mortgage. You can choose fixed or adjustable rates and terms. Closing costs will also be minimal. The other choice is to combine your home loans into one mortgage. This will qualify you for lower rates than if you just apply for a second mortgage. However, if you already have a low rate mortgage, you could lose out on closing costs and interest charges. If you are thinking about doing a total mortgage refi, it’s best to compare numbers on your financing options. Factor in how long you have left on your original loan, future interest charges, and possible savings.

Be Choosing With Your Lender

Your current lender will automatically strive for your business, but take the time to look at other offers. The best way to make comparisons is to ask for loan quotes. These loan estimates should be based on preliminary information supplied by you. Don’t allow lenders to access credit report; unless you want to see your score go down. With loan quote numbers, look at the fine print. Compare the APR for overall loan costs, but also look at the closing costs and rates separately. If you don’t plan on keeping your home or loan for more than seven years, you don’t want to pay a lot at closing, even for a small reduction in rates. You won’t recoup the cost in such a short time.

Don’t Delay Refinancing

Once you find a favorable loan offer, start the application process to secure the rate quoted. With online applications, your loan can be processed in less than two weeks with paperwork complete through the mail.

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