If you have been in your home for any length of time, then there is a good chance that you have equity in your home. This equity can be used to remodel your or even be used to help pay off debts.
There are two ways you can access your equity. The first one is through a home equity loan and the second one is a line of credit. There are benefits and cautions that come with each option.
Looking into Home Equity Loans
The home equity loan is a loan that is given by a lender to a person seeking to use their equity in their home for a specific purpose. Here are some points that you will want to know.
- The money is distributed in a lump sum. This becomes a second mortgage on your home.
- Your interest rate will be fixed over the life of the loan. The interest rate will be slightly higher than a line of credit loan because it is a fixed rate.
- Monthly payments will be fixed along with the interest rate.
- Payments usually begin within 30 days of the funds being distributed.
- You are free to use the money as you want too.
Understanding Lines of Credit
The line of credit option really works like a credit card. When you apply for this type of equity access you will have to provide a certain amount of information to be approved.
- The line of credit allows you to use only that amount of money you need.
- You will have to make monthly payments until the loan is paid off.
- Some lenders have a minimum withdrawal amount that you must take each time you use your card.
- This type of loan has a set period of time that you can access the funds.
- The interest rate will most likely be a variable rate. This rate can change every 30 days depending on the market.