Mortgage / Equity

Equity
Home Equity
Mortgage
Homeowner Line of Credit

A homeowner should be able to get a line of credit secured by the equity in their home that they can use for any purpose.

This homeowner line of credit is usually called a home equity line of credit or HELOC. A home equity line of credit is an agreement that lets a person borrow against the equity in their home. The equity is the amount by which the value of the home exceeds the amount of debt on the home.

With a homeowner line of credit a person can borrow up to a certain amount of money usually about 80% of the equity. The borrower is then obligated to pay the line of credit back with interest. When the line of credit is paid back the homeowner has the right to use it again and again. Unlike a loan a homeowner line of credit is available as long as the agreement is in force.

How to Get a Homeowner Line of Credit

Anybody who has equity in their home should be able to get a homeowner line of credit. You have equity in your home if its value exceeds the amount it is mortgaged for. The amount of equity determines the amount of the homeowner line of credit you can get.

There are many online lenders that make homeowner lines of credit available. These lenders usually use the term home equity line of credit and the acronym HELOC to describe these lines of credit. Typing these terms into a search engine can help a homeowner locate a list of these lenders.

Websites like bankrate.com and lending tree can help homeowners compare homeowner line of credit offers and rates. It is usually best to get the homeowner line of credit with the lowest rate.

Advantages to a Homeowner Line of Credit

The biggest advantage to a homeowner line of credit is that it is an opened line of credit. This means that a person can take advantage of this line of credit as long as there is credit available in it. This gives a homeowner a source of credit they can take advantage of at any time.

Since the interest rate on a home equity line of credit is usually lower than that on credit cards and other forms of consumer credit. Homeowner lines of credit are usually cheaper than other lines of credit.

A homeowner line of credit allows a person to borrow only what they need. This can help a person keep their interest and repayment amounts manageable.

Disadvantages to a Homeowner Line of Credit

The disadvantage to using a homeowner line of credit is that it will increase the amount of debt on a person’s home. This will reduce the amount of equity available and the homeowner’s ability to borrow against it.

It will also cut the homeowner’s disposable income in the future because the homeowner will have to pay back the line of credit. A homeowner line of credit can also increase the chances of foreclosure if the person can’t pay it back.

An individual should never use a homeowner line of credit unless they know that they can pay it back in the future.