Mortgage / Equity

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Mortgage Line of Credit

A mortgage line of credit can be a line of credit is drawn against your mortgage or a document that combines a mortgage and an equity line of credit.

A mortgage line of credit is a potential amount of money you can borrow against your mortgage or the equity in your home. The difference between a mortgage and a mortgage line of credit is that the line of credit is money you can potentially borrow. A mortgage is a loan of money that you have to repay.

A traditional mortgage is a loan of money used to purchase a home or other piece of real estate with. Many modern mortgage products combine a traditional mortgage and a mortgage line of credit. This enables the homeowner to use equity in the home to secure lines of credit used for other purposes.

How a Mortgage Line of Credit Works

Some mortgage lines of credit are secured by the mortgage itself. In these agreements a percentage of potential mortgage payments will be used to pay off the line of credit.

Other lines of credit are secured by equity in the home. The equity is the difference between the value of the home and the principal of the mortgage. The more equity you have the more credit you have available.

There are many products usually called a flexible mortgage that combine a home equity line of credit and a mortgage. The advantage to these products is that a homeowner can use the equity in their home to finance luxury purchases, home repairs, remodeling and other additional costs of the home.

How to Get a Mortgage Line of Credit

The best way to find mortgage line of credit offers is to type mortgage line of credit into a search engine. This should provide a list of lenders that make such lines of credit available.

Once you’ve located a mortgage website look for the terms combination mortgage or flexible mortgage. These are used to describe mortgage products that combine a mortgage line of credit with a mortgage. You should then be able to apply for the combination mortgage in much the same you’d apply for any other mortgage.

If you have an existing mortgage it might be possible to refinance it into a mortgage with a mortgage line of credit. Most mortgage lenders will refinance a traditional mortgage into a combination mortgage.

Drawbacks to a Mortgage Line of Credit

Adding a mortgage line of credit to your mortgage could increase your interest rate and your mortgage payment. Using a mortgage line of credit will increase the amount you owe on your mortgage and your future mortgage payments.

Homeowners who abuse lines of credit by borrowing more than they can payback can end up facing foreclosure. Homeowners should always be careful when they take out mortgage lines of credit.