Mortgage / Equity

Equity
Home Equity
Mortgage
Property Line of Credit

Anybody who owns a piece of real estate that they have equity in should be able to get a property line of credit.

A property line of credit is an arrangement in which a lender lets a property owner borrow money against the equity in real estate they own. The equity is the difference between the value of the property and the amount of money owed on it such as a mortgage. In this arrangement the lender has the right to foreclose on the property if the line of credit isn’t paid.

The difference between a line of credit and a property loan is that a loan is a one time advance of a specific amount of money. A line of credit is an arrangement that lets an owner borrow up to a specific amount of money determined by the equity available. Unlike a loan a line of credit remains open as long as credit is available.

How a Property Line of Credit Works

It is possible to get a property line of credit on any piece of real estate that an individual has title to as long as equity is available. The most common kind of property line of credit is a home equity line of credit.

The amount of the line of credit will be determined by the amount of equity and the amount of credit requested. The amount of credit is usually a percentage of the amount of equity available. In most cases the amount of credit of a line of property credit is 80% of the equity available. The lender does this so it can make a profit on the deal.

The lender will also charge interest on a property line of credit. The interest rate on a property rate of credit is determined by the owner’s credit rating. Those with a bad or poor credit rating will pay a higher rate of interest. Those with an excellent or good credit rating will pay a lower rate of interest.

Drawbacks to Property Line of Credit

The biggest potential drawback to a property line of credit is that increases the possibility that the owner could loose the property to foreclosure. If the owner can’t payback the line of credit, the lender has the right to foreclose on the property.

The property owner will have to payback the line of credit with interest. This means that the property owner will have less to spend on other expenses in the future. Even if the line of credit repayment can be spread over a number of years this could be very expensive.

The property owner will not have equity available to use for other purposes such as new lines of credit or mortgages as long as the property line of credit has an unpaid balance. This could make it difficult to borrow against the property in the future.

Advantages to a Property Line of Credit

The biggest advantage to a property line of credit is that the interest rates charged on these lines of credit are much lower than those charged on other kinds of consumer and business credit. Taking advantage of this financing can save a property quite a bit of money on interest charges.

Another advantage to a property line of credit is that it is a means of finance that is readily available. The line of credit can be used as a means of emergency finance and to pay off consumer debts. A property line of credit is an excellent means of finance all real estate owners should look into.