You can have an option to borrow money against a portion of the available equity in your real estate property or home if you own the home outright, or if the remaining principal amount you owe on the home is less than its current market value. If you have been paying down the balance on your mortgage loan, or if the value of your home appreciates, you can tap into some of the accumulated equity by borrowing against that property. This may be achieved through a home equity line of credit or you may opt for home equity loan.
A home equity line of credit also known as HELOC is a credit that is secured by your real estate property or home which gives you a revolving credit line such as the credit card. However, the difference with the HELOC is that instead of borrowing from your credit card issuer, you borrow from available equity in the home. The house is used as collateral for the line of credit.
Since home equity line of credit is a revolving credit, you can borrow as much as you need provided that you do not exceed the limit. You can borrow anytime you need using your credit card that is connected to the account or by writing a check. With this credit facility, you make payments only to amounts you have borrowed and not the full amounts available for you through the home equity line of credit.
In addition, HELOC could also give you some tax advantage that may be unavailable with other types of loans. You can borrow little or as much as you need as long as you do not exceed the pre-set limit. Like credit cards, when you borrow and repay the outstanding balance, it means the amount available for credit is replenished, and you can borrow again.
For those who want to reduce debt, they can use the home equity line of credit to consolidate higher interest rate debts that have accrued from other loans like credit card debt. The loans are also used for home improvement projects such as those intended to raise the value of a home. If you have a debt that is getting out of control, you may consider consolidating the debt using a home equity line of credit, if you have equity in your home.
Debt consolidations can come with the possibility of a single payment as well as low interest rates, which allow you to make payments for the debt in less and for less money. And, as an advisor with the Debt Counselors of America and the book’s third author Gerri Detweiler says, if your mortgage is a small fraction of the value of a home, or if you are struggling with higher interest rates than the present ones, you may be a good candidate to tap equity from a refinanced first mortgage.
With that refinanced mortgage loan, using the same mortgage payment or something less than you have already been paying each month, you can be able to repay off more expensive debt amounts.
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