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 Using The Equity in Your Home. Looking
for--and finding--large amounts of extra spendable cash is often difficult, if not impossible. If you are a homeowner,
though, using the equity you've built up in our home may provide a solution to your cash needs. In addition, the
interest on home equity loans, since it is considered mortgage interest, will probably be tax deductible (there
are limits to the deductibility, though. For example, if your loan value is in excess of the value of your home,
the excess amount will NOT be tax deductible). Some common uses of home equity loans include home improvement,
education costs, automobiles and to consolidate higher interest rate loans and credit into a single payment that
may be tax deductible, instead of loans or expenses that do not have tax deductibility.
There are two different ways you can access the equity in your home--through
home equity loans
and home equity lines of credit.
Home Equity Loans
A home equity loan provides you with a set amount of cash with a fixed
repayment term. You get all of the cash for which you have been approved at the loan closing. A loan is a good
choice if you have a specific need (for example, a home improvement project where you have a quote for the total
project cost) and a set time frame.
Home Equity Lines of Credit
A home equity line of credit provides you with flexible funding over
a period of time. Lines allow you to use any amount of cash you need (up to your approved limit) at any given time.
You can obtain additional cash at any time during the life of the line, up to your qualified amount, and continue
to repay it on the same schedule. A line of credit is probably the best choice if you will have an ongoing need
(for example, college tuition payments) over a period of time.
Applications.
Regardless of which type of loan you choose, it's never been easier to apply for--and get--a home equity loan or
line of credit. With the popularity of the Internet, you can apply for your equity loan online from the privacy
and comfort of your own computer. Lenders can contact you and keep in touch via e-mail, a distinct time saver.
Comparing Online Home Equity Sources
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Source
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Apply Online?
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Equity Loans or Lines
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LendingTree
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Yes
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Both, up to 4 competing offers
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Hints on Online Home Equity Loans
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H
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N
T
S
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Loan vs. Line. If you
need a fixed amount now, get a home equity loan. If you are not sure what your money needs will be, get a home equity line of credit. |
| Be wary of the 125% of value loans.
These loans can be a ticking time bomb that may take you years to get out from under. You are borrowing 25% more
cash than your home is worth. If your home does not appreciate significantly by the time you want or need to sell
it, you will be forced to write a check for the shortage. |
| Debt Consolidations.
If you are consolidating current debt, be certain that you understand that you are tying your home ownership to
those items you previously bought on credit. |
| Funds Access. Check
the different methods of accessing your loan funds. Make certain you understand any fees associated with using
and accessing the funds. |
| Terms and Conditions.
Compare all terms and conditions of the loan. Some companies, for example offer "no fee" loans--meaning
no closing costs, points or fees for the loan. A closer examination of items, though, may find that there is a
high minimum opening balance or a specified period of time that the loan needs to be active. In some cases, the
bank will charge you back for the "waived" items if you do not meet the terms. |
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