Types of Home Equity Loans

Home equity loans are a way of dealing with the money you've invested in your mortgage by borrowing against it. Being a home equity loan is half mortgage - a loan secured by your property. If you are not good on your payments, the loan or bank can force the sale of your house for their money.

There are two main types of home equity loans - home equity loans and home equity lines of credit, also known as HELOCs. Most lenders who offer home equity loans both species. A home equity loan for $ 10,000 and a home equity line of credit for $ 10,000 are two entirely different animals have a lot of similar functions.

Home equity loan

If you have questions and get a home equity loan for $ 10,000 at 7% APR for 15 years, you will receive a check or a deposit in your bank of $ 10000. This is the full amount of the loan that you can always rely on that specific application. Depending on the terms agreed, you may need a few months before you to start repaying the loan. You pay a fixed amount per month until the full amount of the loan and the interest is paid off. You know from the very beginning how much you repay.

Home Equity Line of Credit

A home equity line of credit - a HELOC - is much more like a credit card. If you have questions and get a home equity line of credit, the bank is a "credit" - which functions just the way a 'credit' is on your credit card. You may receive special checks or a plastic card with access to your credit - but you do not receive the full amount at once.

In fact you do not have to take it immediately. You can use the credit line at any time until the full amount of the credit throughout the agreed on the life of the loan. Suppose that you do some home repairs. You can use your equity line of credit to pay for $ 2000 worth of tiles. That leaves you $ 8000 in your credit line. Three weeks later, you can use your credit to pay for windows worth $ 4500 - $ 3500 and links that you can borrow against.

If you pay back your home equity line of credit, that money becomes available to you. If you pay € 1000 back from what you've borrowed, you now have $ 4500 on your credit line.

A home equity credit line has two phases - is the draw period, during which time you can draw against the credit as long as you stay under the limit. During that time you can choose to only pay the interest up - or you can make payments on the principal amount of space. Once the draw period is over, go to the repayment period. During the period of repayment, you can not record, the more credit, and the full repayment.

By: Joseph Kenny