Article by Connie Barker
Using your home equity is a very savvy way to borrow large sums of money at a very low cost. While there are different types of home equity products that lenders offer, the two most common and popular are the home equity loan and home equity credit line.
Before jumping into these two types of loan products, it is important to understand the nature of home equity loans. Two terms that are extremely important are equity and collateral. Equity is a term that is used to describe the difference between the current appraised value of your home and the amount of the money that you owe (mortgage). For instance, if your home is currently valued at $ 300,000 and you own $ 100,000, your equity is equal to $ 200,000.
Collateral is another term that you should be aware of, whether in home equity loans or a home equity line of credit, it is important to note that you are putting up your home as collateral. Collateral is a way to secure your loan. If you are unable to repay your loan, the bank uses your home as collateral and can sell it to recoup its losses.
The main difference between a home equity loan and a home equity line of credit is that home equity loans are a one time loan for large sum of money. A home equity line of credit is an open account similar to a credit card where you can borrow money at various installments. Another important difference between both products is that home equity loans usually always have a fixed loan rate. The rate of the loan always stays the same for the life of the loan. In a home equity line of credit, the interest rate is variable and can increase or decrease throughout your repayment.
Most people use these two products very differently. For instance, for people looking to purchase one large item using their home’s equity, a home equity loan is preferred. For instance, equity loans are used for adding an addition to your home or paying for college tuition. A home equity line of credit is usually used for smaller sums of money that are withdrawn over a period of time. For instance, many homeowners might use an equity line of credit to manage debt or to renovate their home piece by piece over the course of a couple of years instead of all at one time.
Pulaski Financial Reports Solid First Fiscal Quarter Results
… (1) Current under the restructured terms: Residential real estate first mortgages 13140 14911 Residential real estate second mortgages 962 1861 Home equity 434 1248 Commercial and multi-family 2565 4359 Real estate-construction and development 1226 …
Read more on MarketWatch (press release)
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