I need info!

Hi I am Thomas, Can anyone explain about home equity credit line in detail, please reply along with brief note about home equity credit loan. plzzz!
I also have some thing to exchange!

Okay, so I did some research for you online. I found a blog that I think can help you. Check out Credit Tips Hopefully, you will find the information you need.

Quote:

Originally Posted by babycute

Hi I am Thomas, Can anyone explain about home equity credit line in detail, please reply along with brief note about home equity credit loan. plzzz!
I also have some thing to exchange!

In its simplest definition, home equity loan means using your house equity as collateral in order to borrow money. Collateral means your house will act as a guarantee. In the case if you cannot pay the loan or defaulted too long on payment, the lender has the right to sell the house to get back the loan.

The word equity simply means how much the house is worth minus the mortgage you currently owe.
A home equity line of credit allows you to borrow a fixed amount of money for the life of the loan. You do not need to take a lump sum loan at once since you can withdraw any amount of the loan when you need it. In a sense, it works like a credit card.

The interest rate for a home equity line of credit is variable and will rise and fall during the loan period. Payment per month depends on the total sum loaned, the interest rate and whether your credit is in the payment or draw period. During equity draw period, you can decide whether to pay the principal loan amount or the minimum payments to cover the interest.

hope this help

Plain, simple and straight to the point.

It's a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house.

according to me it is the simplest defination home equity loan means your house as collateral in order to borrow money. Collateral means your house will act as a guarantee. In the case if you cannot pay the loan or defaulted too long on payment, the lender has the right to sell the house to get back the loan.

A Home Equity Line of Credit is a line of credit based on the precentage of your home you have already paid for. For Ex. you have a loan for $100,000 and you have paid 30,000 of it off and owe $70,000 still. The equity would be the $30,000 that you own. YOu could then take line of credit out on the $30,000 that you own. HELOC interest rates are based on the prime rate on Wall Street posted each month, which means that it changes monthly. Prime right now is on the rise. Recently it has been at 7.75% for the last couple of months and now it is at 8%. The prime rate is then added to what is called the Margin. Your margin is based on you FICO(credit score). The better credit you have the better margin you will have. I have even seen negative margins on some loans. So for example lets say you have a 2% margin and then prime rate is 8%. Your HELOC would then have a 10% interest rate. This is pretty high, but lower than most peoples credit card interest rate. Let's say you have 10,000 in credit card debt and the average interest rate on the collection of cards is 22%. It would be a good decision to take out a HELOC and then use that money to pay off your debt on the credit cards. You would save because of the interest rate. HELOC's have a cap rate of 18% so that would still be lower than the 22%. Unfortunately the down side of this is that the interest rate changes monthly, as well as the payment amount. There are all different kinds of HELOC/2nd mortgages you can get. Some are No Cost HELOC's and don't require you to pay closing costs, but the fine print says you cannot pay the loan off or refinance within a certain time period. Also watch out for prepayment penalties or termination fees. These usually only last for 6 months, but make sure read all the fine print! Also sometimes there is an account maintenance fee that is waived only if you never make a late payment within the first year. If you do miss a payment in the first year you end up paying a maintenance fee yearly for the life of the loan, after the first year you don't have to worry about being late except paying the late charge. You really should try a fixed rate 2nd mortgage right now instead of a HELOC since interest rates are on the rise.