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Equity Credit Line
FAQ-
Home Equity Line of Credit (HELOC)
If you need
to borrow money, home equity lines may be one useful source of credit.
Initially at least, they may provide you with large amounts of cash at
relatively low interest rates and they may provide you with certain tax
advantages unavailable with other kinds of loans. (Check with your tax
advisor for details.)
At the same
time, home equity lines of credit require you to use your home as
collateral for the loan. This may put your home at risk if you are late
or cannot make your monthly payments. Those loans with a large final
(balloon) payment may lead you to borrow more money to pay off this
debt, or they may put your home in jeopardy if you cannot qualify for
refinancing. If you sell your home, most plans require you to pay off
your credit line at that time. In addition, because home equity loans
give you relatively easy access to cash, you might find you borrow
money more freely.
Remember
too, there are other ways to borrow money from a lending institution.
For example, you may want to explore second mortgage installment loans.
Although these plans also place an additional mortgage on your home,
second mortgage money usually is loaned in a lump sum, rather than in a
series of advances made available by writing checks on an account.
Also, second mortgages usually have fixed interest rates and fixed
payment amounts.
You also
may want to explore borrowing from credit lines that do not use your
home as collateral. These are available with your credit cards or with
unsecured credit lines that let you write checks as you need the money.
In addition, you may want to ask about loans for specific items, such
as cars or tuition.
Home
Equity
FAQ-
Home Equity Line of Credit (HELOC)
What
is the Difference Between a Line of Credit and a Home Equity Loan?
What
are the Rates and Terms?
Are
There Any Fees to Open a Line of Credit?
What
is the Credit Limit?
What
Type of Property Can be Used for this Account?
Is
the Interest Tax-Deductible?
What
is the Difference
Between a Line of Credit and a Home Equity Loan?
A line of
credit is a revolving credit account, secured by your home. It has a
variable interest rate, with a draw period of 10 years, and then
converts to a fully amortized 20 year loan.
A home
equity loan is a fixed rate, fully amortized, installment loan, with an
available term of 5 to 25 years.
What
are the Rates
and Terms?
The rate
for a line of credit is determined by your credit history, loan amount,
loan-to-value ratio, and property specifics. The rate is calculated by
adding a margin, usually between 0.9% and 5.9%, to the highest Prime
Rate published in the “Money Rates” section of The Wall Street
Journal.
Are There Any Fees to Open a Line of
Credit?
There are
no origination, appraisal or processing fees to open this account.
There are no annual fees or cash advance fees.
What is the Credit Limit?
The minimum
line amount is $20,000. Based on your available equity and the value of
your home, you may receive a line amount as high as $100,000.
What
Type of Property Can
be Used for this Account?
This
account can be secured by owner-occupied single family homes,
condominiums and townhouses. Ineligible property types include mobile
homes, agricultural properties, co-ops, time-shares, rentals, and homes
listed for sale within the last 90 days. Other collateral restrictions
may apply.
Is the Interest
Tax-Deductible?
Because
both types of loans are secured by your home, the interest paid may be
tax-deductible depending on your situation. Consult with your tax
advisor.
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