Is an Equity Line of Credit the Answer to Your Financial Needs?


If you own your home you have a financial resource available to you that can help you with your financial needs or concerns. What is it? HOME EQUITY!

Equity is the value of your home minus the remaining mortgage balance which is outstanding. While you live, eat and sleep in your home worrying about debts or wishing you could refurnish the living room you may be sitting on the cash that will grant your wishes.

Why Would You Want an Equity Line of Credit?

Unlike a typical loan which deposits a set amount of money in your account and begins charging you interest and payments at a fixed rate until repaid, a line of credit acts as a revolving credit (like your credit card). You do not need to pay interest on the full amount you have access to -- you only pay for what you have used. Also, like a credit card, when the debt is repaid you still have access to the credit.

Using an equity line of credit (also known as a Home Equity Line of Credit or HELOC) gives you greater flexibility with the least cost. Not only can you access the credit only as you need it, but your monthly payments will reflect only the balanced used. The less used the lower your payment. Some lines of credit have only the interest as the minimum payment which can be helpful when finances are tight.

An equity line of credit is great when you don't have a large fixed amount to spend in one place that will take many years to repay and you want access to the credit without asking for a new loan when you have paid it back.

What Can I Use the Equity Line of Credit For?

While you can no doubt find numerous uses for your line of credit, here are samples of the more common reasons for obtaining an equity line of credit.

Consolidate Debts

Using your equity line of credit to consolidate other debts can not only eliminate the stress of multiple bills but can also give you a more favorable interest rate or tax benefit.

Second Mortgage

Use your line of credit to pay off the existing mortgage for better interest rates.

Add On, Update or Go Away

You may use your line of credit for renovating, buying new furniture or a car, or taking a vacation with less interest payments than using a credit card or store card making it a wise choice for large purchases.

When Should You NOT Use a Line of Credit?

Before succumbing to what seems like 'easy money' it is important to evaluate the additional risk.

Some debts -- like student loans- have features that you may not be entitled to if you switch them to an equity line of credit.

Other items like cars and vacations may seem like a good idea to buy with your home equity line of credit, but with the ability to pay only the interest you may find the motivation to pay off the debt is lacking and end up owing for items that have lost their value or were consumable. Plan to pay off the debt quickly for the most advantage.

Second mortgage (or refinancing) may or may not be a good idea depending on interest rates and your repayment terms. While lines of credit take advantage of current low interest rates you may find that your regular loans protect you better from fluctuating rates if you will not be paying the loan down in the next few years.

Using your finances wisely can give you great relief and freedom. Before taking on any financial obligations it is important to understand the risks as well as the benefits.

Article Source: Mortgage Technology, This article may be freely reproduced as long as this resource box is included: Article by: Mortgage Technology, http://www.fmhamortgage.com  Get Your Free $97 USDA and FMHA e-Course delivered to you.



 

FMHA Home Loan Mortgage - USDA Farmers Home Rural Development USDA and FMHA Articles

  • Nationally recognized consumer advocate to train NLC Loans employees on true customer advocacy
    CLEVELAND, Ohio -- via PRWEB - Cleveland-based mortgage company NLC Loans(TM) (Nations Lending Corporation) announced today that they have contracted renowned national consumer advocate and mortgage expert ...

  • Mortgage Closing Costs Up 6% Driven by New Regulations
    NEW YORK ( MainStreet ) — Mortgage closing costs rose by 6% over the past year and now average $2,539 on a $200,000 loan, according to Bankrate.com. Closing costs consist of origination fees that are also known as the lender fees and third-party fees which include the appraisal cost and credit score checks.

  • 10 Investigates: Medicaid Mess-Up Leaves Nurses Broke
    Many home health care providers caring for Ohio's disabled and elderly are now doing it without a paycheck.

  • Refinance into a 15-year mortgage and save
    Refinance Refinance Into A 15-year Mortgage And Save Refinancing into a 15-year mortgage is a common way of taking advantage of today's low interest rates. With the interest rate differential between a ...

  • SB Financial Group, Inc. Announces Second-Quarter and Six-Month 2014 Results
    DEFIANCE, Ohio, July 28, 2014 /PRNewswire/ -- SB Financial Group, Inc. (NASDAQ: SBFG), a diversified financial services company providing full-service community banking, mortgage banking, wealth management and item processing services, today reported earnings for the second quarter and...

  • Foreclosure Notice
    Foreclosure Notice (Official Publication) NOTICE OF MORTGAGE FORECLOSURE SALE Minn. Stat. 580.025, 580.04 Date: August 13, 2014 YOU ARE NOTIFIED that default has occurred in the conditions of the following described Mortgage: 1. Date of Mortgage: December 28, 2004 2. Mortgagors: Lisa L. Heathcote and Duncan J. Heathcote, wife and husband 3. Mortgagees: U.S. Bank [...]

  • Mortgage closing costs: State-by-state map
    Bankrate.com researchers gathered closing-cost data from seven to 10 lenders in all states and the District of Columbia. The state with the lowest closing costs was Nevada, followed by Tennessee, Missouri, Ohio and the District of Columbia.

  • Mortgage Closing Costs Up Six Percent to $2,539
    NEW YORK, Aug. 4, 2014 /PRNewswire/ -- Mortgage closing costs rose six percent over the past year and now average $2,539 on a $200,000 loan, according to Bankrate.com (NYSE: RATE). Origination fees increased ...

  • Public Records
    COMMON PLEAS COURT NEW SUITS 14-CV-0470 — OneWest Bank N.A., v. The Unknown Heirs, Devisees, Legatees, Executors, Administrators, Spouses and Assigns and the Unknown Guardians of Minor and/or Incompetent Heirs of Ulyesses D. Phillips aka Uleysses D. Phillips aka Ulysses D. Phillips, address unknown, et al., complaint in foreclosure for property located at 1610 S. Limestone St., for $53,966. 14 ...

  • Guaranteed Rate launches new location in Fairlawn
    FAIRLAWN — Mortgage lender Guaranteed Rate will serve area homeowners and buyers seeking mortgage help at its first retail site in Northeast Ohio, at 55 S. Miller Road.