Home Equity Loans Can Be An Easy Solution For Increasing Your Financial Foothold
By Jami J. Rodgers
Home Equity Loans: An Easy Way to Flex Your Financial Muscle
A home equity line of credit is a form of revolving credit in which your home serves as collateral. This loan creates a lien against your house.
You can use a home equity line of credit for large purchase items, such as home improvements, education or medical bills.
Typically, you may draw against your full line of credit at any time during the loan period. This provides you with increased purchasing power at lower interest rates than most other alternative forms of credit.
Consider the Costs
Most of the costs you will confront when establishing a home equity line of credit are similar to those you paid when you first bought your home.
This may include property appraisals, application fees and points. In addition, you will be paying closing costs and titling fees.
The Differences Between a Line of Credit and a Loan
Before you borrow, it is important to consider the differences between a home equity line of credit and a home equity loan.
When you compare the two, it is important to realize that the annual percentage rates (APRs) for a loan includes interest rates plus points and other finance charges.
The APR for a line of credit is based solely on the periodic interest rate. Do the math to figure out which makes the most sense for you.
This is important when considering an easy solution to increasing your financial power.
Sources: U.S. Federal Reserve Board "Borrowing Against Your Home," The Motley Fool
About the Author: Jami J. Rodgers works in acquisition management for the federal sector in Washington, D.C. Jami holds a B.S. in Spanish with a business option and an international studies minor from The Pennsylvania State University.