If your're a home owner in need of money, and have accumulated equity in your property, you may be able to convert this equity into cash. People choose to draw on their home equity because loan rates are significantly lower than othe types of borrowing, like personal loans or credit cards. There are also tax advantages associated with home equity loans, because the interest may be tax deductible within certain limitations(see your tax advisor). Another reason that home equity loans are appealing is that closing costs are relatively low. Home equity loans are also known as second mortgages because they are subordinate to your primary mortgage. If you can't afford to make your morgage payments and subsequently defualt, the first mortgage gets paid off first from any proceeds of a sale. As a result there is much more risk for lenders who give you a home equity loan. There are two types of second mortgages: The Home Equity Loan, which is also known asa HEL, and the Home Equity Line Of Credit, which is also called a HELOC. A HELOC offers much more flexiblity than its second mortgage counterpart. A lender will give you a line of credit which you can draw from on an as-needed basis. It functions a lot like a credit card, except that the interest rate is lower. by Josh Mettle
If your're a home owner in need of money, and have accumulated equity in your property, you may be able to convert this equity into cash. People choose to draw on their home equity because loan rates are significantly lower than othe types of borrowing, like personal loans or credit cards. There are also tax advantages associated with home equity loans, because the interest may be tax deductible within certain limitations(see your tax advisor). Another reason that home equity loans are appealing is that closing costs are relatively low. Home equity loans are also known as second mortgages because they are subordinate to your primary mortgage. If you can't afford to make your morgage payments and subsequently defualt, the first mortgage gets paid off first from any proceeds of a sale. As a result there is much more risk for lenders who give you a home equity loan. There are two types of second mortgages: The Home Equity Loan, which is also known asa HEL, and the Home Equity Line Of Credit, which is also called a HELOC. A HELOC offers much more flexiblity than its second mortgage counterpart. A lender will give you a line of credit which you can draw from on an as-needed basis. It functions a lot like a credit card, except that the interest rate is lower. by Josh Mettle